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Med Spa Success Strategies
Marketing Math Med Spa Owners Must Understand to Unlock Maximum Growth & ROI
00:27:49
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- [00:00]
A
Foreign. Lauren and I are excited to talk today. It's going to be a little bit of a deep dive on some of the math around marketing. This is going to be called the five Med Spa Marketing concepts that will unlock predictable growth and True roi. I get excited about this presentation. We gave this presentation at a conference that we attended earlier this year. Out of respect for the conference, we didn't go through this actual version of the presentation during the conference. So this is coming out way, way later. This is actually information presented in a way that we've never quite presented it before. When it comes to the math on marketing and how to understand some of the trade offs that we make. We've talked a lot about these concepts. There's overlap on different episodes, but this is a deep dive on the marketing math concepts that will unlock predictable growth and ROI for your med spa. I think this is a really important episode. I believe that we're going to be able to deliver on these things. Right. This is going to help you better manage your marketing investment for years to come. And it's going to give you a framework for measuring success that helps you gain confidence that your marketing is an investment, not an expense. It'll give you clarity on how to strategize and improve the performance of your advertising. And ultimately it's going to give you a predictable system to grow your practice as quickly as you desire. That sounds like a crazy concept, Lauren. Don't you think though, that when you know the math, like you really do have the ability to grow as fast as you essentially want to grow, there's obviously there's a ceiling to that in terms of diminishing returns. You can't throw unlimited money and see unlimited growth in a local market. But yeah, for the most part, you do get to accomplish that or something close.
- [01:30]
B
Yeah. A lot of that is proven by some of the case studies we even talk about too. It's just how much are you willing to put in once you know your numbers and how much are you willing to get out?
- [01:39]
A
Yeah, I love that. That's a great little sound bite right there. Okay, so the five problems, we'll go through these one by one. Let's just go through the five problems we typically see when we talk about math related to your marketing investment. So number one is not properly understanding or evaluating ROI measurement and how marketing ties to cash flow and revenue growth. Right. You just don't understand how ROI actually works. We hear vague things about initial visit revenue, lifetime value. Everything feels very woo woo and up in the air. It doesn't feel concrete. Number two, uncertainty around results and benchmarks for success. Like, are the stats good? What, what do good stats look like? Could they be better? And the margin for error, especially in terms of cash flow impacts, is pretty small. Problem number three, not understanding the relationship between offer and customer acquisition cost. We talked about this trade off a bunch on the podcast. But as offer attractiveness goes down, customer acquisition cost goes up and vice versa. I don't know how many times we say that. I feel like it's one of those things that's hard to stick because we all wish that we could have it both ways. But just understand that basic trade off is a reality as the attractiveness of your offer goes down. Right. It's a less attractive offer. You're going to pay more in customer acquisition costs and vice versa. Problem number four is not optimizing for the full picture. So this is another part of the equation that I think sometimes we miss. You see this when agencies talk about like patient guarantees and it feels like we're taking the risk off the table because we have a patient guarantee, so we'll do that. But the reality is that's short sighted because it doesn't actually give you a holistic view of client quality, lifetime value, and the things that are tied to retention. If we're just looking at initial visit revenue or customer acquisition cost or not seeing the full picture. And the last problem number five is you're locked into a mindset that marketing is an expense, not an investment caveat. There is if you know your numbers and your numbers are good and if you have confidence in your numbers, you really have to break the mindset that marketing is an expense. There are very few things in our business where money goes out the door and it's directly tied to revenue growth. Marketing is one of those things. But I understand most other times we see the money go out of our business accounts and it feels like an expense. And for most people, marketing still feels like that even when it's not. For some of you, it is, and that's a bigger problem. But when it's not, we need to break the mindset. All right, so problem number one, not understanding or evaluating ROI properly and how it ties to cash flow growth. One of the common disconnects that we see is this. You know, your marketing person or somebody's telling you, hey, this is Great. We saw 30 new patients this month and you're looking at your operating expense account. You're going, I don't know, is this really working? You're