The 7 Most Expensive Healthcare Marketing Budget Mistakes You Must Avoid

Whether your marketing budget is large or small, everyone wants to get more results for less cost when it comes to the use of their marketing funds.

Yet most healthcare businesses large and small (including private practices, hospitals and medical product and service companies) keep making the same costly, expensive mistakes in establishing, implementing and evaluating results from their marketing expenditures.

With that in mind, here are the 7 Most Expensive Marketing Budget Mistakes You Must Avoid.

Expensive Mistake #1: Spending marketing dollars indiscriminately – not based on a strong, strategic marketing plan.

 Starting with a predetermined budget and figuring out how to get the most out of it seems logical and pragmatic but It’s exactly backwards. Naturally you have to work within realistic budget parameters but the strategy should determine the marketing budget – not the other way around.

To achieve your measurable marketing and business development goals, you first need to develop your marketing plan, strategies and priorities – before you assign a budget to the tasks at hand.

The late, great author, educator and business maven Stephen Covey used a now-famous analogy that applies to overall business strategy and certainly includes marketing a healthcare business: Covey wrote, “It doesn’t matter how fast you climb the ladder if it’s leaning against the wrong wall.”

Likewise, it doesn’t matter how much money you throw at marketing, if the strategy is flawed – or even non-existent – you will inevitably fail to maximize your marketing budget and fail to achieve your revenue and growth goals.

If you begin with the end in mind (another famous Covey quote) – the end being your measurable revenue and growth goals – you are much more likely to determine the best strategies and application of your marketing budget.

If the cost of implementing your strategic marketing plan and strategies outstrip your financial resources, you can prioritize and execute strategies in a series of phases that correspond to your financial resources. This way, at least you are spending your marketing budget wisely and strategically, even if you don’t have a large enough budget to “eat the whole elephant in one bite.”

Expensive Mistake #2: Failure to track revenue to specific marketing activities and expenses

 The best way to get the greatest long-term profitability for your marketing expenditures is “pushing your marketing winners” and “cutting your marketing losers.” (More on marketing losers in another mistake to come.)

In other words, do more of (and spend more on) what works and do less and spend less (if anything) on what doesn’t work. But you can’t make smart business decisions in a vacuum of information and data about what is working and over-performing to expectations and what is not working (under-performing).

While it’s not always easy to track a direct cause-and-effect or direct return-on- investment for every marketing strategy or expenditure, you have to make the best effort possible to get the best data so you can make the best decisions.

Many businesses focus on branding or re-branding strategies, which are always harder to track to a specific ROI. The trick is to understand that every message in every form carries your brand anyway

So while brand messaging definitely has its place, the hard dollars in your marketing budget should be allocated to the greatest extent possible on messages that are conceived to motivate (not just educate) your audience to want to take action in contacting you or referring someone to your organization.

In prioritizing healthcare decisions, people respond best to messages that clearly communicate a specific solution to a specific health problem or need. And these kinds of marketing campaigns can be more easily and accurately tracked and measured in terms of how many new patients you see for those specific health problems and needs above your prior baseline as a direct result of your specific marketing campaign.

Sometimes people know they have a problem before they are exposed to your message and sometimes they don’t.

For example, if you are a gastroenterologist and you want to perform more colon cancer screenings (colonoscopies), you need to both educate and motivate your audience to the genuine risks of having colon cancer and not finding out until it’s too late to treat.

On the other hand, if you operate a cancer center, your audience (or someone they know and care about) has already received a cancer diagnosis. They don’t have to be educated on cancer risks at that point. They need to decide where to be treated.

A similar process applies to marketing for physician referrals as it does to marketing directly to patients. If you market your specific solutions to their patient’s specific problems, you have a much better chance of getting more referrals for that problem (and tracking those marketing expenses) – particularly if you can differentiate your brand value along with your solution.

If you don’t track, you are going to keep guessing regarding where to allocate your marketing dollars to best effect. Knowing is a lot better than guessing.

Expensive Mistake #3: Treating Your Marketing Budget as Just Another Cost Center

 It’s true that every business expense is part of a cost center. However, the purpose of marketing is to grow your revenue for your desired healthcare products and services (your Top Line), so marketing is as much a revenue center as it is a cost center.

Why does this distinction matter?

In gaining maximum profitability from a cost center, your objective is to “manage costs” and keep costs as low and lean as possible without compromising the quality of your services to your customers. The less you have to spend on a cost center, the more profit is retained.

