Do you know the Lifetime Value of your Dental Patients?
Your patients are the most valuable asset to your business. They’re not just faces in the chair; they’re the foundation of your practice’s success. But how do you measure that value? It goes beyond the revenue from a single appointment. Here’s where the Customer Lifetime Value (CLV) comes in.
We’ll explore the concept of CLV specifically for dental practices. We’ll explain how to calculate it, why it matters for your business’s marketing strategy, and most importantly, how to use this knowledge to build stronger, more profitable relationships with your patients.
What is Customer Lifetime Value?
Customer Lifetime Value (CLV) is a metric that reflects the total amount of money a customer is expected to bring to a business throughout their entire relationship. It’s not just about a single purchase, but the overall value a customer generates over time. This concept is particularly important for service-based businesses like dentistry, where customer retention is key.
Imagine your ideal patient – they don’t simply visit for a one-time checkup and disappear. Instead, these patients become long-term partners, trusting you with their oral health needs throughout their lives. This ongoing relationship translates to significant revenue potential for your practice.
What is the Lifetime Value of a dental patient?
Dental practices are all different. Where they’re located, what services they offer, and how well they market themselves online all affect how much value a patient brings in the long run.
Here’s how to calculate your CLV:
Average Annual Value (AAV) x Lifetime Ratio (LR) + Customer Referral Value (CRV) = CLV
What you need to find:
- Average Annual Value (AAV): This is the average income you generate from each patient in a year. You can calculate it by dividing your total annual revenue by the number of patients seen that year. (Example: £300,000 income / 250 patients = £1,200 AAV per patient)
- Lifetime Ratio (LR): This represents the average number of years a patient stays with your practice. You’ll need to gather data from your patient history to determine this.
- Customer Referral Value (CRV): This is an estimate of the additional revenue generated by patients referred by your existing patients. You can survey your patients or track referrals to get a sense of this value.
Let’s put it into practice. First determine how much the average patient spends per year. If most patients come twice a year for hygiene/exams, for example, and spend £100 each time, your patient’s average annual value is £200.
Now we need to know the lifespan of your average dental patient. If you are not sure, use an industry average of ten years. We can include that in the first part of our Lifetime Value Calculator and see that so far the patient’s lifetime value is £2000.
AAV (£200) x LR (10 years) = £2000
But that’s not it yet. Let’s say that the average client refers two new patients throughout their lifelong relationship with your clinic. Each new patient is worth an additional £2000. For two patients, our client referral value is £4000.
Let’s go back to our calculator:
AAV (£200) x LR (10 years) + CRV (£4000) = A lifetime value of £6000
This example shows that the average patient brings in £6,000 to your practice over their lifetime.
However, this is a simplified approach. The actual CLV can vary depending on factors like the type of services you offer and your marketing efforts. However, this method provides a good starting point to understand the value of your patients.
Why is the Lifetime Value of the patient important?
Understanding the lifetime value of a patient empowers you to make smarter marketing and advertising decisions. By knowing how much revenue a typical patient generates over time, you can avoid spending more on attracting new patients than the profit they bring in.
Thinking in terms of CLV also sets a clear benchmark for success. It gives you a target value to strive for with each patient. By implementing strategies to improve CLV, you can directly contribute to the overall growth and profitability of your dental practice.
Tips on maximising the Lifetime Value of your patients:
- Focus on creating a positive patient experience with friendly staff, clear communication, and efficient scheduling.
- Promote regular checkups and cleanings to prevent future issues and keep patients returning.
- Expand your service range to cover cosmetic dentistry, orthodontics, or other specialties, increasing revenue per patient.
- Incentivise patients to recommend your practice, bringing new patients who are likely to stay.
- Use appointment reminders, follow-ups, and targeted communication to build relationships and encourage repeat business.
- Provide patients with informative content about oral health, fostering trust and promoting preventative care.
- Consider working with a Dental Marketing Agency to reach the right audience with the right message to attract new patients who align with your ideal patient profile.
By focusing on patient experience, preventative care, and strategic marketing, you can significantly increase the lifetime value of your patients and ensure the long-term success of your dental practice. Ready to start attracting the patients’ your clinic needs to grow? Contact our team today!
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