not Seeing the impact in your bank account. So let's talk a little bit about what's going on there. And I've got a screenshot from the book Med Spot Confidential that I like to reference a lot, which is essentially why would we spend. In the example they outline, they're talking about a market med spot spending $5,000 to get 15 new clients who spend $400 on Botox on their initial visit. Why would we do that? Like spending $300 in customer acquisition cost to get a client that spends $400 to doesn't really seem to add up. But the lifetime value of an aesthetics customer is closer to $10,000 is the example they give in their book. So really, that $300 in marketing could potentially be worth up to $10,000 in patient revenue per patient. But the disconnect you're seeing is that lifetime value comes on a timeline. So if you're just seeing initial visit revenue and money in, money out, the impacts can be minimal. In terms of cash flow, they they can actually be negative even on a successful campaign long term, the example they give is a very successful profitable campaign, but it creates short term negative cash flow pressure. So you have to be cognizant of that being a possibility. I would say the goal should be that your marketing is creating, at least paying for itself in terms of covering your ad spend. The cost to acquire the customer, the cost to deliver the service would be the kind of initial goal. This episode is brought to you by MedSpa Magic Marketing, my agency. We help med spas and aesthetics practices grow with more effective marketing strategies. And I know that's a vague phrase, right? That's a vague claim. So I have an offer for you. I offer this to any new prospects. If you're interested in exploring any of another marketing option, a new agency, or just getting into Facebook, Instagram, Google Ads for the first time. I'd love to show you why we're different, what we're doing for clients. And we can do that via a one and a half hour planning session where I'll outline a specific marketing plan and I'll give you all of the blue blueprints that we would implement if we were to do business together. Now you can take that, use that on your own, hire someone else to help you execute it or work with us. We really don't hold anything back on that strategy call. And I think you'll have a lot of confidence in how you manage your marketing investment moving forward. Understanding some of the nuances that can help you implement more effective marketing strategies for your business. So if you want to do that, you can go to medspa magicmarketing.com all right, so Lauren, we talk about two bad ways to measure ROI kind of outlined in that last example. Can you talk about those a little bit?
- [06:27]
B
Yeah, absolutely. I think this is one of the first concepts that we always try to get clients to understand on our kickoff calls too, is different marketing agencies look at this completely different. And I think either way, you're shooting yourself in the foot looking at lifetime value or success of your campaign, looking at these two things. So lifetime value, like I just said, is that first one that you're going to look at, that's a bad way to measure success. So essentially, if we go back to that example that Ricky just showed from MedSpa Confidential, it's really easy for me to tell you, hey, you're going to spend 300 to get this person, but over the course of the lifetime of that patient, they might spend 10,000 doll dollars with you. That's not giving you any picture though, of cash flow currently, what that look is looking like for you for your accounts, for your business. So it's a horrible way to measure, especially when you don't even know your retention rates or how many people are actually sticking with you. So it's not actually giving you a perfect number of what that is going to look like in the future. And then measuring based on initial visit revenue is also a pretty bad way to measure your success because more times than not, you're probably going to lose money on that first visit. That's not to say though, that it's not worth it. That might be. You might have somebody who's going to come back and even on two more visits, you make it back that you spent for them on that first one. But both of these are just a bad way to measure success in terms of how your campaigns are performing. So we are going to talk about kind of how we measure success and how we're kind of mapping that along in your journey.
- [07:47]
A
Yeah. Overly simplified, I would say too. And then we do have this little note on here, which is if you're selling packages that don't necessarily lead to retention, when we talk about this being a bad way to do it, truly for like the injectables or the services that rely on recurring revenue and retention, you don't make a killing upfront. You will make really good profit, really good margin, and really good ROI as time goes on. But there's a time delay to seeing the roi and it is dependent on retention. If you're selling package sales, like, if you're selling coolsculpting or M sculpting packages, I would then look at like initial visit revenue in terms of package sales to look at ROI. Right. If it cost us $1,000 to acquire the client from advertising, but they spend $5,000 on an initial package, I think that's fair. We can assume anything else is just icing on the cake after that.
- [08:32]
B
Absolutely.
