Maybe some of us don't remember this saying – it seems quaint and out of date, but the sentiment is as relevant today as when the saying was first coined.
Todays translation for medical business owners would be:
"Do I need really need to spend money on marketing to succeed in my business and how much do I spend?
Gone are the days when a medical business hung out its shingle or relied on word of mouth to build and grow. Today's competitive world has come with new realities for medical businesses – whether for sole practitioners or large multi-nationals. Like every other business, you need to include a marketing spend component, but how much should that be? Of course all businesses are different, so there are no black and white answers to the question. In essence, your marketing plan needs a budget component that takes into account your overall business goals.
We can look at an example of a company that used a strategic marketing plan including a budget that accounted for their business goals and a company that didn't have a plan or a budget and the resultant outcomes.
Example 1: A large multi-million dollar facility is in the planning phase. The new facility is going to double the existing capacity of their service provision. The existing services are to be moved over. It is a 4 year project from planning to delivery. Early into the project a marketing plan is devised and the budget set. The plan accounts for the new facility to open doors and not have an empty schedule. Over the period covering concept ,design, completion and end delivery the strategy is implemented.
The important point of this strategy is the recognition that to achieve a financially successful outcome , money needed to be invested in marketing long before any chance of income being generated from the service.
The opposite strategy is to build the facility and then try to fill it up. This means not having the marketing expense, but having heavy ongoing operational costs when opening whilst running at below 50% capacity and playing catch up trying to fill schedules.
The result: The facility was completed and was running at around 80% capacity one month after opening.
Was this a successful strategy – absolutely.
Conversely, there are lots of examples of medical products, service providers and facilities that have struggled or failed due to a lack of marketing spend.
Example 2: A joint practice wants to grow their business. They have a good, diverse product and service line and a strong Unique Selling Proposition. There is a business growth plan that incorporates different offerings but it hasn't included a detailed marketing plan. Most of the marketing activities have been done ad-hoc or in-house. The practice relies heavily on word of mouth, relationships and web based marketing. They have experienced inconsistent results and unexplained drop offs. There is no consistent monitoring of the business and the business is in danger of reaching crisis point.
Like the first example, they have the product, services and the facility to expand but they have considered marketing an unnecessary expense that they have wanted to minimise in their business budget.
The time, opportunities and money lost by a lack of planning needed to be put aside and the business completely re-launched with a comprehensive marketing strategy. What the first example knew and the second example learned is that marketing is not an expense item, it's a performance based revenue item.
So how do I set a realistic marketing budget for my business?
Have your business goals set and know what you want to achieve. Make the goals realistic and achievable and set a marketing plan and budget accordingly.
If you haven't set a marketing budget before, there are lots of ideas based around %, but here is a simple 3 step process example to help you get started.
Know your goal.
Start off with the end result foremost in your mind.
Equate your incremental growth goal into dollars. Over your current annual revenues, how much do you want to increase in the next year?
Return on Investment (ROI)
Divide your $ goal by an ROI of 4. Some marketing strategies have better results than others. Overall your goal for your marketing plan should be a return between 3 and 5 to one. We can use 4 as a middle ground ROI. This is a per annum goal and your matching budget can be broken down into monthly or quarterly increments – but remember that you will usually have the heaviest amount of spend in the early stages of your marketing.
Monitor your goal and your budget and keep them aligned. Maintain the ratio between goal and budget if you need to adjust up or down. Ie – if you are increasing in growth at a higher rate – you can increase your marketing.
You need to use your budget wisely – monitor what is effective and adjust it effectively. Stick to your marketing plan and be aware of your budget spends. It is often the small leaking ad hoc items that start to eat into your budget pie. Things like distress rate media and promotional items that never formed part of your plan that can bleed hundreds to thousands of dollars at a time and are unlikely to deliver results.
Have a goal – make a plan, recognise marketing is a performance based revenue item.