For a revenue center, the process is exactly the opposite. Since the purpose of the marketing is to drive more revenue, you need enough fuel in your engine that you don’t run out of gas before you get to your desired destination.

You certainly don’t need to spend more on marketing if your marketing strategy is not effective. You want to eliminate waste in your marketing budget and focus your funds and energy on marketing that delivers the greatest results.

The fact is that no business wants to spend more on marketing than they need to achieve their revenue targets. But you also can’t shrink to greatness by applying a pure cost center mentality to marketing. If you cut off your oxygen supply, don’t be surprised when it gets harder to breathe.

Your marketing budget needs to be determined by your marketing and business strategy with constant effort to eliminate waste and increase efficiency and effectiveness. But because marketing is a revenue center, the more revenue that you count on your marketing to generate, the more fuel you need to reach your desired destination.

Expensive Mistake #4: Setting Your Marketing Budget Based on an Arbitrary Percentage of Revenue/Sales

 While percentage-based budgeting for healthcare marketing has fallen out of favor with more progressive businesses, it is still common for many businesses to establish marketing budgets based on a percentage of revenue (or sales).

The basis for this type of percentage budgeting is based on a cost center approach as described in the previous Expensive Mistake #3. The problem with the percentage budgeting method for marketing expenses is that the percentage selected is generally arbitrary and varies wildly based on the business.

The more aggressive marketers who use percentage budgeting apply a higher percentage to their formula. The more conservative marketers apply a lower percentage.

Unfortunately, there is no standard, approved percentage for all businesses to apply if they even use this method. In addition to the more aggressive vs. more conservative mindset, some businesses simply must rely more on marketing- generated new patients than others. A cosmetic surgeon’s marketing budget, for example, will almost always be higher than, say, the marketing budget for a cardiology practice, whether or not they use a percentage-of-revenue method of budgeting.

Here’s another way of looking at this conundrum. Let’s say you have two healthcare practices of the same annual revenue, the same specialty, same size, same number of providers, same mix of services and same payor mix.

Now, let’s say they both use the same CPA or have the same mentality of their CFOs. Let’s further stipulate that they both assign the same percentage-of- revenue formula to determine their respective marketing budgets.

The only difference is that one practice is located in Manhattan (New York) and the other is located in Manhattan, Kansas. Which business is going to have more buying power for the same budget?

So if percentage of revenue is not the best method of budgeting, how should you determine your budget for marketing?

The most savvy and successful marketing businesses in healthcare use a goal- based method of budgeting because the whole purpose of marketing is to help achieve the desired revenue goal. In other words, the business determines its marketing plan and strategies in alignment with its revenue goals and adds up the costs of implementing those strategies and that total becomes the marketing budget.

If the available money to fund the required budget is insufficient, the business can either establish more conservative goals that match its financial resources or it can phase in the needed marketing costs over a longer period of time.

Expensive Mistake #5: Failure to negotiate rates with marketing services providers and vendors

 Many marketing service and product providers and vendors are willing to negotiate their fees to earn your business but they are rarely asked to do so. Few healthcare organizations have a structured process and protocol for negotiating fees with these marketing service providers and vendors.

Additionally, many healthcare organizations do not employ experienced negotiators among the ranks of their marketing executives or other team members.

So what marketing services are negotiable?

Advertising media is almost always negotiable, particularly traditional media such as TV, radio and print advertising. If you don’t negotiate or do so effectively, the media company gets to charge you its retail fees. Negotiated media contracts can include lower rates than originally quoted, better bang-for-the-buck schedules when more people are watching or listening as well as other extras (freebies).

Online marketing service providers will negotiate, but only if you insist. These service providers include companies that provide SEO, social media, website development, content creation, online reputation management and more.

Consulting services are often negotiable if you know how to structure consulting scope and whether to negotiate for hourly rate or retainer-based pricing.

Marketable product pricing is sometimes negotiable. If you plan to purchase technology or software that can be usefully marketed to your patients and referral sources, it’s worth the effort to negotiate fees based on your needs and how you can position your organization as a more valuable customer to the product provider beyond your direct fees paid to them.

The best philosophy to apply here is that everything is negotiable. Sometimes it won’t work out that way, but experienced negotiators understand and apply that philosophy in their business dealings with many types of vendors, not just marketing service providers.

