Prior to working with us, many of the dental practices we meet with aren’t certain how to know whether their marketing campaigns are really working. One of the questions we get asked most often is how to track what their campaigns are actually producing. To answer that question, we would like to talk a little bit about Marketing ROI — what it is, how to calculate it, and why you should be tracking it.
What is Marketing ROI?
In general, ROI stands for Return on Investment, and it refers to the amount you earn versus the amount you invested. The goal is to have a positive ROI, meaning that you earned more than you invested. When you apply this concept to marketing, it refers to how much you earn versus how much you invest in marketing.
The objective of any marketing plan is to attract new patients who spend money on treatments at your practice. When you want to know if your marketing efforts are paying off, it is important to consider only the actual amount the patient spends because the best way to understand your return on investment is to track the real income earned (revenue) . For instance, if a new patient comes in and you propose a treatment plan totalling $50,000, but they only complete $10,000 worth of services, then the revenue that patient generated for your practice is $10,000. There are instances, as we all know, that a patient only moves forward with a portion of the treatment plan initially but completes the rest at a later date. It is important to understand that this is an ongoing activity. We recommend revisiting these numbers regularly.
How to calculate ROI for your dental practice
The basic way to calculate marketing ROI is:
Revenue Generated – Marketing Costs / Marketing Costs
This calculation method is somewhat simplified, but it will give a general idea of marketing ROI. It can be used to calculate marketing ROI for the year, for a specific channel, or for a specific campaign. The main idea here, again, is to consider the actual revenue generated in your calculations in order to gain a better understanding of how successful your marketing efforts are.
Most practices know how much they are spending on marketing and track how many new patients they see. Some also track where these patients are coming from (Google ads, etc.). However, few practices are taking the extra step to understand how much revenue they are generating, and even fewer are considering the lifetime value of a patient, i.e., how often they return to purchase more services and how many people they refer to the practice.
Marketing ROI calculations are more accurate and useful if you have a way to distinguish how new patients come to select your practice. That is why it is important to track phone numbers online and use form submission tracking to more accurately identify where new patients are coming from. This helps refine your marketing ROI calculation overall and when you want to track a specific campaign. Keeping track of a patient’s lifetime value is a bit more complicated, but is helpful in determining long-term marketing ROI, since annual ROI does not really tell the whole story.
Why track Marketing ROI?
The rise of digital marketing over the last decade has increased average marketing ROI for all businesses that take advantage of online marketing opportunities. In general, digital marketing is a lower cost strategy compared to print, television or radio, and has the best potential to reach the target audience in particular. As digital marketing has gained in popularity, technology has improved and costs have gone down, digital marketing ROI has generally increased in response.
Marketing ROI is an important calculation for any dental practice with a marketing budget. It is especially important if your practice uses multiple marketing channels, including digital. Calculating and tracking marketing ROI takes the guesswork out of marketing your practice.
If you want to know that you are maximizing your marketing budget, ROI is a concrete way to do that. When you calculate ROI for an individual campaign or digital channel, you can then determine if it was worthwhile to begin with and whether you might want to repeat or continue with that particular strategy. In essence, if you know the marketing ROI for your practice overall and for individual marketing channels, it becomes much easier to make decisions about how to allocate your marketing budget. Knowledge is power, as they say.