You probably heard the saying "you need to spend money to earn money". Nothing could be more true when it comes to preparing the marketing budget for your private practice.
Many private practice owners find it difficult to know how much money to allocate to their marketing budget, or even how much marketing costs. The result of this is that private practices set incorrect marketing budgets which in turn costs them lost opportunities. This article goes through how much a private practice should spend on marketing and what prerequisites should be in place to calculate the marketing budget.
Marketing is an investment in your private practice
Many private practices make a mistake of looking at their marketing budget as an expense - and as with most other expenses, they also look here for opportunities to cut costs. In reality, the money private practices, or any other businesses, spend on marketing is an investment. Once you start to recognize that marketing is an investment in new clients and increased revenue through measurable channels, it will be easier to see it as a crucial tool in growing your business.
Know what you want to achieve
In order to set a suitable marketing budget, you need to know what your goals are. You should be clear about what you want to achieve with the money you are going to invest in marketing before investing it. Do you want to reach new customers? Increase the awareness of your brand? Maybe you're looking to book more of your high-value services. Make sure you define these goals clearly before you begin.
Measure every marketing activity
You or the agency you work with should be tracking all of your marketing activities. There should be no doubt as to whether a campaign has been profitable or not. How much did a click on your Google Ads ad cost you? What has an ad on Facebook cost? And how many times did the customer actually click on your ad before making a call to book an appointment with you?
What is a new client worth to you?
When you know the value of a new client, or even better - the customer's lifetime value (CLV), you know how much you need to spend on "buying" a new customer. This allows you to more easily determine the budget in the various marketing channels. Knowing the lifetime value of a customer relationship opens up many more opportunities for marketing than if you only look at the cost per acquisition.
What do traditional marketing budgets look like?
Traditionally, a marketing budget is been planned in relation to the company's revenue. So in this regard, research and comparison data are easy to find. Here are some examples of marketing budget allocations relative to business revenue:
- Established private practices that have been operating for more than 5 years, would have a marketing budget of 5-10% of their overall revenue
- New private practices that have been in business for less than 5 years would typically have a higher marketing budget of 10-15% of their overall revenue
The above examples are consistent with the marketing budget research prepeared by the Business Development of Canada (BDC). For comparison, here are some other marketing budget allocations, depending on the nature of the business:
- In consumer services, the marketing budget is typically 7 to 15% of the revenue
- In services where the brand is the most important differentiator, the marketing budget is typically 15-30% of the revenue
- In an e-commerce-based business, it's a good idea to define the marketing budget purely on a margin basis. The budget can well be 20% - 50% of the product's sales margin
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