Is your practice profitable? Most medical aesthetic practices can answer this question quite easily. A review of accounting statements or tax returns will tell you if your operation is in the red or the black. But is each patient you treat profitable? And did the new dermal filler campaign you just completed bring the return on investment you originally estimated? For many practices, these questions are more difficult to answer.
Taking the time to determine the cost of acquiring new patients, as well as the potential long-term profit margin for specific patients groups, can help you fine-tune your pricing. It can also streamline operations and zero in on your most successful marketing avenues, culminating in increased profitability.
Cost Per Acquisition
Marketing and advertising are integral expenses for medical cosmetic practices, and more media and marketing agencies than ever before are vying for your advertising dollars.
Most small businesses use a combination of guesswork, the amount of funds available and gut feeling to set their marketing budgets. However, understanding the lifetime value (LTV) of a patient and the cost to attract a new patient provides a more concrete view of the most and least successful marketing avenues.
Customer acquisition costs (CAC) are calculated by dividing acquisition expenses by the total number of new patients.
Step 1. Track your expenses for every advertising and marketing campaign you launch to bring in new patients. This includes the cost of salaries for personnel or outside agents organizing and implementing the campaign, as well as any materials or ad space purchased.
Step 2. Track how many new patients book a procedure as a result of that campaign. You can do this by asking—and training staff to ask—new patients how they heard about your practice.
Step 3. Divide the cost of each campaign by the total number of patients who actually purchased a procedure or product from your practice as a result of that marketing effort.
The resulting number will tell you the cost per acquisition. For example, if you ran an ad in a local newspaper for $1,000 and you gained four new customers, your CAC would be $250.
Not too surprisingly, there are different opinions as to what constitutes an acquisition expense. For example, rebates and special discounts do not represent an actual cash outlay, yet they do have an impact on cash flow.
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