Does Advertising Pay In Eyecare? Here’s How To Track Your ROI

In my last blog, I talked about the importance of tracking response rates when you advertise and gave you three techniques to use: 

1. Put a source code in all your ads such as ‘Free LASIK Screening, just ask for offer #YP09.’ The source code can then be traced back to a specific ad. 

In this case, YP = yellow pages, 09 = 2009. This is a very common technique used by direct marketing companies. 

2. Offer something tangible like a ‘Free Report On Presbyopia’ in your ad.

Just write the article yourself and print it on nice paper. You’ll then know that anyone asking for that ‘Free Report’ is responding to a specific ad. 

You could also offer a complimentary bottle of eyeglass cleaner or free eyeglass adjustment. Use your imagination. 

Those two techniques will work in print or broadcast media. 

3. Another great tracking device is to print a coupon in the ad that people have to bring in to get the free service or discount. You see these all the time in magazine and yellow page ads. 

The coupon itself is not important. It’s just a way to find out where someone saw your ad. Experienced retailers use this little trick because they know how important it is to measure response rates. 

It Pays To Know Which Media Works Best For You

The reason sophisticated merchants measure response rates is that they want to identify the media that works best for their message. Marketers who spend a lot of money on advertising have this down to a science.

What is going to work best for your practice in your market? I don’t know. Maybe it’s the newspaper. Maybe it’s the yellow pages. Or, maybe it’s the local shopper magazine.

There is really no way to know until you test and measure. But once you find a profitable formula, you can repeat it over and over again.

Is Your Advertising Paying Off?

So, regardless of how you do it, it’s absolutely mandatory that you make some effort to track the effectiveness of any advertising you do.

Otherwise, you won’t be able to calculate your payback. And I can tell you from experience that a lot of advertising done by ODs in newspapers and yellow pages does not generate a profitable response.

Calculating Your ROI

Let’s say that you spent $1,000 each month ($12,000 for the year) on a yellow page ad that you could track to an average of two patients per week, a total of 100 patients, for the year in 2008.

Let’s next assume that you grossed an average of $300 or $30,000 on those 100 patients. It would be very easy to pull each file and calculate the total revenue.

That sounds pretty good. Now let’s subtract your Cost Of Goods — we’ll use the industry average of 33%. $30,000 x 33% = $10,000.

Therefore, your gross profit on this group of patients would be $30,000 - $10,000 COGS - $12,000 ad costs = $8,000.

This $8,000 is of course, gross profit, not net. I’d have to know your annual gross revenue and net profit percent to give an opinion on whether an ROI of $8,000 is good or bad in this situation. 

Make More Than You Spend On Your Advertising 

As a general rule, I think you need to question the value of any ad campaign that does not produce MORE than its own cost in added gross profits for your practice. 

After all, who is making the money here, the yellow page publisher or your practice? 

Having said that, many marketing consultants would be quick to argue the advantages of brand advertising for general awareness. My comments are directed more to so-called ‘response ads’, but we can debate whether brand advertising makes sense for ODs. 

Regardless of what you call it, you want some type of payback on your advertising dollar. Otherwise, why do it? 

In closing, because the numbers will also vary widely from ad to ad and practice to practice, it’s impossible for me to give you specific advice on how much to spend on advertising. 

What I want you to take away from this article is the methodology.

Use proven techniques to track your response rates, then calculate your profitability. That is when you will know if your advertising is paying off. 

Agree with this blog? Disagree? Have a comment or question of your own? Click here to send me an e-mail. 

Disclaimer: The information and opinions contained on this site are for discussion purposes only and are NOT intended to serve as legal, accounting or investment advice. ©2009 Jerry Hayes, OD. Not to be reproduced without written permission of the author.