Improve Your Marketing Effectiveness

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Nine steps to understand your customer acquisition cost and improve the return on your marketing investment.

By Steve Stalzer, PT, MBA*

I graduate from physical therapy school in 1997 without a laptop, smartphone, or email address. We didn’t have a single lecture on marketing and even if we had, I’m not certain it would be relevant in today’s digital world. It is safe to say that over the past 20 years, my partners and I have made plenty of mistakes when it came to marketing for our practice. In this article, I will share some of the most critical lessons learned.


Early in my career, I viewed our marketing budget as an essential expense but not one that predictably generated referrals. Today, I have a completely different view of marketing. It centers on understanding the cost of customer acquisition. Effective marketing generates new patients. Ineffective marketing does not. As simple as this sounds, it is a concept to consider as you contemplate your marketing plan. By implementing the following eight steps, you will see an improved return on your marketing investment.


To survive, let alone thrive in private practice, owners must be diligent about clinic metrics such as units per visit and arrival rates. To generate consistent growth, owners must also understand what drives new patient referrals. I made several mistakes in this area, from not collecting any information to then collecting too much. I failed to recognize the 80/20 rule, that 80 percent of our patient referrals were the result of 20 percent of our marketing activities.

Start by asking your patients how they found your practice. Track your top four or five channels such as physician referrals, former patients, patient referrals, internet searches, and screening events. Be sure your staff knows the difference between a patient who was referred by a physician and a patient who has a referral but found you through an internet search. Don’t worry about trying to track everything possible as that will leave your head spinning and won’t likely help you anyway.

Table 001


As you start to gather information on how patients are finding you, start to break down your spending into the same channels. Look at your marketing spending for targeting physicians, former patients, digital marketing, and screenings. The goal is to understand the correlation between spending and patient referrals.

You may want to track new referrals above a specific baseline. Let’s say your personal relationships and past efforts generate 10 referrals per week. You then hire a practice liaison to expand physician referrals. In a case like this, it is smart to compare the cost of the practice liaison to the referrals generated over your baseline of 10 per week. This will take a little effort but keep it simple. It does not need to be perfect, just accurate enough to drive smart decisions.


Once you have at least a month’s worth of data, you can calculate your customer acquisition cost (CAC) for the marketing channels that you have identified. Start by listing referrals generated by channel on a per week and per year basis (you will need to calculate the per year). Now, look at your spending for each marketing channel. If your physician liaison works 10 hours per month at a cost of $20/hour with benefits, your labor cost is about $2,400 per year. If he or she drives 1,000 miles (annual cost of $500) and spends an additional $100 per month in printing and lunches, your total cost is about $4,000 per year. After tracking this information for each channel, divide your cost by your new patient (NP) volume to get your CAC.

Don’t be surprised if your CAC increases as you grow. It can be smart to start with activities that have the lowest CAC first. As you grow, you may need to spend more rather than less. In the previous example, baseline physician referrals probably took a lot of time and energy to generate but are now something that can be maintained at a lower cost. Separating baseline referrals avoids giving a new activity more “credit” than it is due. Understanding your CAC is important, but there are a few more points to understand before moving forward.

Table 002


Like many owners, I often wanted to look for new activities or channels to increase referrals. While new channels can be great if you have strong resources in a specific area, it is important to analyze the “lift versus the reward” and compare your options. Start by looking at the total revenue generated from each channel by multiplying your annual new patients by your visits per new patient and your collections per visit. Let’s assume the visits per new patient is 11 and collections per visit is $99 on average. This gives us a total of $1,000 in revenue for each new patient.

Next, calculate how much new revenue you would generate with a 10 percent increase from each channel. If it is a new channel, set a realistic goal, say one-half to one new patient per week. You can now estimate the result of growing that channel and compare the opportunity for each. As shown in Table 2, your CAC is $10 higher for Digital Marketing, but your Physician Liaison opportunity is $10,000 greater.


A true growth mindset should not only grow new patient volume but also increase your practice value over time. This requires knowing the value of your practice and understanding what drives that value. Strategic marketing should then focus on leveraging strengths or fixing weaknesses to both grow and increase the value of the company.

If your practice is heavily reliant on orthopedic referrals from one or two practices, you may choose to focus on marketing to family physicians, past patient marketing, or digital marketing in an effort to diversify referral sources, which in turn will reduce risk and increase the future value of your practice.


It is important that your marketing efforts and spending are aligned with your growth goals. Start by setting goals for new patient growth, then use your CAC to determine your marketing budget. Using the numbers from our first example, let’s say your goal is to generate 1,000 new patients, a 20 percent increase from the current volume of 832 per year. Using a CAC of $35, gives you a budget of $35,000.

To be sure you are getting results from your additional investment, make small changes and assess the results on a quarterly basis. You may, for example, decide to run a new $1,500 pay per click campaign for 90 days before committing to that strategy for an entire year. Continued tracking and review of your CAC will give you the confidence to continue or alter strategies going forward.


If something is not a top referral channel, you would be wise to question why you are spending time and money on that channel. Keep the 80/20 rule in mind and be disciplined about focusing on the 20 percent of strategies and tactics that generate 80 percent of your referrals. Taking a widely scattered approach to marketing will cost more overall and end with less predictable results.

This does not mean you need to say no to charitable contributions. Set aside a percentage of your annual revenue but be realistic about the intent of charitable contributions versus marketing strategies and treat them accordingly.


Growth is an ongoing task. It requires continued effort and investment, not just an initial push the first year you open your doors. “No free lunch” is a cliché but one that applies to growing the value of your practice. Failsafe and low-effort marketing plans that generate hundreds of referrals with minimal effort that sound too good to be true often are.

Steve Stalzer, PT, MBA, is a PPS member and practice consultant with 8150 Advisors. He has over 20 years of experience in strategic growth, operational efficiency, and succession planning. Steve can be reached at

*This author has a vested interest in this subject.

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