Pay-Per-Appointment Marketing for Med Spas: The Problem with Patient Guarantees - Med Spa Success Strategies

Summary

Med Spa Success Strategies Podcast Episode Summary: "Pay-Per-Appointment Marketing for Med Spas: The Problem with Patient Guarantees" Host: Ricky Shockley Release Date: March 12, 2025

Introduction

In this insightful episode of the Med Spa Success Strategies podcast, host Ricky Shockley delves into the prevalent marketing strategy of patient guarantees within the med spa industry. Titled "Pay-Per-Appointment Marketing for Med Spas: The Problem with Patient Guarantees," Shockley critically examines why these guarantees may not be the optimal approach for practice growth and sustainability. Aimed at med spa and aesthetics practice owners, the episode offers valuable perspectives on effective marketing tactics that prioritize both patient quality and business scalability.

Understanding Patient Guarantees

Ricky begins by explaining the concept of patient guarantees commonly offered by marketing agencies to med spas. These guarantees often promise a specific number of new patients within a set timeframe—for example, "30 patients your first month or you don't pay."

Mechanics of Patient Guarantees:

Customer Acquisition Cost (CAC): Agencies calculate the CAC based on past marketing efforts. For instance, if the CAC is $100, an ad spend of $4,000 would theoretically yield 30 new patients.
Reverse Engineering: By understanding CAC, agencies can craft patient guarantees that appear consistent and achievable, assuming a repeatable marketing system.

"If we know, for example, that when we run a specific type of offer or promo that our customer acquisition cost is $100, then we know for every thousand dollars you spend, on average, you're gonna see 10 patients." [01:30]

Issues with Patient Guarantees

1. Misaligned Incentives

The primary concern Ricky raises is the misalignment between the agency’s goals and the med spa’s long-term success.

Case Study: Small Facial Spa in Georgia

Expectation vs. Reality: The spa owner received the promised 30 new patients monthly. However, these patients were often low quality—coming in for promotional offers, not rebooking, and located far from the spa's target demographic.
Impact on Business: High acquisition costs without corresponding retention led to a negative return on investment.

"The problem is patient quality kind of stinks. These people are coming in for my promo. They're not rebooking. They're really far away." [05:20]

2. Return on Investment (ROI) Concerns

Focusing solely on the number of new patients overlooks the financial sustainability of the practice.

Example of Poor ROI:

Low-Spend Patients: Acquiring a client for $100 who only purchases a $100 service results in a break-even scenario, not accounting for the cost of goods sold, leading to losses.

"If I'm spending $100 to get a client through the door who only buys a $100 service and I never see them again, I'm losing money on that." [08:15]

Comparative Analysis:

Offer A vs. Offer B: A Boston client ran two different promotions with varying CACs. Offer A had a lower CAC and more patients, whereas Offer B had a higher CAC but better patient retention and higher initial visit spending. The latter provided a superior ROI despite higher acquisition costs.

"When we looked at the big picture... we're going to be in a much better position financially paying a little bit more to acquire the customer whose stay is retained and spends more money with us." [10:45]

3. Scalability Issues

Patient guarantees can hinder the scalability of marketing efforts due to the controlling nature of agencies.

Challenges with Guaranteed Models:

Ad Spend Control: Agencies may cap ad spending once the patient guarantee is met, limiting the potential for growth.
Arbitrage Practices: Agencies may embed extra margins within their guarantees, leading to increased costs as the practice scales.

Alternative Approach: Independent Consulting Model

Flat Retainer: Agencies acting as independent consultants charge a flat fee, allowing practices to scale ad spend without proportional increases in agency fees.
Enhanced Scalability: This model supports aggressive ad spend growth without the added costs associated with patient guarantees.

