Data Mining

The key to marketing your practice to drive growth and profitability

John Riley

Would you purchase a luxury vehicle without knowing anything about its performance, safety features, or premium accessories? Chances are that you'd do some research before investing your hard-earned money into an expensive new ride and that the intelligence you'd collect would empower you to make an informed decision.

Doing research and gathering data to make calculated decisions is a process that should also be applied to your dental practice, especially when it comes to promoting and growing your business. Data-driven marketing provides us with information about our prospects' reception of our messaging, the channels (eg, website, direct mail, emails, advertisements, etc) we should focus on to deliver that messaging, and how often we should use them.

As a dental business advisor and leader at Amplify360, I know just how integral this kind of data is to the success of a practice. We use it daily to help our dental practice owners to double, triple, and even quadruple their revenue. Mining data from your practice's marketing efforts can provide insights into what's working to attract the patients that you want. At the same time, it can enable you to adjust your investment away from strategies that aren't performing. This helps you to be much more agile and effective in growing your business.

What KPIs Should My Practice Focus on to Drive Profits?

There are multiple ways to measure marketing success, and they require you to focus on important numbers known as key performance indicators (KPIs). Without them, you're flying blind and wasting your time and your money. These numbers reveal a lot about how well your marketing strategy is working to attract higher case values. If you're not measuring the success or failure of your marketing tactics, then you're not going to experience the growth that you desire.

Cost per Lead

The first metric that you need to focus on is your cost per lead, which is one of the best ways to gauge the efficiency of your marketing efforts. How do you define what a lead is, and how much do you invest to lock in each one? A lead is an individual who fills out a contact form or who is mutually engaged in a phone call with your front office. Virtual "window shoppers" who simply visit your website do not count; however, it's still crucial to leave a good impression with a well-designed, patient-centric website. Tracking your marketing investment in online advertisements (eg, Google, website banners, social media, etc), direct mail marketing materials, targeted email campaigns, pay-per-click campaigns, website creation and management, and other efforts is the first step in determining if these activities are attracting the patients that you want.

Using a standard formula, you can quickly determine how much each lead is costing you. For example, if your practice invests $5,000 into marketing (from multiple channels such as ads or direct mail) that generates 50 new leads, then your cost per lead is $100.

Considering your cost per lead relative to how well those patient leads convert to clients should give you a good idea if you're overspending or right over the target. Any time that you are running lean, efficient, and productive marketing campaigns that attract prospects that convert, your marketing dollars are working as they should. This is a perfect example of why tracking marketing data to determine the strength of your spending is crucial to your bottom line.

Cost per Acquisition

Another important KPI to focus on is cost per acquisition. This data point estimates how much each new patient is costing you as they move from lead status to walking through the doors of your practice and getting into your chair. Cost per acquisition is a financial metric that measures the revenue impact of a given marketing campaign. It is determined by dividing the total cost of a marketing event by the number of conversions, or in this case, new patients.

Here's a practical example of cost per acquisition in action. You run a Facebook ad for your practice to attract new patients, and you spend $1,000. After the ad expires, you calculate that it created 15 patients with the qualifications that you catered it to in the campaign. Your ad spend ($1,000) divided by the total number of patients that you acquired through it (15) gives you your cost per acquisition ($66).

Is a $66 cost per acquisition good? Let's dig a little deeper. To determine whether you're spending too much or just the right amount to acquire your new ideal patients, we'll want to look at a closely connected metric called customer lifetime value or return on investment (ROI).

Customer Lifetime Value

Customer lifetime value is a calculation of the total amount of money that each patient is likely to spend during his or her lifetime relationship with your practice. Once a patient becomes a fixture of your practice and your practice profits from him or her, you can begin to calculate the revenue that this person generates. This begins with a calculation of the same-day value, the 30-day value, and the 90-day value. Without venturing into the weeds too much, you'll want to estimate the average monthly revenue that you expect to generate from all patients. If you offer a membership plan, that'll be easier to determine. If not, a quick study of collections per month should give you a rough estimate.

Once you've determined your customer lifetime value, you can figure out how much is reasonable to spend on marketing based on your monthly operating costs. Costs may vary widely from practice to practice, but if your operating cost per month is $50,000 and your customer lifetime value is $6,000, then 40% of the customer lifetime value goes to that operating cost, so your marketing spend is $2,400 per patient ($6,000 multiplied by 0.4). Again, this is just a rough estimate, but the data will show you if you're spending too much to acquire patients that aren't providing you with a higher return.

Make the Most of Your Marketing Dollars

Although you didn't get into dentistry to become a marketing expert or accountant, running a successful dental practice requires you to have an understanding of both marketing and finance. Marketing your practice to attract the best patients shouldn't be like throwing darts while blindfolded, hoping to hit the bullseye or somewhere close. Employing data mining techniques can go a long way in revealing the effectiveness of your marketing investment. Knowing your numbers allows you to shift marketing dollars to the campaigns that perform and stop flushing money down the channels that aren't serving you well. With targeted marketing campaigns, you can not only achieve the best ROI but also simultaneously attract your most ideal patients. Ensuring that the right messages are going through the right channels can make a huge difference in your new patient opportunities, production, and profitability. The data that you collect helps make your decisions crystal clear.

Before you throw more marketing dollars at campaigns that might not be serving you, start mining the data that you already have to determine your next move. This will help protect your bottom line, and you'll be creating an effective and profitable plan for your business. And you don't have to go it alone either. An "advisory-based" marketing partner can help you dive into your data to determine the best and fastest route to success-however you define it. Working with a marketing expert who knows the business of dentistry inside and out and who has decades of experience helping practice owners achieve their goals can help get you back to focusing on your patients and doing dentistry in no time.

About the Author

John Riley is the executive vice president of Amplify360.