Let me start this post with an obvious statement: if you have a dental or orthodontic practice, you will almost certainly need to market to attract patients. And if you are going to market, you need a plan in place.
With the obvious out of the way, here are the 4 steps to developing a useful marketing budget. The process won’t take very long at all, but has proven to be useful for a wide variety of markets from the size of Brunswick, GA to New York, NY:
Set an initial marketing budget
To do this, take your expected annual revenue and multiply by 7%. Why 7%? This number isn’t exactly etched in stone, but over time and through various market sizes, this percentage has proven to be the most effective on average. So, if your practice generates revenue of $500,000 per year, your marketing budget for that year is $35,000. This is your total marketing spend amount for the year. It includes costs for production, placement, distribution and any other costs related to marketing. If this amount is going to be exceeded, you need to be notified beforehand.
If you have a new practice, you need to set a minimum monthly amount to spend. A good starting point is $2,000 per month. That can be adjusted for market size as we’ll discuss in the next paragraph. Also note that we referred to expected annual revenue. If you have a mature practice, your expected annual revenue for the coming year should be the same as last year’s (just to be conservative). If the practice is relatively new and growing, judge based on the number of annual contracts and multiply that number by 80%. So, if you sign $200,000 of contracts annually on average, the expected revenue for these purposes would be $160,000.
Adjust that budget for market size
Placing almost any type of ad is more expensive in Atlanta, GA than it is in New Orleans, LA. The clear reason is that the number of people that will potentially see any ad in Atlanta is substantially greater than the number that will potentially see the ad in Pensacola. As a result, a budget that can buy 10 TV ads per month in Pensacola may only get you 3 in Atlanta. You need to have a certain minimum level of market coverage to make your marketing work so the budget needs to be adjusted upward in Atlanta. By the same token, advertising in Tifton, GA is cheaper than Pensacola for the same reasons.
The general rule of thumb here is to adjust up to as high as 9.5% for the largest markets (top 10 media markets) and down to 5% for the smallest markets (ranked 100th and smaller). If our $500,000 practice was located in Dallas, TX, the budget would be $47,500. If it was in Ada, OK, that budget would be $25,000.
Split your budget up by quarter
As we noted in an earlier post, this is a seasonal business. When kids are out of school for various reasons in the first and third quarter, new patient demand is the strongest. The holiday season is the weakest. You want to spend the most when people are most interested in your services. Here’s one way to divide up the spending by quarter:
1st quarter – 30% of total budget
2nd quarter – 20% of total budget
3rd quarter – 35% of total budget
4th quarter – 15% of total budget
A number of practices will simply stop advertising from Thanksgiving through the end of the year. Most of that fourth quarter spending will come during October thanks to a small boost from that month being Orthodontic Health Month.
Determine how much you will spend on each type of media
Entire websites, companies and industries are dedicated to the myriad types of advertising available for practices. Certain types will work better in some markets than in others. We have provided some general guidance on what we believe is the most effective (you don't necessarily need a 50 page, graph-laden demographic/psychographic breakdown), but results will vary. Here you simply want to decide how much you plan to invest in each type of media. With a definite nod to the fact that spending will vary depending on practice, market and a host of other factors, here’s one way to break up that spending:
Take 60% of your spending and put it toward the marketing that you want to push the heaviest. If it is electronic media (TV or radio), print, direct mail or, gasp, yellow pages (please don’t let it be yellow pages), you’ll want to make your biggest push here while leaving some funds to diversify into other areas.
From there, you can split it up among the other ad means. Maybe you put 60% toward electronic media, 20% toward a billboard and the other 20% as a general usage among social media ads, a couple of open houses and sports team sponsorships.
Very clearly, as the year progresses, things will change and you will need to adjust your budget, spending and media mix accordingly. Weaknesses and opportunities always present themselves. If you could predict in November of 2013 exactly what would happen in November of 2014, you are in the wrong business. What we’ve described here is a place to get started best on the best information you have. From there, you can adjust as you see fit.
Of course, we’d be more than happy to help with any aspect of developing your marketing plan. Contact us and we’ll do what we can to help get everything set up for you.
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