Did you know that it costs more to attract a new patient than it does to retain an existing one – but how much can you really afford to spend to attract a new patient?
Knowing the lifetime value (LTV) of your patients is the key to creating a workable budget for marketing.
That number should dictate how much you spend on marketing and advertising. Spend too much and you’re losing money in the long run. Spend too little – and you’re missing out on an opportunity to grow your practice.
How to Calculate Your Lifetime Patient Value in 5 Simple Steps
- Start with your company’s total revenue in the past year and divide it by the total number of purchases in the same period. The resulting number is your average purchase (service) value.
- Next, take your total number of purchases (services) in the past year and divide it by the number of unique patients who made purchases (received services). The resulting number is your average purchasing frequency rate (service rate).
- Take your average purchase value and subtract the average purchase frequency rate from it. That gives you the patient value per year.
- Calculate the average number of years a patient continues to buy from you. If you’ve been tracking unique purchases this shouldn’t be difficult. This number is the average patient’s lifespan.
- Now, multiply the patient value by the average patient lifespan to get the lifetime value of your patient.
Let’s look at an example. Here are the raw numbers:
– $100,000 in annual revenue
– 250 purchases (services)
– 150 unique patients
Your average purchase value would be $400. You would then take that number and divide it by 150 to get your average purchase frequency rate, which is 2.67.
Next, you would subtract your average purchase frequency rate from your average purchase value to get $397.33, your patient value per year. If you keep your patient, on average, for 10 years, your patient lifetime value would be $3,973.30.
That’s a very simple example but it illustrates the point. The practice would have a lifetime patient value of nearly $4,000.
How To Use Patient Lifetime Value in Marketing
You know your patient lifetime value – now what?
The short answer is that you’ve got a piece of information that can help you attract more patients and make better use of your marketing budget.
Every patient you have contributes to your company’s success and profitability. Understanding just how much each patient is worth to you can help you do a better job of attracting new patients, increasing their lifetime value, and maximizing your profits.
So… if you are a private practice healthcare business owner and you are looking to grow and scale your practice or generate more new patients for the practice – we are here for you! Drop a comment below if you have questions or if you’d like to set up a call with us go here: https://chat.practiceinsidersedge.com/PIE-Triage-Call