Setting a marketing budget for 2010

ByPaul M. Stubenbordt

Many practices ask me, "What should I spend on marketing?" Some consultants might give the same number to anyone who asks, a generic $10,000, $50,000, $100,000 or what have you. I, however, believe that there is no simple catchall answer, as many factors influence the true value of advertising. The answer depends on the size of your market, the number of competitors, how new you are to the market and your desired revenue goals.

Marketing is intended not only to acquire new patients but also to keep your current patients. Marketing also should not be marginalized to mere radio, TV and print ads. Good marketing utilizes logo items such as pens and notepads, internal pieces such as posters and educational DVDs, and printing of brochures and patient newsletters.

A good rule of thumb is to spend 3% to 6% of your total revenue on marketing. However, if you're new to town or trying to launch a new service, then be prepared to spend in excess of that percentage. Marketing budgets are usually determined a few months prior to the beginning of the new fiscal year. If this is January for your practice, then you should have next year's budget complete by the end of October or absolutely no later than the end of November. After the budget has been approved, your agency will develop a marketing plan based off of the budget.

Example:

Acme Eye Institute

2009 revenues through October = $2,913,000
Projected revenues throughout the remainder of the year = $3,495,600

Choose your level of spending.

Slight presence: 1% = $34,956
Moderate: 3% = $104,868
Strong: 6% = $209,736
Aggressive: 10% = $349,560
Ultra-aggressive: 15% = $524,340

Now, let's say you've picked 6%, but in March 2010, you notice revenues are down 10% and you need to cut expenses. Many practices look at marketing as the first cut. I strongly recommend against doing this, as it can send your new patient acquisitions into a death spiral. That's why you need to set a budget you'll feel comfortable with from the beginning.

The great thing about marketing in an economic recession is the cost of media; there are some real bargains out there. Radio, television and cable are only 50% to 80% of the cost from just a few years ago. So if you have reservations about spending money on advertising and return on investment, then you could look at it like you're saving 20% to 50% or just getting that much more bang for your buck. But as the economy continues to improve, more and more advertisers will be gobbling up media. As demand increases and supply decreases, we'll see the price of media once again reach pre-recession pricing. My advice is to get your budget approved so that you can lock in annual contracts to take advantage of low rates. Most contracts come with a 2-week cancellation clause, so if you do cancel before the year is up, you won't be penalized.

In my next blog, now that we have our budget approved, we'll look at how to choose the right message and medium for your 2010 marketing campaign.