Creating a Healthcare Marketing Budget – The Most Rational Method

Forgive my blog-cation.  It was not completely intentional.  There was a death in my extended family and that set solid planning on edge. I am returning to weekly publication.  Onward!

Often, I tell clients to be careful with advertising expenditures.  Of course, they know they need to be careful because typically, for healthcare providers, budgets are small, small, small and demand for return on investment (ROI) is great.  But still, with this knowledge many healthcare marketers still want to plunk down valuable dollars on traditional media outlets without doing a solid analysis of what they will get in return and worse, they place advertising because of a knee-jerk reaction instead of considering the longer term requirements.

At a minimum, I ask that you have an overall promotion plan and create a budget.  I could push you just a bit more and suggest that you develop metrics for measuring the effectiveness of your outreach but that is a different post.  Right now, the focus is on the basics of developing a healthcare marketing budget.

As a percentage of sales, advertising expenditures vary considerably from one organization to another.  Pharmaceutical companies spend approximately 20% of their sales on advertising. It is unlikely that a hospital or medical practice will spend such a high percentage on their healthcare promotion efforts.  But what should you spend?

Different Methods of Determining  a Heatlhcare Marketing Budget

Method #1 – Historical

Built upon whatever was used previously, often with a percentage increase.  This method is not typically tied to overall objective.

Method #2 – Fixed percentage of sales

Often used in markets with stable revenue volume and where it is easier to see the direct relationship between sales and advertising.  Organizations have recently found this method to be problematic with the economic downturn for advertising budgets have been slashed just when they needed to be increased.

Method #3 –  Based on marketing objectives or tasks

This approach centers on creating objectives that the actual advertising needs to complete – i.e. number of physician referrals requested based on advertising about physician referral service.

Method #4 – Accepting industry average or based on competition

This approach is not dissimilar to method #1 but is based on the concept of an industry average that is accepted by market leaders.  This method does not work in favor of an organization wanting to increase market share by detailing competitive advantages or spending beyond the acceptable average.

Method #5 – What’s left

I don’t even like to include this method because it is counter-intuitive.  Essentially, an organization budgets for all other costs and then determines that the remainder of funds can be expensed to advertizing.  This method is reactionary and does not recognize the value of outreach and promotion.

Recommended Method

In lieu of the above methods, I suggest that you decide on your objective(s) first which is like method #2.  What are you trying to do with your promotion dollars?  Are you trying to increase visibility for your new wellness center or do you want to promote the new primary care physician?  First, delineate what you want to accomplish.

You will also need to consider who is your target audience and how you might best reach them. There are blog posts about marketing segmentation that can help you think about your targets.  Once you know your objective and target, it will be easier to consider the methods to employ to reach that market.  If you are targeting new moms, you may want to reach out to parenting bloggers.  If you want to focus on new members to your community, then piggy-back onto new neighbor outreach programs or consider library postings or even direct mail to new homeowners.

In some cases, you might want to have a large bill board, especially if you intended objective it to build overall brand awareness.  The point is to match you tactics to your objective.

Then prioritize based on resource availability.  Gather estimates for each medium and pick and choose your promotion endeavors carefully.  If you are building a longer term budget, you can experiment with alternatives and make quarterly or annual assessments based on effectiveness.

Okay, I know I am cheating because I told you that I wouldn’t cover metrics in this post, but let’s just take one moment to consider results tracking. Set up a tracking report for every promotion action, a spreadsheet will be just fine and include, at a minimum, the following categories:

• Outreach description
• Contact information
• Placement date
• Repeat runs
• Cost (labor, design and placement)
• Intended target
• Impact (measured how)
• Comments

Advertising, to be effective, needs to be planned, tested and analyzed. And always be able to answer the question – Is our advertising most-effective in this medium?

Tags: healthcare marketing, healthcare outreach budgeting, healthcare promotion planning

This entry was posted on Monday, April 12th, 2010 at 12:55 pm and is filed under marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.