- [08:33]
A
Okay. The reality also is that instead of looking at this in two kind of like isolated components, which is initial visit revenue or lifetime value, there's a whole timeline in between those two things that's happening. And so the reality is growth is compounding. So as we chart this on the screen, you can see our ad spend line is going to be linear. It's going to incrementally increase from left to right as you go up the char. And the revenue generated is compounding because it's growing over time with retention. Right. You have the same number of new clients. If you're spending $5,000 on advertising or $10,000 on advertising, you probably have a relatively set number or a ballpark number of new clients that come in that are new every single month. The real magic happens when all of a sudden the clients that were here three months ago and six months ago and nine months ago and 12 months ago are overlapping with all of our new patient acquisition to create a snowball effect. And that's what we see on this chart. As growth is compounding, these numbers get better over time and as time goes on. So we do this in the ROI calculator. If you want the ROI calculator, we give this as a free download. You can just comment ROI on the YouTube video. If you're seeing this in a social media post, wherever it is, just comment ROI and we'll make sure you get a copy of the ROI calculator, give you directions to get that. But this is a tool that allows us to forecast growth over time. So problem number two, uncertainty around benchmarks for success. Are the stats good? Could they be better? Right. So if you don't know your numbers, the margin for error is small. So in one of our other videos, go scroll our YouTube channel. I think if you're watching this, we'll have a newest version. So scroll through the feed. Literally go to YouTube, go to videos, or go to the podcast and go to the episodes and those are called. Let me pull up the name of those videos, Lauren, so I can give people a good reference for it. Think it's like a strategies that are working now I think is the name of the episode. And we do these seasonally so you'll get our most up to date version of this if you scroll to that other video. And these will give you actual benchmarks for success on what we expect to see with customer acquisition cost on certain campaigns. I think that's enormously valuable. So we did like a spring and a summer edition Insider Secrets marketing strategies that are crushing it. And we do have different seasonal additions. We'll update this about every quarter, at least a few times a year. So if you just Google Insider Secrets marketing strategies that are crushing it for med spas, you should see one of the most updated versions of these videos and we'll give you the benchmarks that we have internally for success to understand. Are your stats good? What should you be paying for customer acquisition costs? Could these numbers be better? And the reality is you're the gap between your customer acquisition cost and your initial visit revenue is very important because it indicates your short term cash flow impacts. If you can create enough of a gap between your initial visit revenue and and the cost to acquire a customer from ad spend, then you can take off the table any negative cash flow pressure and it's all going to be icing on the cake. Right. You're making more money back than you're spending even in a given month, covering all costs associated with delivering the service.
- [11:30]
B
I think a bigger thing too that goes with that is knowing your numbers in general. Like not even understanding if they're good to some extent, but also knowing what it is. I feel like constantly, probably eight times out of ten we talk to a new client or a new potential client. We ask them, hey, what's your current customer acquisition cost for Botox campaign? They have no clue, no idea what ad spend they're spending to get a new patient through the door when they're running an ad. And I think that's just a huge part of this is you have to understand even what those numbers are to know then where to go from there, where to optimize.
- [12:01]
A
Yeah, absolutely. So we have this charted real quick just to kind of look. If we project all stats the same from a $4,000 a month ad spend, if you have $125 customer acquisition cost on something like let's say a Botox or Dysport campaign, all other things equal on our ROI calculator it would project out in this example to $767,000 in 24 month revenue generated at $125 customer acquisition cost. If you're paying $200 in customer acquisition cost, that goes all the way down to $479,000. So you're leaving almost $300,000 on the table. Sorry, over 300. About $300,000 on the table in a 24 month window by what seems like a relatively small inefficiency in your advertising efforts. So, so a lot of you are advertising, you feel like, well, it's working, it's pretty good. But is it really good enough? And should we should always be striving to be better because that difference between $200 customer acquisition cost and 1:25, all things equal in terms of retention and initial visit revenue being stagnant, that's a $300,000 difference from a $4,000 ad spend investment over just two years.
- [13:03]
B
Yeah, and I think the biggest thing that ties back into too, Ricky, is that main key quote that we're always talking about is the attractiveness of your offer and is what affects your customer acquisition cost. So the more attractive your offer is, the better your customer acquisition cost is going to be. So maybe you want to go $10 cheaper on your Botox promo, and that might cost you $10 in product cost, but it's going to save you a hundred in customer acquisition cost. So making sure you're going back to those key principles too, of what you're running to get your customer acquisition cost as dialed in as possible.
