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Why Medical Spas Fail Reason #2: Poor Advertising or Not Enough Advertising
Advertising is one of the biggest challenges facing an aesthetic practice because it is such a moving target. There are so many variables that determine a successful advertising campaign. In addition, what may generate a response at one point stops working eventually and you need to create a new strategy. How do you know if you have “poor advertising?” Where the “rubber hits the road” is your Return on Investment (ROI). As a general rule of thumb, for every ONE dollar you spend, you NEED to get at least FOUR dollars back, if not more (a 4 to 1 ROI). Why is this? The key reason is that you STILL have all of your other overhead to cover. If your advertising just pays for itself (a 1:1 ROI), then you will quickly be out of business. Let’s use a simple example. If I am investing $1,000 per month in Google Adwords, my expectation is to get at least $4,000 back in CASH revenue for my practice from that advertising expense (a 4:1 ROI). If I just got $1,000 back (a 1:1 ROI), then all I’ve done is paid for the advertising and I still have all of my other overhead to cover (including those leases on equipment that I paid TOP DOLLAR for).
If you find an ad source is generating a 4:1 response, then you can often RAMP UP this advertising and generate more dollars. What you begin to do is eliminate underperforming forms of advertising and invest MORE money in advertising strategies that are working. Whatever you’re advertising, you need to make sure you have enough margin built into the service you are advertising that it will be profitable. You could sure advertise a special on $10 facials, however it may be difficult to make a good ROI on this type of service. I always like to advertise the BIG GUNs services such as laser lipolysis, Thermage, Accent, etc. These are services in which there is enough margin to make it worth your while and will help ensure a high ROI.
The greatest advice I have to give in this area is this: YOU NEED TO COPIUSLY TRACK YOUR REFERRAL SOURCES. Every call that comes in and every consultation that is booked needs to be assigned the correct referral source. In our clinics, we require that when booking the consultation, a required field is to ask the caller how they heard about our clinic. This referral source is fresh in the callers mind and it is now locked into the client’s information. Our software program allows us to track how much revenue we generate by each referral source. In this manner, it allows us to make intelligent decisions on advertising. If advertising is not working (at least a 4:1 ROI), we pull the plug quickly. Forget about “brand building” which is what the big boys do such as Coca Cola and Microsoft, we want and need DIRECT RESPONSE ADVERTISING to stay in business. The key definition to direct response advertising is advertising that is designed to do one thing: GET YOUR PHONE TO RING AND BRING MONEY THROUGH THE DOOR.
Not every prospective client calling your practice books an appoint, so there are now excellent ways to track EVERY referral source. There are internet services available that allow you to assign individual telephone numbers, including toll free numbers to EVERY advertising piece you broadcast to your audience. This allows you to capture key information such as: (a) Total Calls Generated From Every Ad You Publish by day of the week, by the hour, and a myriad of other criteria. In addition, since you know how much you are spending on your advertising, these services will also calculate your COST PER CALL. As an example, if you are paying $1,000 per month for newspaper advertising and the total number of telephone calls you received from that ad source is 20 calls, then ($1,000 / 20 calls = $50 per call). From my experience if you can get your cost per call below $50, then you are doing something right to get your telephone to ring.
What I also like about these services is you can actually record the telephone calls coming in to your practice. How is your receptionist answering the phone? How are her techniques? Is she effectively booking 60 to 70% of prospective clients into booked appointments? Does she have an accurate grasp of the technology to answer basic questions? Call tracking services such as these become INVAULABLE TO YOUR PRACTICE. The reality is this. You’re spending A LOT of money to get your phone to ring, you need to make sure you are capitalizing on this.
Since most practices don’t track their advertising, they are constantly shooting in the dark and trying new things without knowing what is truly working, except anecdotally. One bad experience with a large outlay of advertising dollars without a lot of money in return can cause the doctor to retreat in fear and not do any advertising at all or very little advertising. This becomes a downward spiral if you stop investing in advertising altogether. It becomes a death sentence if you cease to invest in new leads for your practice.
External Advertising
External advertising represents advertising to people who are not currently your clients. Traditional forms of advertising have become less effective such as newspaper and the yellow pages. Subscribership continues to fall away as is evident with several large newspapers going out of business. When is the last time you used a yellow page phone book to find what you’re looking for? The reality is the internet is completely replacing most of these traditional forms of advertising.
From my experience, you can save a lot of money by utilizing Internet Advertising. There are several courses online that teach you how to do your own Google Adwords Advertising. If you want to save significant money in the long run, you should develop this expertise in-house versus outsourcing this to an outside company. In addition, many new internet mediums have exploded into the marketplace such as Facebook. These new mediums have generated significant leads for the clinics I have associated with and are worth investigating.