Expensive Mistake #6: Spending time (and money) trying to fix/tweak your marketing LOSERS

 The process for continual improvement and increased return-on-investment for your marketing expenditures is really easier than it may seem.

The simple trick is to double-down on your winning marketing strategies, tactics and campaigns and also knowing when to cut bait on marketing activities and costs that are clear losers for your business in your market.

In other words, push your winners and cut your losers and shift marketing strategies and budget accordingly. But remember that it’s always important to test new ideas and ways of leveraging your marketing budget to better effect.

If you are relentless in this commitment, you will always be focused on doing more of what’s working, finding new strategies than may work even better and having little patience for low-return marketing investments.

Many marketers and even more leaders in private practice healthcare tend to be stubborn about making something work even if it isn’t working because they believe it should work. They just keep plowing ahead in hopes of solving the challenge and fixing strategies that just are not performing to expectations.

Life’s too short and the opportunities for wins are too numerous to justify beating a dead horse. (No horses were harmed in the writing of this report.)

Expensive Mistake #7: Picking the wrong agency (if you even need an agency)

 Some healthcare practices and many hospitals as well as other healthcare product and service companies work with marketing and advertising agencies to help execute branding or rebranding strategy, development of creative concepts and messaging as well as organizing and improving online marketing performance including better website development and design as well as SEO, social media, online advertising and more.

Some agencies do a great job for their clients and more than justify the fees they charge. Other agencies…not so much.

While most hospitals and healthcare product and services businesses need to work with agencies on at least some projects, many healthcare practices don’t even really need to engage an agency to get professional help in organizing and executing their marketing strategies. This is particularly true for practices with smaller marketing budgets but can apply to some larger groups as well.

Many healthcare marketing consultants have a network of relationships with high-quality freelance talent and can help coordinate the work of an external marketing team as a kind of “agency without walls” that can be delivered at a lower price than many agencies that have lots of employees and high overhead that they have to account for in determining the fees they charge to their clients.

So how do you decide which agency will be most productive for your organization if you have determined that you need and want to work with an agency?

Comparing agency services and fees can be tricky because agency services are not a commodity that can easily be compared on an apples-to-apples price comparison. Some agencies specialize in only some specific marketing and advertising services while others offer a wider range of services.

It’s not always necessary to engage an agency that specializes exclusively in your field of practice (particularly since most agencies don’t want to limit their customers to one specific industry or segment of an industry).

But you also don’t want an agency to be learning on your time and your dime. (Due to inflation since the Great Depression era, yesterday’s “dime” works out to many thousands of dollars in today’s financial setting – particularly for the cost of agency services. So it’s a safer bet to find an agency that has at least a reasonable track record of working with healthcare practices and/or hospitals.

Here is a quick checklist you can use when making this decision.

  • Do we really need an agency or is there a better and less expensive way to get professional help that agencies provide?
  • If we do intend to engage an agency, does this agency have experience working with healthcare businesses  and/or provider organizations? Does their portfolio and case studies on their website bear this out?
  • Does the agency specialize in the categories of healthcare marketing that I need (e.g., online, traditional media, consulting, strategy, branding, referral marketing, etc.)
  • Is the agency open to negotiating their fees? (You don’t want to ask them directly but you can test them by negotiating and see how they respond.)
  • Will the agency provide client references who can vouch for them?
  • Does the agency have a unique or proprietary process that allows them to 
charge less because they are not reinventing the wheel for every client but still provides specific customization to your business, brand and needs?

Bonus Mistake: Continuing to spend money on legacy marketing just because “we’ve always done it.”

Healthcare organizations that achieve the highest ROI on their marketing budget believe (correctly) that there is no such thing as “legacy” marketing. In this definition, legacy marketing does not apply to promoting business anniversaries or milestones.

Legacy marketing is the same marketing investment carried over year-to-year because it’s always been done or because it’s a pet program of the company CEO or one of the doctors. 
Many times, brand marketing becomes legacy marketing in the context of marketing the same brand story in the same ways and replicating marketing costs even if the marketing reinvestment is not justified based on any measure of results or impact.

If your organization wants to make a charitable contribution each year to another organization or program by running a brand ad in their publication or on their website or sponsoring an event, this is perfectly reasonable but should be part of your public relations or community goodwill budget without any expectation or a return on the investment or a single new patient taking action as a result of your branded sponsorship dollars.

However, legacy marketing that is just committed year after year because it’s a habit without a strategy or business justification can be a black hole for marketing dollars.

 

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