Budgeting for advertising at a hospital or practice is a lot like appraising real estate. When real estate investors value a home, they look at it in 3 ways: the sales comparison approach (finding the market value of comparable properties), the cost approach (what it would cost to replace the building with a similar one), and the income approach (what you would expect to earn if you rented out the space).
A good appraisal takes in all of these factors, in the same way a healthcare marketing budget should include more than just an ideal estimate. Budget planning for hospitals and practices is something we talk about in our seminars all the time and a good medical marketing agency can help you get on the right path. But it’s not easy, and it’s definitely not something you can ignore.
The biggest medical marketing budget mishap
After a successful year, some healthcare providers make a dangerous assumption. They start to believe that if revenue was sufficient in the last fiscal year, this will automatically be true for the next one. In other words, they decide they don’t need to spend any more money because they’d like to keep their marketing about the same.
This just isn’t the way it works. If equity protection is your goal, you still have to spend on marketing to see money come in. You cannot expect to keep a steady flow without a continuing investment.
Marketing is a revenue center, not a cost center.
You have to plan for budgeting if you expect to see any ROI. But it can be tough to figure out where to start. You might begin with some simple questions:
- What did you spend last year? Of course, this isn’t always a good indication of what it will take to compete with the changing healthcare landscape in the coming year, but it’s a good starting point if you had a relatively successful year.
- What would you like to spend? It’s a bit of a loaded question. You’d like to spend as little as possible on marketing, if this could get you results, but of course it’s a lot more complicated than that.
- What are competitors spending? This one can be difficult to figure out, but a healthcare marketing agency like ours can help you get a good sense of competitor spending.
These questions create a decent launching-off point, but you cannot expect to arrive at the right number without thorough planning. And that involves using a combination of methods to arrive at the right budget, just as you would if you were appraising real estate. The right investment includes the perfect budgeting strategy.
#1: The Dartboard Approach
Grab a dart, shut your eyes, and throw; the number you land on is your medical marketing budget for the fiscal year. The dartboard approach is what many new practices or those just beginning to establish a budget often rely on.
The dartboard approach may take into account an ideal spending level, but your marketing falls short when you just pick a number and hope for the best.
#2: Percentage-of-Revenue Method
A smaller practice may need to spend about 10-15% of their revenue in order to see a return. Then again, there are those practices that spend zero revenue on advertising. On the other hand, some medical specialties and hospitals might spend less than 5% of their revenue.
Percentage-of-revenue is certainly something to take into account when developing a budget, as long as you keep in mind that this can vary greatly. A hospital bringing in millions of dollars a year in revenue can do well with an advertising budget of less than 5%. But a practice bringing in $100,000 won’t get by with such an unrealistic budget.
#3: Goal-Based Budgeting for Healthcare Marketing
A truly customized budget will take into account your goals for your hospital or practice. Your goals likely change from year to year, and your budget should change with it.
- Is your goal to build your brand?
- Do you want everyone in a certain area to see your ad 5 times?
- Do you hope to expand your reach and frequency?
- Are you promoting a new hospital wing?
#4: ROI-Based Budgeting
Perhaps the most important factor to take into account with your healthcare marketing budget is your expected return on investment. How much would you like to grow this year? Let’s say it’s $1,000,000. With the right budget and strategy, you might have a goal of a 3-1 to 5-1 return on investment. If you set a goal of a 4-1 return, the resulting budget would be $250,000 a year–or about $20,000 a month.
If you’ve never marketed before, you might be falling out of your chair right now. We’d love to tell doctors and hospitals they can spend $1 and turn it into a successful marketing campaign that generates millions of dolars. Or that’s not possible, and the fact is, your case is unique.
There’s no one-size-fits-all budget. If you’re feeling lost with all this, give us a call at (800) 656-0907.