- [13:34]
A
Yeah. And there's a balance there. And that leads us to this problem. Three, which Lauren just said, which perfect segue. It's not understanding the inverse relationship between offer attractiveness and customer acquisition cost. And I would say what Lauren just mentioned is understanding you're paying for this on either side of that equation. So like Lauren said, if you take your new patient promo, let's just use the Botox example. Let's say you shave $20 off, you make it even. You up the ante on the attractiveness of your new patient promo. You shave $20 off. Well, if that saves you $50 in acquisition cost, because you get your customer acquisition cost from 200 to 150, you, you're, you're financially ahead of the game and you're seeing a larger volume of new patients. So again, there are other trailing data points. You want to look at how that affects retention and patient quality and initial visit revenue. But just to simplify that example, understand this inescapable reality, which is that these things have an inverse relationship. Right. As the offer attractiveness goes down, customer acquisition cost goes up and Vice versa. Well, wish we had. Could have the best of both worlds. Um, but that's just an inescapable reality. And this is where we always see the. Hey, but Lauren. But Ricky, if by offer you mean discount, I don't want to cheapen my brand and attract bad clients. Lauren, can you speak to that a little bit? Cause we hear that it's a very common thing. We hear.
- [14:48]
B
It is very, very common that we hear. And I, I think there. We've talked about this probably a million times on our podcast before, but the main quote that Ricky loves, that we all love to keep saying is action changes attitude faster than attitude changes action. So by getting somebo in your chair, having an authentic experience with your practice, with your providers, that's how you're going to end up seeing that lifetime value be worth it. And those numbers end up playing out in your favor. So basically what we're saying here is you're going to spend less to get people through the door by having a more attractive offer. So you're going to have more at bats, more butts and seats, giving more people the opportunity to take action with you to change their attitude about the next steps. So it's going to make way more sense if we can have a hundred new patients in the door where maybe 25 of them stick. Right, because you're having more volume, more people in that are giving that opportunity to have that experience with your practice. That's when we really see numbers make sense in the long run.
- [15:48]
A
Yeah, that's another one of those trade offs, like Lauren said. And again, there's a, there's a trade off here. If you don't want to. If you don't want to. I always say if you don't want to sift through the dirt to find the gold. You have to understand the trade off that you're making though. But would you rather see 100 clients and 25 of them are sticky? So you have 25 good quality clients left over versus just seeing 15 good quality clients that you optimized upfront for patient quality. That's typically what we see like the trade off looks like. The other thing I always like to say is that perception is created best through experience. That's another way of saying this exact quote. And I always ask people on my, on the calls that I have with them when I first talk to people is, what's your favorite restaurant in your town? Pause for a second so you can think about the answer as you're listening to this. And inevitably your favorite restaurant or the place that you would be excited to go eat today for lunch or grab dinner with your family is going to be a place that you've actually been to and eaten at. Right. You don't have a favorite restaurant you've never been to. So if we truly want to be someone's favorite med spa, the best way to do that is to create perception through experience. We want them to come in and get to know our injectors, get to know our space, and fall in love with us via the experience.
- [16:48]
B
I think we talked about this on the last episode too. Sorry to interrupt, but it is so dependent on your practice. Like we could tell these same principles to two practices on the same street, on the same city and people who have it dialed in in terms of patient experience experience who are giving an A plus plus plus patient experience, they're seeing the best numbers in this sense. They're seeing the people actually return and stay with them. Somebody who has it dialed in just a little, maybe they're having like a B minus, B plus patient experience. You're not going to see nearly the same retention as somebody who has it fully dialed in. So it really is to practice dependent and provider dependent on how successful you can be with that.
