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Has Your Practice Outgrown Your Marketing Budget?

By Stewart Gandolf, Chief Executive Officer

Colorful animated 3D pie chart displaying marketing budgetIn less than a decade, healthcare in the US has changed greatly and frighteningly fast. Too fast, it seems for a multi-specialty group that was wrestling with competition and an unfamiliar business slowdown. Their story might sound painfully familiar.

The business backdrop to their story is nearly universal in healthcare. Under the ubiquitous label of “reform,” long-established medical practices, hospitals and health systems have been drawn into mergers, acquisitions, rollups, and other unprecedented dynamics. About the only certainties in healthcare marketing is continuing change and intense competition.

While some solo practices have disappeared, other doctors have found a mutual business benefits in creating a multi-practitioner group practice. In our case example, the multi-specialty practice had grown to five locations with five distinct service lines…and multiple target audiences.

Although group practices ordinarily enjoy some economy of scale benefits, continued growth and new business acquisition for this practice had slowed to an uncomfortable plateau.

It turns out that, although the practice had grown in recent years, the business direction was stuck in a mindset of “one-business, one-marketing-budget”—and it wasn’t working. The business was trying unsuccessfully to stretch an old budget model across a significantly larger business situation.

These example numbers illustrate the problem: Five distinct locations with five service lines at each location is not five, but 25 active service lines. Let’s say the total marketing budget—dictated by the old mindset—was $100,000. The simple math of $100k divided by 25 lines allows only $4,000 per line per year. (We’re talking a little more than $300 per month.)

Given this independent perspective, the diagnosis is easy and obvious. There’s not enough marketing allowance to properly support the service lines. The resulting marketing effort was anemic; all 25-service offerings were suffering from neglect (or strangulation).

Sound familiar? The root cause of the marketing problem in this situation was that the marketing mindset was old-school-static while locations and services expanded without adequate support.

To be successful, treat each independent service line as a business. And be serious about owning that service in the market, with sufficient budget to properly defend and grow each.

Give us a call if an independent and objective point of view can help you work through business or budgeting roadblocks. And for related reading, see: How We Scientifically Establish Healthcare Marketing Budgets For Hospitals, Healthcare Organizations and Private Practices and Budget Basics: Big Enough to Matter.

Lonnie Hirsch

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