As a savvy pharmacy business owner, you already know you need marketing for your business to succeed.
But are you maximizing your marketing money?
If you want to get the most from your marketing efforts, you need to set your spending. A budget ensures you get a return on investment. And, it prevents overspending on ineffective strategies.
Creating a marketing budget is intimidating, especially for the first time. But you can do it.
Here’s a guide to help you set a marketing budget for your independent community pharmacy.
The Factors You Need to Know to Determine Total Marketing Allocation
Most small businesses allocate a percentage of their gross revenue to marketing. You can base that number on the previous year’s actual revenue or on next year’s projected revenue. There’s no magic number, but a general rule is to allocate about 7 to 8 percent of your sales revenue to marketing.
But every pharmacy is different. You should account for several factors as you determine how much to spend on marketing including:
Business maturity
The stage of your pharmacy’s development affects how much you’ll want to spend on marketing.
For example, if you’re a newer pharmacy or if you’re opening a new location, you’ll need to ramp up marketing. You’ll need to spend up to 20 percent of sales to drive awareness and interest.
If you already have a strong customer base with a steady stream of revenue, you can spend less, closer to 2 to 5 percent.
Growth goals
Your pharmacy’s long-term and short-term goals affect the amount of marketing you’ll need.
The more aggressive your growth goals, the more you’ll allocate to marketing.
For example, say you want to double your revenue in three years. Then, you’ll need to escalate marketing to generate that surge of revenue.
And, if you’re planning to launch new services, you’ll also need to increase your marketing efforts.
Competition
Your competition also determines how much you’ll need to spend on marketing.
A pharmacy without competition in 50 miles will need to allocate less for marketing than a pharmacy with a national chain pharmacy a few blocks away.
Industry average
If you’re still unsure how to set your marketing budget, contact your state or national pharmacy associations. They can provide data or general knowledge on what other pharmacies spend.
Those numbers will give you a baseline and you can start customizing your budget from there.
RELATED: Are You Making These Pharmacy Marketing Mistakes?
An Example of How to Set a Pharmacy Marketing Budget
Your pharmacy is in an area with a high geriatric population. You have 3,000 prospective patients who spend a lot of money on chronic conditions. They read use print newspapers and watch locally televised news.
Step 1: Set a marketing plan
Now that you know your total percentage for the year, you’re ready to divide it into an annual budget.
First, create a marketing plan so you can decide how to best divvy up the budget.
A marketing plan identifies what you need to spend money on to attract and keep patients.
Before you can determine what will attract and keep patients, you need to know who those patients are.
Questions to ask:
- How big is my target market?
- What are its demographics?
- What are its buying habits?
- How much money do your patients spend on pharmacy products or services?
- What media do they use? (magazines, newspapers, websites and social media sites)
You know that your prospective patients are older and use traditional media.
Step 2: Decide which marketing methods to use
Once you know who your target patients are, you can specify which marketing methods to use.
Common marketing methods:
- Your website
- Online advertising
- Email newsletters
- Social media, such as Facebook and Twitter
- Public relations
- Referral marketing
- Direct mail, such as postcards or letters
- Traditional advertising (print, radio, cable or out-of-home)
- Marketing materials (business cards, flyers or brochures)
- Promotional and community events
- Networking (conferences, partnerships with physicians, dinners/lunches etc.)
A geriatric population will likely respond most to direct mail campaigns and recommendations from others. That means you’ll focus your marketing efforts on print material, referral marketing and physician relationships.
Step 3: Break down your budget
Once you decide which methods to use, you can divide your budget in more detail.
To break down your budget, you need to know:
- Where you’ll use each marketing method (the specific website, newspaper, etc.)
- How frequently you’ll use it (monthly, weekly, daily)
- How much it will cost (both per instance and in total)
It costs $500 for an advertisement in the local newspaper. You’ll pay for an ad in the local newspaper once per month and you’ll pay an employee two hours of salary ($20 per hour) to write and design the ad. So, for the year you’ll budget $6,040 for newspaper advertising.
When you plan your marketing budget ahead of time, you’ll target your best patients with more effective marketing. It requires an upfront investment of time for research as well as trial and error, but it pays in the end.
And, keep your marketing budget on track with a marketing checklist. A checklist will help you keep track of which marketing efforts are working. (Or not.) So you can make adjustments and better use your budget.
With a detailed marketing budget in place, you can feel confident that your spending is going to good use.
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