Different dental practices have different marketing needs. But often a practice will allocate a flat sum to its dental marketing – a monthly budget. This budget is most often set by the dentist himself based on what he feels he can afford and what he feels is “a lot” or “enough”.
Why A Flat Budget May Not Be Right for Your Dental Marketing
Why Use Percentage of the Gross towards Your Dental Marketing? The best answer to this is marketing momentum. If your marketing is working well and your dental practice has a good month that means marketing gets more money. That money can then cause another even stronger month and marketing gets a little bit more again. What this does is allow you to fan the fire. Good marketing results in more good marketing and you get steady expansion. Steady expansion is good because you can also steadily hire and train new staff and grow in a controlled fashion. Using a percentage of the gross means that on lean months, when you have to cut back you can. But all this requires that you set your marketing up in such a way that you are not locked into a fixed budget.
Don’t Get Locked In. Companies that offer marketing services normally do so on flat monthly rates. They also normally insist on longer term contracts. Thus when you set up your marketing you are normally locked into set amounts for your marketing and flexibility is not an option. This is a “fire and forget” approach. You set it up and you can just let it run till next year. It is much harder to find companies that can move your budget around. The problem is that you can get loaded up with ineffective marketing and a complete lack of flexibility. Then you are stuck till the contracts expire. It’s more work to set up flexible marketing and then adjust monthly. However it is also more effective if you have control of your marketing budget and can shift it around. Try to set up flexibility into your marketing efforts right from the start. There are companies that offer this (such as ours). Also internet advertising can be pushed up and down fairly easily.
Seasonal Factors: December is often a slow month for dentistry. January can be strong as people start taking care of dental issues they put off over the holiday season. Each practice will see its own seasonal factors. If you have flexible marketing you can push harder in the slow months and ease off in the strong months. This helps even out your schedule.
Percentage Based Marketing is the Recommended Standard: The Small Business Association and many other references point to percentage based marketing as the correct method. See below for some quotes regarding this.
Effective dental marketing must take into account a number of core factors
Numbers vary a lot for marketing. In some case 6% is recommended all the way up to 12%. Here are the factors you should consider when setting your amount.
Size of existing Client Base. The larger the client base, the stronger the referral traffic. If you have a small client base you must push your advertising budget up.
Length of Time in Business. The longer you have been in business the more brand awareness you have. New practices must advertise harder because they have little brand awareness in their communities.
Size of Practice. This is largely determined by how many dentists you have and how many chairs are available. It can be strongly influenced by how skilled your dental assistants are. A single orthodontist could have thirty chairs and a single family dentist could have three. Your income potential is controlled largely by those two factors. Your marketing should be pushed up or down based on your potential to deliver.
Competitiveness of Your Area. You have to look at how hard other dental practices in your area are advertising. If you do not have aggressive competition you can keep your percentage low. But if there are other dentists who are marketing very aggressively you must compete or they will capture the area.
The Profit Margin of Your Speciality. Cosmetic dentists, implant dentists and orthodontists generally have a much larger profit margin and handle larger fees per client. But they have very little repeat business compared to general dentists. Because of this the specialities advertise much harder than general and family dentists. If you are delivering higher fee speciality services, you must push up your advertising percentage.
Using a Percentage for Your Dental Marketing: References
Small Business Association:
As a general rule, small businesses with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing. This budget should be split between 1) brand development costs (which includes all the channels you use to promote your brand such as your website, blogs, sales collateral, etc.), and 2) the costs of promoting your business (campaigns, advertising, events, etc.).
This percentage also assumes you have margins in the range of 10-12 percent (after you’ve covered your other expenses, including marketing).
If your margins are lower than this, then you might consider eating more of the costs of doing business by lowering your overall margins and allocating additional spending to marketing. It’s a tough call, but your marketing budget should never be based on just what’s left over once all your other business expenses are covered.
From the Small Business Association Website
Percentage Spent on Advertising
The most closely followed guideline for large consumer companies is to spend about 7 or 8 percent of their revenue on advertising, with half that devoted to the labor involved in the project.
Consumer focused companies spend larger amounts, up to ten percent, while business focused companies spend around five percent. According to a 2007 IDC survey, companies had an average of one marketing professional for every $16 million in revenue they had.
– Ehow Article
Chief Marketing Officer Council Website
Companies who drive more than 10% of total sales from the internet allocate more of their budgets to marketing (16.4%) than companies with less than 10% of their sales coming from the internet (10.2%). August 2012 11
Marketing spend represents 11% of their firms’ revenues, up from 8.5% reported in a similar Duke University study conducted in early 2012. August 201212