- [17:28]
A
Yeah, I did a podcast episode. I don't know if it'll be out by the time this comes out, but really successful business owner in San Diego owns multiple locations out there and he was talking about how they track all of their providers and their injectors. So they have benchmark ranges for initial visit, revenue retention, retail sales. So they kind of understand the range of outcomes. They can figure out who the top performers are and get to leverage their knowledge and their experience and how they're doing things to lift the performance of the rest of the team. A side note, but I thought that was a good thing to add on here. We've also had Sarah Schickman on the podcast a few times. She sold and exited a multi location, very successful med spa and she talks about issues. I think she said in our last episode, I will die on this hill. When she audited her practice, her very successful practice of her top 20% spenders, 80% of the people at the time had originally come from Groupon. Now I don't think Groupon is the best place to do this nowadays. I think Facebook ads probably right now as we're filming this are like the new Groupon in terms of that type of a strategy. But the reality is everybody loves a discount. It's the best way to tip the scales in your favor when people are weighing similar alternatives to get them to choose you over the other options. And we see it in our data. What we typically see with our successful practices is even when running aggressive new patient discounts at really low price points, we still see retention numbers on that strategy in excess of 50%. And like Lauren mentioned, we, we're optimizing to some extent for volume. But the absolute number of people that are left over at the end of the funnel that are retained. Right. I'd rather have 50% of 100 than a hundred percent of 40. And that's what we're talking about when we look at the trade off in these numbers. And I think all of the evidence shows this is not theory, this is not anecdotes. We have data from Miami to Seattle and Los Angeles to Boston and scattered all in between that this is how this plays out when we run these types of ads and these types of efforts. This is a very effective strategy. Using new patient discounting to attract new clients to, to give you that first at bat to establish the relationship is insanely effective. Hey there. Wanted to briefly interrupt the episode to make a quick ask. If you're a podcast listener, it would mean the world to us if you leave a review for the podcast, whether that's on itunes or Spotify. It's something I hadn't really remembered or thought of asking for, but it does help us show up more frequently so that we can reach more people with the information that we're providing. So it mean the world to us if you'd leave a review on itunes or Spotify. If you're listening on audio, if you're watching on YouTube, make sure to hit the subscribe button so you're in the loop for future videos and you don't miss any of the content that we're putting out. So let's talk about an example of the extremes of the math on new patient specials as a leverage option for attracting new clients. So when we run new patient, when we do new patient specials and we have a discount involved, we might see something like, I don't know, just say 160 acquisition cost and a 400 initial visit revenue. That means for every $6,000, we're getting 36 new clients that spend $400 with a retention rate of 50%. We forecast that out on our ROI calculator. We look at 24 month revenue of $863,000. When we try to win upfront on reputation alone, we might see customer acquisition costs climb to $375 or more, even if initial visit revenue is dramatically higher. Right. We just. In this example, we're doubling our initial visit revenue from 400 to 800, and we're going to take our retention, for argument's sake, all the way to 100%. So these are. None of these people are having any sort of attrition. They're all staying with us and rebooking and staying with us for two years and beyond. Even then, we paid so much in customer acquisition costs. We have such a lower. Such fewer patients overall in terms of volume. You forecast this out for 24 months. We're $767,000 in revenue. We're behind where we were in example A, where we only had 50% retention. This is Lauren's example in the math demonstrated. Now, there's a breaking point with that, right? Like, if the initial visit revenue is high enough and the retention is high enough, that it offsets. There's a breaking point with the math. But more often than not, we see the discounting strategy be the best way to create perception through experience and to create the best, best mathematical scenario for revenue growth and profitability. So I have some real examples on the screen, but let's just jump to problem number four, which is we talked a lot so far about optimizing for customer acquisition costs relative to initial visit revenue. We talked a little bit about retention and how it ties in, but I think it's a mistake to optimize for customer acquisition cost alone. Right? We want to look at the full picture. We want to understand client quality, revenue retention, and lifetime value. Because just looking at customer acquisition cost alone can be a mistake. So looking at the full picture, very, very important problem number five, and this is the easiest one to explain and the hardest one mentally to overcome, which is if you know your numbers and you can run through the exercises that we illustrated in this podcast and in our other podcasts and YouTube videos, and you know that there's a satisfactory gap between what it costs to acquire a customer and what people spend with you and how often they stay. Right? You know that these ads are profitable. If you're still locked into a mindset that marketing is an expense and not an investment, you're shooting yourself in the foot, right? So if your