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How Much Money Should a Medical Practice Spend on a Marketing Campaign?

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Today – A Frequently Asked Question

By John Deutsch

As a web services company specializing in medical practice marketing and medical web design, we are asked this question frequently.

Introduction

In this turbulent post healthcare reform era, physicians are now being challenged to either adjust to the market or be forced to join a hospital in order to stay profitable. The physicians who are adjusting to the changes are adopting new ideas in order to remain profitable – such as implementing Electronic Medical Record (EMR) systems with government stimulus money, introducing new cash-based or high profit services such as aesthetic treatments, or introducing concierge medicine care and launching marketing campaigns to attract higher-profit patients.

So – What is the industry standard for marketing budgets?

While suggested marketing budgets vary significantly from one industry to the next, the US Small Business Administration (SBA) suggests a marketing budget between 2% and 10% of gross revenue.

However, budgets for Business-to-Consumer, retail companies and pharmaceutical companies can exceed 20%. But, with a range of between 2% and 20%, where should a medical practice be?

How much should I spend?

Here’s a few questions to consider when identifying a marketing budget for your practice. Start with a recommended 5% marketing budget and add/subtract from there.

1)  Do you receive the majority of your patients through physician referrals – SUBTRACT 2%? If you do, and consider that a business model of receiving referrals from physicians is a sustainable one then you’re in the clear. Keep in mind that many practices are now being bought by hospitals and will therefore refer internally.

2)  Do you have any high-profit or cash-pay products/services – ADD 2%? If your business depends almost entirely on insurance/medicare reimbursement and there is limited profit margin on these products, your business is at a very high-risk since the trends in reimbursement have not been positive. You should consider introducing new products/services to diversify your revenue channels.

3)  Have you recently introduced new high-profit products/services such as aesthetics, concierge, diagnostics or nutraceuticals – ADD 5%? If you have, you’ve likely introduced new hard costs into your business. You therefore need to market these services enough to surpass your break-even point and generate a positive ROI on these new ventures.

4)  Are you located in or near a major metropolitan area – ADD 1%? If you have the ability to draw from a large pool of customers, especially where competition is higher, you must have sufficient marketing budget.

5)  Are you losing market share to another business in your area – ADD 2%? If you are, it is a slippery slope. The vast majority of medical practices are poorly marketed, even hospitals. Introducing a new marketing campaign in order to win back your market share will likely not require significant investment.

6)  Are your current marketing efforts producing a positive ROI – ADD MAX? If your marketing efforts are producing a positive ROI its an easy decision – max out your budget to a level that is sustainable for your current work load capability while maintaining a positive ROI on your marketing efforts. Sometimes businesses lose focus on which marketing campaigns are working and which are not. They get lumped together and focus is lost. Try to identify which of your marketing campaigns have been a success, track these campaigns as much as possible and make educated decisions for increasing the budget – while decreasing budgets on your poor performers. Internet marketing is one of the most effective forms of marketing and also offers the highest ability for precise ROI tracking.

About the Author

John Deutsch is the founder and CEO of Medical Web Experts, a marketing group for physicians, hospitals and healthcare organizations. Since 2001 he has specialized in healthcare marketing and has implemented hundreds of marketing campaigns. For additional marketing tips by John Deutsch, please read his blogs: johndeutsch.blogspot.com and medicalwebexperts.com/blog/

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8 Responses

  1. Hi John,

    I’ve been in the business for two decades and am currently the office manager of an independent four man internal medical practice who thinks your post is a bit extreme, yet understandable given your bias.

    For example, our rule of thumb is to spend 3-7% annually, top line [gross] revenues, for a marketing and advertising budget. And, there are two mistakes I see both new thru mature practitioners making time and again:

    1. Not keeping the program fresh; spending more and more money on the same old message and medium that is no longer working.

    2. Cutting back on advertising dollars in lean times, like today. In fact, while you may indeed be able to reduce your budget a bit when times are good; today is the best time to over-weight your budget and achieve an above average ROI on your marketing efforts; both in financial and professional esteem terms.

