Physicians News Health news for doctors and patients.
By Rebecca Anwar, Ph.D.
Obviously, everyone knows there’s no free lunch no matter what product or service you buy. So why is it physicians frequently feel that throwing a few dollars at marketing will do the trick? This just isn’t so. Marketing will cost you, but it’s a purchase that gives you a great return on investment.
The value of marketing is simple. It is the key to growing and sustaining a healthy patient base, strengthening your image in the community and maintaining a desirable revenue stream. This is accomplished by attracting your referral sources, educating them about current and new services you introduce, and meeting their needs.
Unfortunately, despite these incredible gains, few physicians view marketing as a line item when preparing their annual budget and planning for the future.
The rule of thumb for practice marketing is to allocate an annual budget based on five to eight percent of your annual gross revenue. In fact, if the practice has never conducted a market study, written and implemented a marketing plan or introduced a new product or physician, launching your initial efforts will require a first year budget of at least ten percent. Beyond this rule of thumb, marketing costs vary depending on these factors:
• How aggressively the competition is marketing and what is required to offset their marketing efforts.
• The age of the practice. An established practice will not have the extensive needs of rolling out a new practice.
• Whether or not you are adding new services or new locations at the same time you introduce marketing the overall practice
• Whether or not you need to do crisis marketing because of an incident or outcome that portrays the practice in a negative way.
It is important to recognize that some of the marketing expenses are already in the practice budget, but are living in your general operating fund. For example, yellow page advertising expense often appears on your monthly telephone bill and when it is paid the costs appear in the category of telephone expense. When you extract this and allocate it to marketing, building your marketing budget becomes more palatable.
Printed matter is another area of current expense that is often affiliated with marketing but appears elsewhere on your expense reports. This includes business cards, announcements, stationery and newsletters.
The question to address is whether or not the current expense dedicated to marketing is used wisely and whether it is sufficient for you to grow and sustain the practice.
It is prudent to address marketing with a well thought out strategy, beginning with examining costs and value. Start by examining past spending patterns that contribute to marketing. Have the practice administrator extract these expenses from last year’s income (profit and loss) statement. Once the expenses are itemized, chronologically list what marketing activities were performed during the past year. This list should include public relations, advertising and relationship marketing, such as:
• Announcing a new partner to the practice.
• Entertaining referring physicians and professional colleagues.
• Christmas gifts to referring sources.
• Lectures and public speaking engagements.
• Media attention, such as quotes, feature stories or byline articles.
• Memberships in community professional and social organizations.
• Marketing activities your staff has engaged in, such as representing you in a local service club, health fairs or visiting hospital patients.
• Sponsoring a cause.
The costs for these events should be listed with your past marketing expenses.
Once you understand the marketing expense patterns of the past, you will be in a position to commit to a marketing budget for the future. If, in fact, you do not have a formal marketing program, this will be the time to invest in a marketing plan.
Developing and preparing a marketing plan requires specific expertise and an inordinate amount of steps that you may not be aware of. It includes market research and demographic analysis of the consumer and competition, as well as identifying marketing goals and strategies to accomplish them.
A marketing budget, supported by a well-prepared marketing plan will take you into the future. It is an essential component to achieving practice financial goals and securing your place in the market. It’s a value driven purchase you won’t regret making!
Rebecca Anwar, Ph.D., is a senior consultant in the Philadelphia office of The Sage Group, Inc.
