Today we have a guest blog post about Return on Investment (ROI) from Brad Mitchell, Chief Operating Officer of Griffin & Reed Eye Care Centers in Sacramento, California. Griffin & Reed has been a long-time client of Page 1 and we have worked closely with Brad over the years. He goes above and beyond to make sure that we do everything we can to ensure that their website shows up on top of the search results for Sacramento LASIK and related search phrases. He also pushes us to enhance the website to maximize the conversions from visitors to leads. Then, he compares the results with previous years and with his other marketing and advertising efforts based on return on investment.
Today, Brad shares his insight into how you should track your own website's ROI (and the ROI of all of your marketing efforts):
ROI or Return On Investment is a term frequently used in business. Many LASIK and ophthalmology practices are surprised when I ask what their ROI is on their various efforts. Therefore, I decided to dedicate an article covering ROI specifically for folks who might not be familiar with the execution or measuring of ROI in a medical or legal practice environment.
Truthfully, calculating ROI is the same regardless of the type of business and a practice is indeed a business. Calculating ROI is very simple. The difficult part for most is determining one portion of the equation, revenue. What I'm referring to is revenue (or gain) generated by the effort for which you are trying to calculate ROI. Why is this important? Without accurate numbers, the end result means nothing so no guessing is allowed. We need factual information and sometimes it isn't pretty. As one doctor friend likes to say, "Sometimes facts get in the way of a perfectly good argument." Funny, but true, so let's make sure the components of our equation are accurate.
Consider the formula for ROI. To calculate ROI, total your revenue or gain from a particular effort and subtract by the total cost of the effort. Don't leave anything out associated with the cost of the marketing effort at hand. If there were printing costs, include it. If there are talent fees for radio ads with the local morning show, include it. After determining that number (Revenue - cost), divide by the cost of the effort to determine your ROI. You may be asking, "Why don't you just subtract your cost from your net gain to determine ROI?" You could do that. However, that would be calculating your profit. With ROI calculations, we are determining the ratio of money gained or lost relative to the amount of money invested. When evaluating marketing performance, I want to know the ROI. Profit is definitely important. However, with ROI you realize just how significant or insignificant the profit or loss. You can calculate ROI for whatever period of time you desire as long as all things are consistent. What I mean by this is if you are calculating for the year then obviously use annual data for all parts of the equation. If quarterly, adjust the numbers so all things are equal for the time frame you are calculating. I would encourage you to not get too specific and calculate for short periods of time unless the effort for which you are calculating is not a new endeavor. Why? I always counsel that you should never get too excited about the results from a particular effort immediately. Most require some "sink in" time.
ROI = (Revenue from effort - Cost of effort) (Cost of effort)
The cost of the effort is easy to calculate as we all know. It only takes a quick look at your bank statement or a call to your accounts payable folks to determine how much you are paying for a particular item. The challenge as I mentioned above is determining how much was actually gained. It all starts with tracking your data as mentioned above. As Bob Parsons of godaddy.com states in his 16 Rules For Success, "Anything that is not managed will deteriorate." This is the absolute truth. How does one even begin to track their data? I would suggest a simple spreadsheet for data intake that staff members can use to enter information as the calls or emails come in. You don't want to do this at the end of the day from memory. It needs to be tracked in real time. This data can then be collected from all staff involved and entered into a main spreadsheet. Tracking needs to also extend to consumers actually proceeding with your service. If XYZ radio station brings in 50 calls a month but no one proceeds with your service, what is wrong? It may not be the radio station's fault. Internal help might be in order.
Why Calculate ROI?