    Nevertheless, this was an excellent post. I especially appreciate the effort to mathematically quantify your thoughts.

    Clarise Adams Murphy MBA
    [Philadelphia, PA]

    Like

  2. How much should I pay for a website and marketing for my medical practice?

    A related article by ME-P “thought-leader” John Deutsch.
    http://www.medicalwebexperts.com/blog/pay-website-marketing-law-firm/

    Ann Miller RN MHA
    [Executive-Director]

    Like

  3. What is the Difference Among Medical Marketing, Advertising, Public Relations and Sales

    As a medical consulting firm, our clients ask us this question frequently http://www.MedicalExecutivePost.com In fact, many modern Health 2.0 practice, economics, financial, accounting and business management principles have been codified in our new textbook: http://BusinessofMedicalPractice.com

    Nevertheless, the short answer may be summed up as follows:

    Marketing = What the doctor knows, or does, differently? How s/he is unique and what is his/her strategic competitive advantage in the marketplace. Is the advantage real, perceived and sustainable?

    Advertising = How your marketing advantage is disseminated to your target audience; TV, radio, signs, websites, blogs, coupons, billboards, insurance booklets, brochures, etc. These are known has media channels of communication and information distribution. And, the marketing message and media must be kept fresh, be credible and repeated, and contain an option for feedback. A marketing campaign must also have clear goals and objectives, and a method of determining success or failure [usually, but not always, ROI].

    Public Relations
    = Generally, PR is deemed to be more credible than marketing or advertising endeavors. Doctors must earn clinical marketing uniqueness, and purchase advertising, but they hope for positive public relations. Media coverage is probably most synonymous with PR since reporters or editors will cover a story if it seems newsworthy, timely or important to their constituency. It is usually in the form of press releases, feature articles, announcements, seminars, charities, alliances and endorsements, testimonial and other referrals.

    Sales = Closing the deal on your marketing, advertising and/or PR efforts. Treating the patient, achieving the expected outcome, and receiving payment for services rendered.

    Best.

    Dr. David Edward Marcinko MBA, CMP™
    Prof. Hope Rachel Hetico RN MHA, CMP™

    http://www.MedicalBusinessAdvisors.com

    Like

  4. SEO

    Being that there has been an algorythm change in Google and that I’m in the business of search engine optimization, I will speak a bit bias to my industry .

    Any budget should absolutely be focused upon content in my ultimate opinion. This in conjunction with smart and social content aggregation. Whether its content marketing, video marketing, Pinterest or Facebook.

    It’s all about good and smart content aggregation where the type of exposure would certainly mean the difference between a “White Hat SEO” or a “Black Hat SEO”

    Hope I added some value to the community!

    David Z.
    [SEO Marketing Specialist]
    Integrated Health Care Marketing Services
    http://www.axiomhealthseo.com

    Like

  5. Why any practice can benefit from better marketing

    3 ways to use marketing to your advantage

    http://medicaleconomics.modernmedicine.com/medical-economics/news/why-any-practice-can-benefit-better-marketing

    Dr. Hurley

    Like

  6. How much time do you have to invest in your marketing?

    Time is an issue especially if you are first starting off. The rule of thumb you need to consider here is the 30/60/10 rule.

    The 30/60/10 rule says that if you are running a product business [DME, etc] you spend 30 percent of your time creating product, 60 percent of your time marketing, and 10 percent of your time doing administrative tasks.

    If you run a medical service business [practice], spend 60 percent of your time on doing your services, 30 percent marketing, and 10 percent on administrative tasks. So, if you only have 10 hours a week to run your business, then spend three hours marketing.

    Good luck.
    Gregory

    Like

  7. PR

    Physicians have been shy about reaching out for free publicity too, even though they are some of the most well-trained and accomplished professionals in our society. There’s no reason for them not to seek out attention and to promote themselves in an ethical fashion.

    Neil Baum MD

    Like

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