Many health related business such as dental practices are better positioned to advertise for new customers than other industries, BUT you must understand YOUR CRITICAL numbers properly.
What you need to know…
It sounds simple but the reality is it can be difficult collating the information you need to work everything out –
BUT the businesses that do make the effort and time know how much to each patient is worth and therefore how much to spend.
They know:
One has to know how much spending is being done. And how is that spending is being transformed into profits through a patient, if that treatment is a regular treatment or a one off such as dental implants?
For evaluation of the profits, one has to know the worth of patients and they may have to be segregated into two or three categories.
The mistake many make is simply dividing the promotional budget the previous year by the cost of treatment each patient received.
The lifetime value of the consumer concept?
It is overall profits generated by a specific customer from the beginning of customer and business relationship to the end. It is a marketing concept that aims to evaluate a customer’s profit given to the business over the customers lifetime.
To properly evaluate, as a minimum one has to provide the following information:
Dentist A
Hard working dentist who has a general practitioner dental practice and looking at gaining more general dental patients. Their average annual return per patient / visit is equal to $190.
( has worked out the average profit from this customers treatment is 40% which equates $76)
| What a New Dental Patient is Worth |
| Average return per visit in one year | $190 | |
| Profitability of Patient | 40% | |
| Sub Total | $76 | |
| TOTAL VALUE OF PATIENT | $76 |
Looking at these figures, this particular dentist would not want his advertising Costs to Acquire this patient to be any more than $76 and ideally less to leave profit in the business so let’s say the maximum he is willing to spend would $50
With the dental industry being a competitive industry say he gets 3 patients a month every month for 12 months at a cost of $50 / patient
| Cost to Acquire new Patient | $50 | Total Cost |
| Number of new patients /month | 3 | $150 ( 3 * $50) |
| Number of months | 12 | $1800 (12 * $150) |
| Net profit / year from advertising ( $26 / patient) | $936 | ($ 76 * 36) – $1800 |
Conclusion
Dentists are smart, educated and professional and may well have an understanding that referrals will happen. But by looking at these figures one might assume online advertising is risky with not a great return for time and effort.
Dentist B
( has also worked out the average profit from this customers treatment is 40% which equates $76 But also noticed the customer stays for an average of 6 years, the average attendance is 1.5 times a year and refers 1 additional patient within that period )
| What a New Dental Patient is Worth | ||
| Average return per visit in one year | $190 | |
| Average no visits / per | 1.5 | |
| Profitability of Patient | 40% | |
| Average lifetime of customer | 6 | |
| Sub Total | $684 | |
| Average number of additional patients referered | 1 | $684 |
| TOTAL VALUE OF PATIENT | $1,368 | |
The value of a new patient will be $1368 = 190*1.5*6*40%*(1+1).
This dentist understands they can pay Advertising Costs to Acquire this patient as much as be $100, $200,$300 or more and still leave a great profit in the business.
With a willingness to pay more for a patient, naturally they will achieve greater success on ad platforms such as google ads, facebook and SEO.
With the dental industry being a competitive industry, say he gets 6 patients a month every month for 12 months at a cost of $200 / patient
| Cost to Acquire new Patient | $200 | Total Cost |
| Number of new patients /month | 6 | $1200 |
| Number of month | 12 | $24000 |
| Net profit / year from advertising | $84,096 |
Conclusion
Dentists are smart, educated and professional and those with a deeper understanding of CLV and ROI can maximise their advantage over their competition., Of course once you start to target various orthodontic and cosmetic treatments the figures start to look exceptional.
Based on the Sunshine Coast, Queensland
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