What am I bid?
It started with a question at our Mastermind meeting on Saturday. “Chris – we always send a patient who refers a friend a £25 M&S gift voucher – do you think that’s a good idea?” To answer – I decided to hold an auction. Lot 1 is a new private patient. If I can guarantee you that:
in the first 12 months of your relationship, this new patient will invest £1,750 in treatment
each year for the next 10 years, she will invest an average of £300 in preventative maintenance
she will regularly refer family, friends and colleagues to the practice
you and your team will enjoy having her in the practice
How much am I bid? Can you guess what the top bid was this weekend? £4,000. Even I was surprised – and when I asked “why so high?” the reply came: “because I would be prepared to pay for this patient in advance, knowing the quality of the referrals she would bring.” That is a very far-sighted and confident viewpoint indeed. The majority of bids came in at the £500 – £1,000 level – even then, a considerable sum of money (maybe I should be in the new patient auction business). My next question was met with silence – as delegates considered the impact of where I was going with this: “so how much do you currently invest in the acquisition of each new patient?” There were two answers around the room:
I have no idea
The marketeers ask us to make a distinction between a sale and a long-term relationship. Groupon is about selling – come in, get your teeth whitened or straightened – we will try and keep you but the chances are you will bugger off to the next “deal” and we will never see you again. Very poor return on investment and customers not clients (did you hear the one about the dentist who sold Clearstep cases on Groupon at deep discount – then the supplier went bust?). Your objective is not to sell – it is to become a “Principal Trusted Advisor” to the patient – just like an business accountant, family lawyer or IFA. In so doing, you acknowledge what the marketeers call the LTV – life-time value – of the relationship. In the case of Lot 1 above – the LTV was £1,750 + £300 x 10 = £4,750 PLUS the referrals. How much would you have bid? How much do you invest in the acquisition of each patient currently? How much do you think you ought to invest? How would you invest the money? May I suggest that dental business owners need to raise their game when it comes to new patient acquisition? I’m not suggesting £4,000 M&S gift vouchers – but I am calling for a radical re-think of how much is invested and where the funds are allocated. Remember my suggestion that your new patients should arrive: 1/3rd word of mouth 1/3rd selective visibility, direct marketing and networking 1/3rd web and social media and that your marketing budget should be allocated across these three sources. Remember also, my suggestion that your marketing budget should be 5% of gross sales every year, with a further capital investment in re-branding and re-marketing every 3 to 5 years. Here are a few tips:
calculate the average first year spend of each new patient in the last 12 months (by the way – by fee-earner in the building – just so that you can prove to yourself that you personally persuade patients to invest 5 times more than your associates)
calculate the average spend of existing private patients per year
work out the LTV of your patients over a 10-year period
ask yourself what proportion of that you would be prepared to invest in a new patient
and how many new patients you would like in the next year
Now you have marketing budget – and you are ready to attend the new patient auction, knowing what you are prepared to bid.