Why would a practice want to calculate ROI in the first place? Most practices don't spend tons of money on marketing efforts so why does it matter? My reasoning is it helps you determine what truly works. Unfortunately, most practices don't track their marketing results at all. The results are guessed and that helps no one other than perhaps the generation of false conclusions. It doesn't help you as the Marketing Director or owner in the slightest. Don't be afraid to find out what really works for your practice. Unfortunately most marketing efforts engaged in by most practices are what I term, "BWM". BWM stands for Busy Work Marketing. BWM efforts make everyone feel all warm and fuzzy about "doing something" to help move the practice forward but really nothing is achieved or gained. All that is achieved is a waste of staff time and money even if it is a small amount. How do you determine what is BWM and what isn't? You guessed it, ROI. Typically BWM efforts are low cost which is a dead giveaway. Good marketing isn't cheap. If it was, everyone would be doing it. You might be saying to yourself, "Wait a minute - I spend a decent amount on marketing and I am still not getting results." You might have a different problem at that point. I always say, it isn't WHAT you've done but HOW you've done what you've done. Of course that is another topic for another time but something I wanted to mention. If you measure an effort and the ROI isn't there then why would you keep doing it?
Why track things so closely? The data is extremely helpful when negotiating media contracts to get the best price possible. I'd also encourage you to share weekly stats regarding marketing performance with all involved. Why? People by nature are competitive. I can assure you that if you share the weekly data with everyone involved that it will result in your favor. Don't be afraid to show radio station X how radio station Y is doing. For example, if you are doing traditional media, bonus spots will most likely be awarded to bolster your ad frequency to outperform a competing station and people will work harder to keep your business and beat the rivals. I've seen this happen many, many times. I hope now you understand why this is important to calculate ROI and track marketing results on a consistent basis.
Now that you are excited about calculating ROI and turning things around for your practice, "How do I start?", you might be asking. If you are starting from ground zero calculating ROI, don't worry. You aren't alone I promise. I've been doing practice marketing professionally for over 13 years and I would say 90% of the practices I come in contact with have no idea regarding their ROI and that is ok. Well, it isn't ok but we are fixing that and that is why you are reading this so you get a gold star for that. You can't change the past so stop worrying about it. Let's focus on today forward. That is what this article is here to help with - to try and help you get started in the right direction. So, how do we do that? First of all you need to determine a reliable tracking system in your practice as mentioned above. This may be more detailed if you have a large practice but I assure you it is doable. At our practices we have a dedicated phone number used only for advertising and a dedicated group of staff that only answers those calls and emails in their own office inside our main office. Even though we have a larger staff, we've segmented down the number of folks actually involved with incoming email or phone requests by potential customers so it is manageable. Every call that comes in or email received is tracked and logged. The time they contacted us, how they heard about us, name, date of appointment, etc., is all logged. Gathering this information is where the rubber meets the road. This information is posted in real time. Why would we go through so much trouble to track this information? Because without it we wouldn't truly know the results from a particular effort and be able to calculate the revenue.
Now back to ROI. After you have calculated ROI for a particular effort, what does that number mean? The number you reach is how much return you receive for each dollar you spend.Real examples:
A. Below is an example from one of our radio station partners in 2012:
ROI for 107.9 FM The End = 265,200 - 65,557
In this example, the revenue from the effort for 2012 is $265,200 and the cost is $65,557. The ROI is 3.05. What does 3.05 actually mean? It means for every dollar we spent, we received a return of $3.05.
B. Let's take a look at another example. This example is from our LASIK website marketing in 2012:
ROI for Page1Solutions (LASIK website marketing) = 187,063 - 17,381
In this example, the revenue from website marketing for 2012 is $187,063 and the cost in 2012 was $17,381. The ROI is 9.76. As you learned above, this means that for every dollar we spent regarding website marketing, we received a return of $9.76. Proper website marketing consistently yields the highest ROI for our practices.
I hope you now see why this information is so valuable and why the efforts to track data are so imperative to even be able to complete the calculations. What if we were losing money rather than multiplying our money? Obviously, adjustments would have to be made. My goal was to help you understand the importance of calculating ROI, tracking data, how to actually calculate your ROI and put it to work to help your practice become more efficient and healthier financially. If you make ROI a common point of reference and take the time and effort necessary to put tracking systems into place, you will be rewarded and I can testify that marketing will become a joy.
~By Brad Mitchell
Griffin & Reed Eye Care Centers