"Agencies that are acting as independent consultants... we're not charging as a percentage of ad spend, for example. So when you start to scale your ad spend up, you're not paying any more in terms of agency retainer." [15:30]

Recommendations for Med Spa Owners

Ricky advocates for a more holistic approach to marketing that emphasizes patient quality and business sustainability over mere patient numbers. Key recommendations include:

Focus on ROI and Retention: Prioritize marketing strategies that attract high-quality patients who are more likely to return and spend more.
Choose the Right Agency Model: Opt for agencies that function as independent consultants rather than those offering patient guarantees, ensuring scalable and sustainable growth.
Comprehensive Marketing Strategies: Implement marketing efforts that consider the full customer lifecycle, from acquisition to retention and repeat business.

Conclusion

In conclusion, Ricky Shockley presents a compelling case against the widespread use of patient guarantees in med spa marketing. While these guarantees may seem attractive due to their promise of risk-free patient acquisition, they often neglect crucial factors like patient quality, retention, and overall ROI. By adopting a more comprehensive and scalable marketing approach, med spa owners can achieve sustainable growth and financial freedom.

Notable Quotes

On Misaligned Incentives:

"The problem is patient quality kind of stinks..." [05:20]
On ROI Concerns:

"If I'm spending $100 to get a client through the door who only buys a $100 service and I never see them again, I'm losing money on that." [08:15]
On Scalability:

"Agencies that are acting as independent consultants... we're not charging as a percentage of ad spend..." [15:30]

Final Thoughts

This episode serves as an essential guide for med spa owners navigating the complex landscape of marketing strategies. By understanding the drawbacks of patient guarantees and embracing more effective, ROI-focused approaches, practices can better position themselves for long-term success and financial independence.

Transcript

A (0:00)

