Updated: Jan 3
It’s the start of a new year, which means it is time to set your 2022 marketing budget! As the adage says – marketing should be treated like an investment in your company. In my opinion, it is more than that, especially for independent pharmacies. Marketing is about awareness. Are your local prescribers aware of your pharmacy’s offerings? Is your community aware of your pharmacy at all? Are your patients aware of the products and/or services they aren’t utilizing? Are local businesses aware of the potential benefit to their employees by partnering with you for immunizations, point of care testing, screenings, etc?
Every month, chain pharmacies are spending hundreds of thousands of dollars trying to get your patients to switch, and the never stop. What are you doing to make sure your patients don’t switch? What would you have to spend to get those patients back? How are you trying to highlight the benefits of your pharmacy over the chains? While we can’t match the budget the chains have, if you aren’t marketing at all, you are letting them have all the control and voice within your community.
The good news is, there are things you can do today to mitigate and compete without breaking the bank.
Determining your marketing budget. In our experience, a good rule of thumb for figuring out what your annual marketing budget should be, is the 1-2-3 rule. At a minimum, you should spend 1% of your previous year’s profits on marketing. For growth, you should spend at least 2% of your profits, and for aggressive growth, you should spend at least 3% of your profits.
According to the 2021 NCPA digest, on average, independent pharmacies had $3,460,000 in annual sales with a 21.9% gross profit or $757,740. Assuming this – a 1% marketing budget for the average pharmacy would be $7,577.40, a 2% marketing budget would be $15,154.80 and a 3% marketing budget would be $22,732.20.
In general, pharmacies in larger cities usually require higher than average budgets due simply to geographic location and increased potential.
Creating a plan. Every pharmacy requires its own unique marketing budget. Since no two pharmacies are the exact same in terms of products, services, physical location, available marketing avenues, etc. what your pharmacy can do is different from any other pharmacy. To simplify the process, we have created a free marketing budget expense sheet for you to use as a jumping off point. This is by no means all potential expenses but does include the most common marketing expenses for you to track.
In addition to tracking your marketing expenses year over year, we also highly encourage you to track any noticed results from your marketing efforts. While finding true ROI from your marketing is difficult, whenever you do notice an uptick in sales/patients/interest from your marketing campaigns, you should note it. You can also pull reports from your dispensing and POS systems to track results. Common reports to review are new patient counts, script counts, product sales, patients utilizing a specific service, etc. By focusing specifically on those reports that are most applicable to what you are marketing, you can get a good idea of what works and what doesn’t.
Sticking to your plan. Oftentimes, pharmacies find themselves over budget when it comes to marketing. A sponsorship or two here, a charity donation or a deal on a newspaper ad there - and before you know it you have spent more than you have budgeted. In addition to having your total marketing budget set, it is important to also have smaller budgets set for each individual avenue of marketing. For example, say you only want to spend 10% of your annual budget on sponsorships. Having that number in mind will make it easier for you to accept or decline sponsorships depending on where they fall within your designated budget.
We also encourage all our clients to perform an annual review of marketing vendors to ensure you aren’t duplicating your efforts. Often, we find pharmacies are using multiple people or organizations to post to their social media when using one would suffice. Along those same lines, make sure to review any contracts you have (billboard, radio, newspaper/magazine, etc.) each year to ensure you aren’t spending significantly more than previous years without realizing it. Many times, pharmacies just keep paying the same vendors to run the same things repeatedly without realizing that the price has increased significantly since they originally started.
Finally, while you don’t want to waste marketing budget on ineffective strategies, writing off something because it didn’t work one time isn’t always a good idea. It is important to try different messages and ideas multiple times before marking an avenue as a lost cause. Just because a direct mailer you sent once didn’t yield results, doesn’t mean it isn’t an effective marketing tool. It could be that your message wasn’t appropriate for the audience, or that you tried putting too much on one piece, or maybe your call to action wasn’t strong enough. Either way, trying new things to find out what works is part of developing a successful marketing strategy.
Bottom line, creating and sticking to a marketing budget can be stressful, but by carving out a bit of time each month to update your spreadsheet and confirm you are still on track, you can go a long way in ensuring you don’t overspend and put yourself in a bad spot, financially.
Additionally, GRX Marketing has been helping pharmacies develop and stick to marketing budgets for over a decade. We can provide a variety of recommendations on what is best for your pharmacy based on your goals and desired outcomes, we can review contracts and make recommendations to save you money, and we can offer expertise and assistance that won’t break your budget.
To talk with our team about how we can help your pharmacy, give us a call at 515-280-2914 or fill out our contact form and a member of our team will be in touch.