Content Dam Diq Online Articles 2019 04 Digital Marketing 1

How much should your dental practice spend on digital advertising?

April 4, 2019
It's hard for dentists to determine how much they should spend on their digital marketing campaigns. Here's a formula to help you out.
If you’ve made a commitment to digital advertising, one of the first questions you need to answer is: how much of my extremely valuable free cashflow dollars do I want to spend on it? Here I will provide some metrics and methodologies to help you develop this number.

To arrive at your budget, in general, you will work backward from your intended return on investment. For example, let’s say that you determine that each Invisalign patient is worth $5,000 and that your goal is 10 new patients a month. Whatever you decide to spend, you could reasonably be guided by this metric—the revenues you earn from marketing should be eight to 10 times what you spend.

Therefore, working backward, the $50,000 in new monthly revenues the practice is seeking suggests a monthly marketing budget of $5,000 to $6,300, i.e., $50,000/10x ROI = $5,000 or $50,000/8x ROI = $6,300.

If the math doesn’t feel intuitive, here’s a different approach: your marketing budget should be between 10% and 12.5% of the revenues you would like to generate.

Here’s another example. Suppose you own a general dentistry practice and you want to generate 10 new patients a month, 120 new patients a year. Suppose that each patient is worth $2,500 annually. All in, the new-patient flow will generate $300,000 in revenue. Applying the 10% to 12.5% metric suggests a marketing budget of $30,000 to $37,500, which is $2,500 to $3,125 per month.

Why isn't everyone doing it?

These metrics underscore an age-old marketing dictum: the more revenue you want to generate the more you need to spend. The metrics should also provoke a question. If you can spend $5,000 to get $50,000, why isn’t everyone doing this, all day, every day? I believe there are three reasons for this.

First, some practices simply don’t believe these figures are achievable. Yes, they are achievable, but like all marketing, it takes work.

Second, these numbers reflect an annualized run rate. That is, once you have 120 new patients contributing $2,500 each, your ROI is indeed eight to 10 times what you spend. But that’s not what happens in year one. The patients you earn in the latter months of the budget period won’t deliver revenue until the following year. Thus, in the first year, the difference between what a practice earns on marketing versus what could be earned on an annual basis might be thought of as the sunk marketing costs. Further, these sunk costs won’t be fully realized until you cease to spend on marketing.

Third—and this is the most important dose of reality—these figures assume optimum operational preparedness. Specifically, spending $3,100 per month on marketing may indeed deliver enough leads to produce an eight to 10 times return on investment, but for whatever reason the leads are not converted.

There could be a number of reasons for this. Maybe the practice doesn’t do a good job of responding to incoming inquiries. Maybe an implant patient had a bad experience with the extraction and went elsewhere for the implant. Maybe the practice can’t schedule new patients within the time frame they expect.

But the beauty of committing to marketing is that it can help practitioners identify the weak spots in their practices. There are few catalysts more motivating than spending hard-earned dollars on marketing that fails due to lack of the ability to capitalize on the leads the marketing delivers. In this context, a commitment to marketing leads to an exercise in backward integration that can transform a practice from one that simply generates leads into one that’s poised to capitalize on all new opportunities that come its way.

Finally, I should also highlight that dental marketing is an iterative process. It’s not likely that a plan will work perfectly right out of the box. Earning the desired ROI that’s absolutely within reach requires a commitment to tracking data, and to collaborate with the marketing firm to make informed decisions about the advertising and everything that flows from it.

Shay Berman is the founder and president of Digital Resource, an internet marketing agency that specializes in helping dental practices increase their patient volume and revenue through innovative digital marketing programs. Mr. Berman attended Michigan State University, where he learned from some of the Google executives who taught there. This knowledge, along with extensive experience in the dental business, has been instrumental in his success advising dental practices. Contact him at [email protected].
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