Check out this deal from Medical Spa MD for a special deal on a Podium patient review marketing account.
Internal Advertising
Internal advertising represents advertising to your own client database. We all know that it costs a lot more to obtain a new client that to retain one. If we assume you are providing the best possible service to retain your clients, the missing piece in most practices is developing a system to advertise to your own clients and keep them coming back. If you have clients who love your clinic and your services, they welcome your offers and they want to hear from you! Continue to send them special offers available to “established clients” only to make them feel special. Your ROI on your warm list of clients will be substantially higher than mailing to a “cold” list of people you are trying to obtain as new clients. It is not unusual to receive a 10 to 1 ROI or higher with this group.
The amazing part of this, your advertising in this area doesn’t have to be expensive. It can be a very simple letter or postcard or even telephone call. Mailing out a simple letter that you mail-merge with your database personalizes your contact with the client and helps them feel unique. You can promote new services and aesthetic devices you have recently acquired and offer “members only” pricing your database. Emailing your clients is also good, but I have found my response rate drops off too dramatically to just rely on emails alone. Emails should be coupled with a physical mailing such as a letter.
There are also services available that allow you to upload your list of clients to an online database. You can then record a single telephone call and broadcast this single message to all of your clients! It is an amazing tool that can really add a personal touch to your practice and leverage your time. The doctor would record the call, thanking the client for their business and informing them of new services and offers available. The message is only left on voice mail so the client doesn’t know it was a recording. It is an exceptional service and I highly recommend it. It ends up costing you approximatley 0.06 cents per phone number.
Vin Wells, MHSA
800-794-1097
Why Medical Spas Fail Reason #1: Paying Too Much for Equipment and Build-Out
The key to this issue is to identify the companies who repair the used equipment you are considering to purchase. Ask them to quote you prices on repairs and warranties if you have them. Also make sure that parts are readily available for this equipment and that the equipment manufacture does not hold a monopoly on spare parts. You need to do this footwork BEFORE you buy. After you buy it can be too late and you may be taking too large of a risk.
You also need to find out which laser manufacturers are user-friendly to pre-owned equipment. Some manufacturers can charge you a laser “RECERTIFICATION FEE.” Recertification fees are sometimes required by the manufacture if the laser device is sold to someone else. The laser manufactures claim it is to ensure the device has not been tampered with, however the real reason is to protect the manufacturer from being undersold by doctors looking to sell their used equipment. Charging a “recertification fee” levels the playing field between the new and used price. These fees can be as high as $25,000.
Sadly, most aesthetic equipment becomes obsolete 2 or 3 years after the initial purchase, however most leases on that same equipment last for 5 or 6 years. In the world of aesthetics, technology is evolving at a rapid pace. This evolution also means that technology does not remain useful for very long. It’s a hard pill to swallow when you continue to make monthly lease payments on equipment that has become a “doorstop” inside your practice. If you’ve paid top dollar for that equipment, it just makes that pill you’re swallowing even the more bitter.
Let’s use an example to illustrate this point. If your practice buys a new Laser Gadget and your competitor buys the same Laser Gadget pre-owned at a 70% discount, your competitor has a large competitive advantage over you. His fixed costs on capital equipment are 70% less than yours which means higher profit margins for him. He also has the ability to offer lower treatment prices and potentially put you out of business. You also have the option to match his lower prices, but you will need to compensate for the higher costs you are paying on that equipment by having a higher treatment volume. If you choose to keep your prices higher, then you will need to somehow differentiate your practice from the competition by offering other “value-added” benefits that justify your higher prices. This could be “Board Certified Dermatologist” or “Onsite Physician” etc.
If you feel strongly about buying new laser equipment versus used, do not accept the sticker price presented to you by your laser sales rep. You must understand that everything is negotiable. Do not accept a 1 year warranty, ask for a 3 year warranty. If they are not negotiable on the price, then ask for a “DEMO” unit. Demo is normally code word for a discounted price. In most cases, demo units are not even used pieces of equipment, but it allows the manufacturer to legitimately sell you a new piece of equipment at a much lower price while maintaining their price integrity.
Regarding clinic build out, my recommendation is to find a medspa location that is already built out. There are hundreds of medspas that have gone out of business. In most cases they have ALREADY spent HUGE bucks to create a beautiful facility. They have already spent the big bucks for tenant improvement. You can pick these built-out locations for FREE. Don’t invest this money yourself. Find a realtor in your city who specializes in renting medical office space along with retail space. He should have a good lay of the land on what is available. You will be surprised with what gem locations are available.
Vin Wells, MHSA
President
800-794-1097
medical spa business 