Expense Series Part 4

Do you often send out hundreds of mailers and ask yourself “Am I paying too much to advertise, and is this even working?” If so, you are not alone. Advertising and promotional expenses are a key operating expense that should be evaluated regularly.

marketing to customer loyalty flow chart

As an average, a general practice will have advertising and promotional expenses at 1.4% of their collections. When you look at your advertising percentage, some important items to account for are:

How many PPO Plans do I participate in? If you participate in many PPO Plans, you do not need to advertise in as many different channels as a “fee for service” practice. The reason for this is that you are getting many of your new patients from the insurance company’s website itself. In turn, your discounted production/collections can be viewed as an advertising cost in itself.

What is the target growth rate for my practice? If you are trying to grow your practice (outside of just adding additional PPO’s) a general rule is that 3%-5% of your collections should be spent on advertising costs. If your practice is at a point where you are looking for new patients to maintain current practice size, we would expect to see advertising costs closer to 1%-2% of current collections.

What practice competition is in my area? If you are in an area that has many other dental practices trying to acquire new patients, you might find that it takes 2%-3% of your collections to maintain your practice size and as much as 4%-6% of your collections to actually grow your practice. On the other hand, if you have a practice in an area without much competition, you might find that it only takes 1%-3% of your monthly collections to grow your practice.

Do we ask for reviews and referrals from our existing patients? Acquiring new patients from internal marketing efforts is cost effective and typically results in quality new patients. A good internal marketing program is focused on quality care and quality patient service. To increase these new patient numbers, make sure the staff is trained to ask for referrals and reviews at the proper times and in the proper way.


After you have evaluated the advertising percentage in your practice, you can now determine if your percentage is in line for what your current new patient goals are. If your adjusted advertising percentage is in line, important questions to ask yourself are “Are my advertising efforts turning into the new patient numbers I am targeting,” and “Are my advertising efforts producing quality new patients.” If the answers to either of these questions is “no,” you should break your current advertising expenses down further by advertising channel and evaluate each of these channel’s separately. If you are not already doing so, having the front office track where new patient inquiries are coming from will help you see how each channel is working for you. In addition to tracking new patient inquiries they should track who scheduled and who didn’t and why. After this, you might find that your advertising approach is fine, but there might be some issues with current schedule openings or the terminology used when discussing insurance that kept the new patient from actually scheduling.

Stay tuned next time when we talk about direct costs and how to monitor them in your practice.

Leave a Comment

Your email address will not be published. Required fields are marked *

Notify me of followup comments via e-mail.