As med spa owner, you're probably seeing all sorts of marketing and advertising materials from agencies and marketing providers touting patient guarantees. Something like 30 patients your first month or you don't pay. Here's why that's probably not a good idea for your business. So the first thing to understand is, as marketing providers, we can reverse engineer this number pretty easily, this cost of customer acquisition number to. To reverse engineer into a patient guarantee. So if we know, for example, that when we run a specific type of offer or promo that our customer acquisition cost is $100, then we know for every thousand dollars you spend, on average, you're gonna see 10 patients. So you can basically say something along the lines of, let's add a buffer in there. For every $4,000 a month you spend in ads, you're gonna get 30 new patients through the door. And you can reverse engineer that patient guarantee, because these things are pretty consistent if you've got a system that's repeatable, which most agencies, including ours, do. So first thing to know is it's just really a function of your ad spend. The. The patient guarantee, you could almost make that number whatever you wanted it to be. Once you know your acquisition cost, you could guarantee yourself 50 patients a month if you know your acquisition cost from a specific effort. So that's the first thing to understand. But the first problem that I wanted to discuss with patient guarantees is the idea of misaligned incentives. I talked to someone last year who was running a small facial spa in Georgia, and she was working with an agency. They'd given her this patient guarantee of 30 new patients. A and one of the first things I asked her was, well, are they. Are they actually doing what they said they were going to do? And her answer was, yeah, you know, every month I get 30 new patients through the door like clockwork, guaranteed. Never an issue. Like, I get those 30 patients every month. And so my next question was, great, so. So why are we having a conversation? You paid them to perform a service. They checked the box. They did exactly what they told you they were going to do. And she said, well, the problem is patient quality kind of stinks. These people are coming in for my promo. They're not rebooking. They're not from the part of town that I actually want to attract CL clients from. They're really far away. They're. They're extra, you know, they're really, really, really big discount shoppers, as kind of a general rule on that extreme of the spectrum. And so that is a major issue. You have a misaligned incentive structure when you use patient guarantees. Because it, it assumes that the entire story here is butts in the seats. And as a med spa, that is absolutely not the case. For example, when we run ads for facials for, for our clients, which I'll get, that's a whole other conversation. But just as a med spa, when you run ads for facials, if you've got a really good deal or a really good offer, you're going to have low customer acquisition costs and that means you're going to have a lot of butts in the seats and a lot of patience through the door. The same thing would be true if you offered a crazy good deal on Botox, for example, right? You can pretty much guarantee you're going to get butts in the seats if you offer a good deal and you spend ad dollars to reach your target market with that good deal. The problem is it doesn't take into the full picture, doesn't take into account the full picture of ROI and patient quality. If I'm spending $100 to get a client through the door who only buys a $100 service and I never see them again, I'm losing money on that, right? I've got cost of goods and I paid $100 to acquire the customer. I only collected $100 in revenue. Like I'm, I'm negative, I'm in the hole. So that does not make sense to do that. We want to make sure that our strategies are comprehensive and that we've got a pulse on patient quality and retention to make sure that we're optimizing our ad spend to put us in the best position possible for growth as we look to the months and years ahead. For your med spa. 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 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 great example of this is we had a client in Boston who's running two different types of promos for injectables and facials. There are two different kind of versions of the same offer type, and on one of them they had a higher customer acquisition cost, which meant less butts in the seats relative to the same ad spend number. So if we're simply optimizing that campaign based on butts in the seats, I'm going to go with, you know, offer A that we were running. The problem is, when we looked at the big picture, the people that came in from offer B that had a higher acquisition cost, they were also retained at a way higher rate and spent more money on their initial visit. And if you break that math down using something like our ROI calculator, by all accounts, we're going to be in a much better position financially paying a little bit more to acquire the customer whose sticky is retained and spends more money with us. So there's a breaking point to all of that math. But the bottom line is you want an agency who's really acting as an independent consultant for you, trying to guide strategy into the efforts, initiatives, and offers that are going to put you in the best position for growth and return on investment. It's not as simple as just looking at butts in the seats as a med spot, a business that relies on retention. There are strategies that you can implement all day that'll get a butt in the seat but don't lead to satisfactory retention. So you want a comprehensive view. So that's really the main issue here is, number one, misaligned incentive structure when you use patient guarantees. The second thing is scalability. So agencies will either do one of two things. They're either arbitraging, which is totally fair. I don't want to, like, act like this model is horrible. I think this is better than, you know, most marketing agencies were doing five years ago, at least. Having the ability to guarantee butts in the seats is more than some agencies can do. And I think there's no harm in that. And I understand why agencies do it because it resonates. That marketing message tends to resonate with you as practice owners. Right. It eliminates risk or perceived risk. But here's the issue with scalability. If they're running a patient guarantee, they're basically probably controlling the ad spend number and they're going to turn those ads off once they reach that patient guarantee. So you're paying them a big chunk of money. It includes maybe ad spend and retainer and fees. And their job is to make that as efficient as possible and then to shut that off when they reach the patient guarantee, or to set the pacing so that you get that patient guarantee, but not much more if you're not paying more. So because they're arbitraging that it's not as scalable, they're going to charge you more money and they're going to continue to arbitrage it if they bring in additional patients. So if you wanted to renegotiate your contract to, let's say 50 patients from 30, then they're building in extra margin on top of that. For, for the, the arbitrage of patient acquisition with an agency that is acting as an independent consultant, it's generally going to be more scalable as you grow because the more money you put in the system, your agency is going to have a flat retainer for services, kind of acting as an independent consultant for you. And then we don't charge as a percentage of ad spend, for example. So when you start to scale your ad spend up, you're not paying any more in terms of agency retainer, you're just paying the acquisition cost related to ad spend. So it actually tends to scale better long term, especially for bigger, more established practices. It's. The math is generally going to work out more in your favor if you can find a system that works and then be able to go pedal to the metal with your ad spend as aggressively as possible without an agency adding that arbitrage element. So those are really the two reasons that I think that patient guarantees are not a good idea. Like, I've thought about offering these in our agency because I know how attractive that marketing message can be. But it doesn't take into consideration the full picture of effectiveness of your advertising and marketing.