Years ago, while working for a marketing agency that served the healthcare industry, I was regularly asked a variation of the question, “how much should I spend on marketing.” Many times, I heard people throw out concepts like “you should spend 2% of your revenue” or “you need at least $3,000 per month”. That just seemed awfully random to me. Shouldn’t it depend on the type of business? What product or service are you marketing? Who is the audience you are trying to reach? We need to understand the answers to these questions first, before determining what your investment should be.

So, I sat down and started with the end in mind. What if we think about this as a math problem that is focused on an ROI on the investment in marketing? And who doesn’t love a good math problem, right?!?

Before I get to that, I want to address that branding has its place too, and most branding campaigns don’t have a specific ROI target. Those campaigns may be measured by followers or mentions or by using a brand listening software. Branding definitely has its value and its place in marketing, but it won’t be the subject of this series. Maybe we’ll tackle that down the road.

As I thought more about defining and calculating an ROI for marketing, and the investment needed to generate an ROI, what came to mind for me was thinking about it more as customer acquisition, or in the case of a pharmacy, patient acquisition. By thinking of it this way, it meets my need to connect my marketing investment with a result. It also helps to define the marketing process:

I invest in marketing > “stuff” happens > I gain more customers and patients to serve.

It is very easy to listen and react to “just post more on Facebook” or “get some bag stuffers” or “you need to get out into the community.” The purpose of this blog is to help you recognize that each of those efforts may be valid and fit your needs, but without taking a few minutes to understand how to create the clarity you need to understand if it’s working and double down when it is.

Let’s start with the end in mind = I gain more customers and patients to serve.

You may not have gotten into pharmacy with the goal of making a profit, but the reality of it is that your community needs you to be sustainable. Your team needs you to be sustainable. Your family needs you to be sustainable. Therefore, it is vitally important that you are profitable, because a profitable pharmacy IS a sustainable pharmacy.

Here is a simple way to think about it (you will need a couple pieces of data from your PMS or your P&L):

• Gross Profit per Rx
• Average number of Rx’s per Patient per month

We could complicate this further by adding in the services you provide, like flu shots, or the OTC products your patients use, but for now let’s use the lowest possible number, knowing that in reality it is likely more than what we are calculating.

Gross Profit per Rx = Total Gross Profit ($) in a month divided by Total Rx’s (#)

• I would separate out any compounding you do or any specialty, which if you do a lot, it is probably separated on your P&L. If it’s a small percentage of your business, then leave it in, it won’t change the number too much. Note: If you do a lot of compounding or specialty, then doing this same exercise specifically for those prescriptions will be helpful too.
• Wondering how you compare to a benchmark? The 2023 NCPA Digest data would suggest that this number is between $12-13.

Average number of Rx’s per patient per month = Total Rx’s dispensed in a month divided by the number of patients served in that month

• If this is not a readily available number, a quick online search from the CDC and other sources suggests that the average number of prescriptions is between 3-5.

Input your numbers below:

While it is likely that your team and your customer service keep your patients coming back year after year, for the purposes of helping design a marketing program and investment strategy, let’s assume the value of a patient is the annual value displayed above and not 5-10x.

If we make an assumption that through the efforts that we will define next, that you can bring in one new patient per week. That’s it, just one per week.

Note: This is intended to show the minimum possible annual value of a patient. It can be higher when factoring in immunizations and other services, OTC purchases, compounding, and other ways you engage your patients and provide solutions.

To help you organize your efforts let’s start by organizing them into segments:

1. Inside and around the store
2. Out in the community
3. Digital marketing

To provide complete details on how to execute across all three segments will require us to create an additional series of blogs, which we will do. So, we don’t keep you waiting I’ll share some low hanging, easy to adopt ideas, and point you to some of the other resources we have published over the years that you can leverage.