numbers are good and you have confidence, you need to break the mindset that marketing is an expense. It really is an investment. When you track the numbers and you know your numbers, like Lauren mentioned, especially once you start to understand your retention numbers and how much these clients are spending with you over A course of a year, two years and beyond, you start to get a clear picture of roi. And when you have that data, you need to break the mindset that marketing is an expense. It really isn't an investment. That's what we're doing here. When it's working well, it's a money printing machine. You're putting a dollar in and in 12 to 24 months, it's printing you 4, 5, 6, 7 on the back end. So I think I just have a last example here, which is breaking the mindset that Mark is marketing is an expense. So one of the things we talk to clients about is, hey, the numbers are good. We've measured initial visit revenue. We know customer acquisition costs. We're looking at retention numbers now, three, six months in. We're excited. These numbers are great. These are very profitable campaigns. Let's bump the ad spend. Now. There's times where like, hey, but we're at capacity. We don't have plans to grow. Like, we've got to do something else. That's fine. But for most practices you're trying to grow, I want to get my books as full as possible. I want to bring on a new injector. I want to open a second location. So if you're in that situation, you have to break this mindset because marketing is not an expense. So you shouldn't be going back to your marketing provider or to your internal marketing team saying, no, no, keep the budget where it is. We should be spending as much as we can possibly spend in terms of being able to handle the business. So at $2,000 a month, for example, the other thing to consider here is more ad spend makes the cash flow situation better. Not just the growth, but the actual cash flow situation. So if you have $167 customer acquisition cost and an initial visit revenue of $400. In my example, if you're paying an agency in this, let's say you're paying an agency to manage your marketing efforts a couple thousand dollars or $1,000, this is creating some short term negative cash flow pressure and it's really not making a dent. In terms of putting additional money in your operating expense account beyond your expenses for several months, you look at the 24 month growth path. At $2,000 a month, you're at $287,000 revenue. In this example, at $6,000 a month, you're generating $863,000. You have more substantial cash flow impacts happening out of the gate. Or six months in, you got $30,000 more in your operating expense account plus, I don't know, an extra 180 new clients or so. So again, when you have the data and you have the evidence, break the mindset that marketing is an expense. It makes the cash flow situation better. It accelerates your growth. The only limitation is your willingness to put spend and maybe the three to four weeks that it takes to make the money back. But as long as those things aren't creating short term negative cash flow impact, you should be willing to extend the ad spend as aggressively as possible to accomplish your growth goals. So kind of key takeaways track and know your numbers to have confidence in your marketing investment. ROI gets better as time goes on, especially with things like injectables. Inefficiencies in your strategy or process that lead to higher customer acquisition costs can potentially be costing you hundreds of thousands of dollars in lost revenue in just a couple so you make sure your strategies are dialed in your mission, dial up your offer attractiveness while also keeping in mind retention. But overall more at bats equal better growth. Once you have that data and you're confident dialing up your ad spend when your marketing is working is the fastest way to achieve faster growth. And like Lauren mentioned, these last little disclaimers we'll throw in there because what you do on your end as a practice is more important than anything any marketing program or provider is going to do for you. Lauren, do you want to do those those wrap notes? Sorry?
- [26:11]
B
Oh yeah, I didn't hear that part. Yeah. So definitely having everything on your end, being an A plus experience is going to be absolutely huge and making all of this worth it in the long run for you, creating top notch patient experience, having those little things that really set you apart and make a different experience for you than a different practice would. Going to them, effectively communicating and selling your solutions. So having some of those key takeaways or tidbits that you do that are special to you as a provider rather than other locations or other providers getting clients to rebook at a high rate. I think that's the biggest one that a lot of people just think will happen and will fall in their lap. But really that takes effort too. So put the effort into getting the rebook too. Not just that first visit and then have excellence in every single area of your business from the first communication touch point with somebody to walking them out the door.
- [27:05]
A
Yeah, being it. Like Lauren said, being B plus and thinking hey, my providers are pretty good, my front office staff is good. It's not good enough. You need to be shooting for excellence. You have to be a plus in every capacity. And then on that retention number. I can't let an episode pass without saying this. Rebook in the office. Please do not let people leave without an appointment being on the books. The default should be that somebody's got another appointment on the books for their next visit when they leave the practice. Thanks. We hope that was valuable. Going a little bit in depth on the marketing math, how to think about your marketing investment, how to gain confidence in those solutions. We'll see you on the next episode.