Calculating ROI just got a whole lot easier
If you think measuring return on investment sounds too much like hard work, Guy Meyers, head of customer success and product at Software of Excellence, has some useful tips on how to make sure your marketing budget is returning the results you expect.
For most business people, the task of calculating and analysing return on investment (ROI) is a straightforward necessity of business life. Whether the investment is being made in plant, machinery, people or promotion, the need to understand whether an investment has been worthwhile is surely one of the first rules of business.
However, despite this logic our recent research into the marketing habits of dentists found that of those sending what they described as ‘marketing communications’, less than 20% were routinely measuring success, with many preferring to rely on ‘gut feeling’ to determine whether a particular campaign had been successful or not. So in an era when the need for a co-ordinated, strategic approach to marketing is greater than ever and when every pound spent needs to be wisely invested, why do dentists fail to accurately measure the return on their marketing activities?
Measuring your return
The answer primarily lies in the tools available to help make such calculations and the time required to gather the evidence. In a Marketing Services Survey conducted in 2015, Software of Excellence identified that a lack of knowledge, time and the inaccessibility of data were the key reasons for not formally measuring success of marketing campaigns. But as marketing grows in influence and with the drive to spend ever greater amounts on patient communication, the need to accurately define and measure success has become an influential business metric for dental practices.
The website www.investopedia.com defines ROI around a calculation of profitability: ‘[ROI is] a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ROI measures the amount of return on an investment relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio.’
So it follows that to determine ROI for a particular campaign, a dentist or manager should follow some simple steps:
- Determine the initial outlay – this is the simplest part of the analysis and requires the calculation of all the costs involved in the campaign – remember to include the cost of any human resources required to execute the campaign
- Calculate the return – this is a more complicated step and can take many hours if the correct systems are not in place. Calculating your return based on revenue requires a mechanism by which you can easily and efficiently calculate the total income generated. At Software of Excellence we define ‘return’ in three ways: direct return – when a targeted patient takes up a promoted treatment. Indirect return – when an untargeted patient takes up the treatment. Secondary return – targeted patients who take up another type of treatment in addition to the promoted treatment
By using this more sophisticated approach, dentists can get a true picture of the revenue generated by a particular campaign.
- Divide the return by the initial investment so you can determine whether the return has met or exceeded expectations.
Success of failure?
The ability to measure the success of a campaign in terms of facts and figures is helpful because it adds an element of objectivity to the analysis. If you want a whitening campaign to give you a 300% revenue return on your initial outlay, there is a clear definition of success or failure. However, our latest research has revealed that success criteria are measured predominantly in terms of appointments booked and treatment uptake – rather than revenue. I suspect this is because correlating an increase in revenue to a specific campaign has, until now, been too difficult and time consuming. Furthermore, any attempts to determine revenue uplift would more than likely only take account of direct treatment uptake, rather than being able to calculate the secondary or indirect return generated.
There is nothing wrong with having enquiries, appointments and treatments as part of your success criteria for a campaign and drilling down into this level of detail can provide a deeper insight as to where campaigns are faltering. For instance, if a promotion gains a lot of enquiries, but few appointments, you might be able to pinpoint a problem in how enquiries are being dealt with in reception. If initial consultations are being booked but treatment uptake is low, then perhaps chairside discussions between the dentist and patient need addressing; with the potential for extra training.
The point is that by analysing the data, dentists will be more knowledgeable about their business, enabling them to make better, more informed decisions in the future. At Software of Excellence our mission is to make important business data easily accessible and in Exact V12 we have now turned our attention to marketing and made the calculation of ROI a focus in the new software.
The Marketing Manager element of V12 provides dentists with the tools they need to accurately audit the success or otherwise of their marketing initiatives. By using the practice’s actual treatment data within Exact, the Marketing Manager module automatically calculates all the revenue generated by a campaign and splits the results according to the type of return.
We believe the ease with which this data can be gathered will make a fundamental contribution to a practice’s ability to effectively market to its existing and potential patients. Interpreting the relative effectiveness of different campaigns will enable dentists and managers to embark on a routine process of review and analysis, which is crucial if marketing is to be improved over time. Understanding which messages and treatment options resonate with which groups of patients is fundamental to ensuring that resources are not wasted.
One of the crucial elements in determining marketing success is the ability to put the right message in front of the right people at the right time. By analysing ROI it is possible to refine one’s messages and identify the appropriate audience in order to improve success, increase future revenue, and ensure more patients take up optimum treatment.