Marketing Mechanics

Managing the Metrics

• By Joseph D’Alessandro
• Jul 01, 2007

Consider a simple return on investment (ROI) scenario. You deposit money into investment accounts, with the expectation that your money will earn an attractive return. You typically know how well your money is performing, and at times you are actively involved in moving your money from poor performing accounts to those that are performing better. In this example, you are simply managing your personal ROI.

In terms of your business, however, can you answer two important questions about your advertising/marketing dollars: Which advertising/marketing channels perform best? What is your ROI for the advertising/marketing channels you use?

Narrower margins, increased competition and shifting market conditions are making it increasingly more important to know which dollars are working for you. Relying on “gut intuition” is more of a risk now than ever. Managing by the numbers allows you to compare one campaign to another across a variety of marketing channels, and it offers a reliable, consistent and efficient way to manage your business. It is also a way to effectively manage a diverse marketing portfolio, allowing you to confidently expand your marketing efforts and drive growth.

While many national DME/HME providers have taken steps toward building diversified marketing portfolios (online lead generation, television, radio, direct mail, etc.), the majority of small to mid-sized HME providers have relied on a traditional physician-and-care-facility referral model as its primary marketing channel. This model can be quite compelling, especially considering the direct costs of other marketing campaigns. When small to mid-sized providers operate with the traditional marketing model, they often look exclusively at direct costs and tend to overlook the opportunity costs (i.e. what opportunities are you missing because of your involvement with the traditional model).

An apple-to-apple comparison from campaign to campaign, regardless of the marketing channel, requires the development of an ROI equation. The ROI equation in the traditional referral model can be complex. There are many variables to consider, including employee compensation, total marketing dollars spent and employee expense reimbursements. These variables must factor into the ROI equation and impact whether or not a marketing campaign is profitable. What if you could simplify this complex equation to see through to the underlying variables impacting the campaign’s success (or failure)?

A dashboard report of key ROI metrics is something you might want to consider. The dashboard report gauges whether you are in the red or black — and whether your marketing dollars are operating at a sustainable pace. More importantly, the dashboard allows you to do this without having to get under the hood and tinker with the working parts each time your gut intuition tells you something isn’t working. Certain key metrics to consider in a dashboard report include the following:
•    Response percent — Percentage of leads that respond to your marketing campaign
•    Qualified percent — Percentage of leads that appear to qualify for your respiratory product
•    Delivered percent — Percent of leads in which you deliver your respiratory product
•    Cost per acquisition (CPA) — Lets you know how much it costs to acquire one customer. To calculate CPA, divide the total price paid for the campaign by the number of sales actually made. This lets you decide whether or not the campaign was worthwhile. At the same time, it gives you an apples-to-apples comparison from one marketing campaign to the next.

By managing your metrics effectively, you get a better sense of the campaigns that work and those that don’t. A cost-effective CPA will help you discover whether or not a specific marketing campaign is worth the time, effort and money spent to get it off the ground. Over time, you’ll begin to collect historical data on the campaigns that work, and you can budget accordingly to put your dollars in the investments that yield the best results.

This article originally appeared in the Respiratory Management July/Aug 2007 issue of HME Business.