Understanding your practice’s Patient Acquisition Cost (PAC) is crucial for the growth of your vein practice. This single number can guide you through your marketing efforts and help you cut down non-effective marketing costs. Many vein practices fail to consider the PAC metric. Instead, they scramble to acquire more and more patients, oblivious to the amount of money being paid out to reel them in. When you repeatedly spend money on marketing, regardless of whether it is on print ads, digital marketing, direct mail or community education seminars, and you have no idea what your PAC is, it’s bad for your business.
It is not surprising then that a vein practice that doesn’t take the time to figure their PAC and Revenue Per Patient (RPP) is unwilling to spend money on marketing initiatives because they look at this as an expense, not something that generates revenue. Many experts, both inside and outside of healthcare, believe that failure to determine customer acquisition cost and revenue per customer and its impact on business is a major reason why businesses fail. But that’s not all there is to it; PAC and RPP are also important metrics for determining where and how to distribute your marketing dollars, helping you get more bang for your buck.
Calculating Your PAC
Determining your patient acquisition cost is quite simple if your staff is trained to identify exactly where each and every patient found out about your practice and is committed to accurate documentation within your practice management software.
It all boils down to following these steps:
- Track your expenses for every marketing initiative your practice uses to generate new patient inquiries to convert to consultations.
- For each marketing initiative, categorize and track the number of new patient consultations you acquire in the same period for which you tracked the expense.
- Divide your expenses per marketing initiative by the number of acquired patient consultations and you have the PAC for that specific marketing channel.
- Now track the revenue generated (cash or insurance payment) by each marketing initiative and you can identify the RPP.
Example – Determining PAC
Let’s say you spend $15,000 in 4 months on a digital marketing campaign (SEO, Social Media, Paid Search) and you gain you gain 32 new patient consults. Your PAC for your digital marketing campaign is $468.75. ($15,000 / 32 = $468.75.) Repeat this process for all marketing initiatives.
Example – Determining RPP
Now it’s time to calculate your revenue per patient for each marketing initiative. Unlike a restaurant or retail store, this calculation must wait 4-5 months until the patient has completed treatment. In the PAC example above, you spent $468.75 to acquire a new patient. Now we track all (32) patients through treatment and payment. If the (32) patients generated $110,000 in revenue, your RPP would be $3,437.50. ($110,000 / 32 = $3,437.50)
The relationship between the two metrics is easy to see. You spent $15,000 to gain $110,000 in revenue and your profit exceeds your cost for acquiring the new patient. In marketing, you always want your PAC to be less than your RPP. We generally look for a minimum of a 5:1 ROI for every dollar spent. The above example would generate a 14:1 ROI.
There’s magic in the numbers. By examining the average PAC and RPP for each marketing initiative, you can decide the best places to put your marketing dollars to work. When you identify a marketing initiative in which you have an ROI greater than 5:1, it’s time to invest more money in that initiative, but only if your practice has the capacity to support a growing patient base.
If you find that some marketing initiatives have a PAC that is higher than your RPP, you might want to do some due diligence. It might possibly be that patient consultations / procedures were not properly assigned to the correct marketing initiative or revenues were not tracked to the conclusion of treatment.
Understanding the cost of customer acquisition is vital for success. Now is the time to start tracking your PAC and RPP.
To find out more on how Vein Specialists of America can help you CLICK HERE.