While attracting a large volume of new patients may seem like the quickest way to grow revenue, there are more sustainable practices that clinics can focus on for long-term success.
For example, as a general rule, it costs much more to attract a new patient than retain an existing one. This means that even the most efficient of patient acquisition strategies will have less of an impact on your long-term success than loyalty programs and positive patient experiences that result in return customers.
While customer acquisition cost is one of the most important dental KPIs, what truly matters are your patient retention and attrition rates. Put simply, maximizing the patient lifetime value (PLV) is the key to running a profitable dental clinic.
What is lifetime value?
The lifetime value of a dental patient is the projected total amount of money the patient will spend throughout their relationships with the dental office. While lifetime value is important for any service business, it’s especially so for relationship-driven occupations like dentistry.
For instance, an ideal patient won’t be one-and-done. Instead, they’ll return for their bi-annual cleanings as well as any other dental issue that requires medical attention for years to come.
But PLV isn’t limited to the revenue a single patient will generate for the practice. You must also consider the potential value of patient referrals. When developing a holistic dentist-patient relationship, you’ll not only retain the individual as a patient, but you may also convert them into brand ambassadors who freely refer your services to their friends, families, and coworkers.
If your patients already have a high PLV, then you should focus your efforts on new customer acquisition. But, if they have a low PLV, then you should look for ways to maximize the value of the existing relationship.
What is the optimal lifetime value of a dental patient?
The optimal lifetime value of your dental patients depends on the services you specialize in. For example, $10,000 is a common PLV for general dental practitioners. Yet, if you specialize in niche oral health problems and complex surgeries, you may find you have fewer patients with a significantly higher PLV.
Optimal PLV can vary depending on several factors, including:
- Location of the clinic
- Services rendered
- Size of the clinic
- Average appointments per year
- Average cost of appointments
- Patient satisfaction
- Overhead
How do I calculate patient lifetime value?
It’s important to note that a PLV calculation is an educated guess, not an exact science. Each dental practice will need to consider the variables listed above, and then adapt its own model for PLV.
For instance, a patient that needs to undergo significant dental reconstruction and prostheses will have a higher average lifetime value than a patient who comes in for a regular tooth cleaning once per year.
Because there is variance between patients, calculate PLV with the following three steps.
Step #1: Calculate the LV of a single patient
Generally speaking, the formula for a single patient’s LV is the average number of years a person is a patient multiplied by the average amount of money a patient spends annually.
In greater detail, the formula can look like this: Lifetime value = Average transaction value per visit x Average number of visits per year x Average patient retention (in Years)
Or, it can be reduced to: Lifetime value = Average annual value x Average patient retention
If an individual is a patient at your practice for 10 years, and they typically spend $500 on treatments each year, their dental patient lifetime value would be: $5,000.
Step #2 Calculate value of referrals
When it comes to how to attract new patients to your dental practice, word-of-mouth marketing is one of the most cost-effective ways to grow your practice. Providing high-quality care, fostering and actively seeking referrals, are some of the best strategies when it comes to how to improve the patient experience, and can incentivize patients to spread the word.
This value can be expressed as secondary-referral value = PLV of one patient x average number of referrals
For example, if a new patient spends an average of $5,000 and refers three other patients (each spending the same amount) that would be $15,000 in referral value.
Step #3 Calculate total patient lifetime value
This figure accounts for the patient’s direct lifetime value as well as the value of secondary referrals.
The formula looks like: total PLV = Value of one patient + Value of secondary referrals
For example, using the values from step 1 ($5,000) and step 2 ($15,000), the customer would have a total lifetime value of $20,000.
How to Maximize Lifetime Value
Putting the calculators away for a moment—how can you maximize the value of each patient you see? After all, if you can maximize the value for each patient, then your average PLV will increase as a result.
#1 Improve Patient Chair Time and Return Appointments
Patient experience can be dramatically improved simply by observing and optimizing patient chair times. After all, a seamless and quick dental visit can improve patient satisfaction scores. To accomplish this, clinics can embrace digital technologies.
For instance, Dandy’s intraoral scanner makes it possible to improve the patient experience while dramatically reducing chair time and the cost of materials associated with impression taking. Furthermore, a fully digital lab process can whittle down a multi-appointment procedure into a simple two-appointment process, mitigating any dental fears your patients may have.
This results in happier patients while freeing up the clinic to take on even more patients.
#2 Create a referral system
Dental practices should pay special attention to their referral process, which will function like a loyalty program that encourages clients to suggest your services to prospective patients. This should be a dedicated system that you can continuously track and improve your marketing efforts.
Strategies to consider include:
- Improve your systems and technologies to foster a better patient experience
- Create a portfolio of before-and-after photos of advanced cases
- Ask patients for referrals in person
- Personally thank patients who refer you
- Request referrals on social media
- Create an incentive program where clients are rewarded for patient referrals
#3 Upsell services
One of the natural sales tactics for increasing the value of a patient is to recommend additional services and treatments. For example, if a patient typically only comes in for a cleaning, you could see whether they were interested in value-add services, such as whitening or clear aligners.
The key to upselling effectively is to provide information on other services and how the patients might benefit from them—pushing patients repeatedly or too heavy of a sales-hand will create the opposite of the intended effect.
Foster a positive patient experience with Dandy
A patient’s lifetime value estimates the average revenue each patient offers a practice. Equipped with this data, a dental practice can make informed decisions about how to strategically invest its budget to improve its services and maximize profits.
While various factors go into this equation, at the end of the day, the goal should be to couple a high-quality experience with improved care outcomes.
For that, Dandy can be your partner in growth. Our digital dental technologies and workflows enable dental professionals to optimize their processes and enhance their care delivery, which leads to more satisfied patients and increased referral rate.
If you’re seeking to maximize your PLV, Dandy’s fully-modernized dental lab is the answer. Get started today.
Sources:
Dental Economics. Attracting More Patients Who Need the Advanced Procedures You Enjoy Doing. https://www.dentaleconomics.com/practice/marketing/article/14203052/attracting-more-patients-who-need-advanced-dental-procedures
Forbes. Does It Still Cost 5x More To Create A New Customer Than Retain An Old One? https://www.forbes.com/sites/blakemorgan/2019/04/29/does-it-still-cost-5x-more-to-create-a-new-customer-than-retain-an-old-one/?sh=32f2d7603516
