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Connect Branding to the Bottom Line, Part 2

Gabrielle DeTora, for HealthLeaders Media, September 8, 2008

In healthcare's highly competitive marketplace, your brand has to be developed into something extraordinary. It must evoke a positive rational as well as emotional response from all your stakeholders, including patients, physicians, employees, and donors. But most importantly, your brand needs to drive the bottom line. In Part 1, which ran in last week's HealthLeaders Media Finance e-newsletter, we outlined a plan for CFOs to measure true return on investment from your marketing team's efforts. This week, in Part 2, we will go through steps to improve ROI once you're able to measure it. 

Analyze and Improve

ROO
To analyze your ROO efforts, cross reference service line initiatives by target audience, message, channels of communication, and identify what is working and what isn't. Design of experiments is important in the Analyze and Improve phase. This tool is used to determine the priority of competing marketing opportunities. DOEs provide information on which variables have the greatest impact on the objectives. The basic premise is that certain elements of a process are held constant while other elements are varied. This is used to maximize and minimize various results.

ROI
Let's look at a real-world financial forecasting example. Last year, for instance, perhaps your hospital attained CyberKnife technology. The business goal for the year was 100 CyberKnife prostate procedures. Therefore, your financial goal was 100 times the average net income per procedure. For ease of math, let's say the net income is $500,000. Hypothetically, it took $300,000 to create 1 million impressions (message exposures) though print, radio, out-of-home, and direct mail within a four-month span to attain 500 qualified candidates interested in your hospital's CyberKnife prostate procedure. Out of those 500 candidates, 100 procedures were scheduled.

Now say your hospital attains the daVinci technology the following year. For simplicity, let's say your business goal is also 100 daVinci prostate procedures. If the marketing launch is approximately the same time of year, to the same target audience, you can forecast how much media, how much direct-to-physician marketing time and materials, and total budget you need. You can even calculate adjusted returns based on diminished or expanded marketing budgets. If your budget to launch the daVinci program decreases from $300K (used to launch CyberKnife) to $200K, your results may also diminish by 30%.

In our CyberKnife example, to calculate profits, start with the $500,000 total net earnings (which are gross reimbursed income—not including bad debt, charity care, etc.—minus the cost of the service for all 100 procedures). Then subtract out the marketing costs for the campaign ($300,000) to calculate profits ($200,000).

$500,000 - $300,000 = $200,000 profit
To calculate ROI, divide the net income ($500,000) by marketing costs for the campaign ($300,000) to give you the percentage of ROI.

$500,000 / $300,000 = 166% ROI
You can also divide the marketing costs for the campaign by 100 to get a marketing cost-per-procedure for forecasting.

$300,000 / 100 = $3,000 per patient
As you track the trends, these costs will go down. The cost per procedure when launching a new program, per our example, is far more than the incremental cost for every new patient thereafter. If it is not, you are doing something wrong.

Please keep in mind the following when calculating ROI:

    1. The launch scenario outlined above was a very simple example. If the service is in the middle of its product life cycle, you need to pull a series of quarterly financial reports and benchmark new tracking against that financial history.
    2. When calculating the actual net income, work with your CFO to identify the fixed and variable costs, as well as the break-even point (BEP).
    3. CFOs should define what portion of growth will be "credited" to marketing.
    4. Adjust financials for the time-value of money.
    5. Always conduct a scenario analysis with forecasting to define the most plausible outcomes based on multiple variables. In our example, variables may include what technologies your competition owns, what new technologies are in the pipeline and when they will be available, and the diminishing procedure rates after your health system or your competition acquires new technologies.

Report
The simpler the presentation of critical success data, the better. No executive likes a huge stack of data without a summary of the analysis and what its implications are. That's why dashboards are recommended. They are designed to reflect what the organization is most interested in knowing in a snapshot format. Named after easy-to-read automotive dashboards, these are management reporting tools highlighting LMIs in easy-to-read pie charts, bar charts, and tables. They consolidate important data into one page (or dashboards), allowing busy managers to quickly understand the success or failure of given initiatives. They also allow for fast adjustments based on market responses. Common elements of marketing dashboards include total marketing spending, media mix allocations, ROO, ROI, and a calendar of what marketing initiatives are being conducted when. All aspects should be color-coded by service line.

Getting started
CFOs should work with marketing leadership to define LMIs based on your business and marketing goals. By conducting a bi-annual survey to first-time patients during a one- to two-month duration, marketers can prioritize LMIs. Analyze how patients decide to use a particular service. Who were their key opinion leaders (family members, physicians, etc.)? Was the determination swayed by their insurance carrier, HMO, or PPO? Or was it based on a marketing activity? Calculate what percentage of new patients arrived through what channels. Assess what marketing source was most influential to tell if customer-related or physician-related marketing is having an impact.

Next, conduct a SWOT analysis of current marketing function support systems such as contact center staffing levels during peak and non-peak hours, current call volumes, referral and conversion rates, IT functionality and data collection, analysis and reporting, existing referral policies and procedures, Web application development and database integration, and revenue reconciliation. Take a look at the ability to match caller requests with existing clinical data, current marketing costs, and current ROI/ROO measurement devices. What information is missing to accurately provide the intelligence to track and forecast? Use this analysis to define what you would need in a tracking system.

Actually setting up a tracking system is unique to each healthcare system and varies widely based on human resources, financial resources, and IT sophistication. There are many customer relationship management (CRM) systems that can be used for capturing marketing intelligence as well as tracking results and forecasting.

Once your system is in place, test it. Begin by tracking a single service line initiative. Smooth the wrinkles before expanding your tracking system to other areas. Slowly add other service lines.

Work together

Healthcare CFOs and marketers can work together to aggressively drive the bottom line given the right information. By following these guidelines, you can set up ROO and ROI tracking systems that maximize results and lower expenses.


Gabrielle DeTora is a Strategic Healthcare Consultant in Philadelphia, PA. She may be reached at 908-447-9231 or info@GabrielleDeTora.com. To learn more about effective ROI tracking go to www.GabrielleDeTora.com.
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