The Sales-continuum Approach to Marketing ROI

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In today’s challenging business environment, not many people would buy into the philosophy, in operating an imaging center, that if you build it, they will come. Most accept that marketing the center is required. Even so, the questions of exactly how to market the center and, equally important, how much to spend marketing the center remain difficult to answer. The difficulty comes from an inability to measure the effectiveness of marketing campaigns. There is, however, a method for segmenting the market of referring physicians into a sales continuum, and that segmentation enables analysts to compute a return on investment (ROI) for a marketing campaign.
The sales continuum paradigm has proven to be an effective tool in evaluating and managing our marketing teams. It emphasizes the goal of creating loyal relationships and allows progress toward that goal to be tracked.
This assumes that the decision on where a patient has the imaging exam is predominantly determined by the referring physician’s office. The validity of this assumption, and the question of whether the trend is toward more patient control, is a topic for another article. The assumption translates into the goal, for marketing, of building loyal relationships with referring physicians’ offices. Loyalty can be defined as continued referral over time. A physician who sends you one patient would not be considered loyal, but a physician who sends patients every month would. To measure loyalty, you need to look at the referral trends, or referrals over time. In our sales-continuum work we segment referring physicians into four groups. We use a six-month window of referral history and then group the physicians by how many months out of the past six they have referred at least one exam. The segments are visualized in Figure 1.
Segment Number of Months in Past Six with Referral
Prospect 0 Months
One Time 1 Months
Occasional 2 or 4 Months
Loyal 5 or 6 Months

Figure 1 Note that the segment is determined by whether there were any referrals in each of the past six months, not by how many patients or exams were referred. Obviously, you care more about a loyal physician who sends eight patients for MRI exams each month than you do about a loyal physician who sends you one patient for a radiograph per month, but both physicians would be included in the loyal segment. These segments can be placed side by side to form the sales continuum. In a new center, all the physicians would be prospects. As time goes by and physicians continue to refer, they will move from left to right across the continuum and, one hopes, enter and remain in the loyal segment. It takes five months for a physician to become loyal. This positive movement is depicted in Figure 2.
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Figure 2.
The prospects segment is shown as a cloud because the exact number of prospects is unknown. Physicians can refer from outside the defined marketing area and/or new practices can open. Of course, if physicians stop referring, they will move from right to left along the continuum. In addition, physicians in any segment could retire or move outside the marketing area, as depicted in Figure 3.
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Figure 3.
Putting the positive and negative movement together—adding the actual number of physicians in each segment and the number of physicians who move between the segments—produces the sales-continuum profile. This profile changes every month when the referral-trend window moves. The profile is displayed in Figure 4.
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Figure 4.
The numbers inside the segment are the total physicians in that segment, and the number in parentheses represents the change from the previous month. The numbers on the arrows represent physicians who moved between segments. In addition to the profile, sales-continuum trends are maintained for the number of physicians in each segment, as well as the various movements. This allows us to track success in generating loyal physicians. Our referral-trend analysis allows us to identify the particular physicians who make up any segment or move between segments in any given month. This ability is the key to developing marketing ROI. For example, in September and October 2007, Raleigh Radiology Cedarhurst, Raleigh, NC, expanded its services by upgrading its MRI and mammography equipment and opening a new location. The marketing team actively promoted these new services through its normal marketing activities, but also added mailings and advertising that cost around $15,000. Was that extra cost worthwhile? If we look at the trends of physicians moving from the segment for prospects to the segment for one-time referrers, we can make multiple observations (Figure 5). Prior to September 2007, there was an average of 56 physicians making the transition. During September and October, those numbers jumped to 81 and 111, respectively, so there were 192 physicians referring over the two-month period. If September and October were average months, we would have expected 112. Thus, the extra marketing activity can be credited with 80 (42%) of the physicians making that transition during September and October. Now, we need to know the value of 42% more physicians making the transition from one segment to the next.
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Figure 5.
Since we can identify the particular physicians making the transition, we can also track their referral activity over time. This allows us to calculate the value of having more new referring physicians. Remembering that our goal for marketing is to build loyal relationships, we can also watch how many of these new physicians come back and how many become loyal. The table shows the gross charges generated between September 2007 and February 2008 by all the physicians who transitioned from prospect to one-time segments in September or October 2007. We can only credit 42% of these gross dollars because, even without any extra effort, there were physicians who made the transition. Since you do not put gross charges into the bank, we will use earnings before the deduction of interest, tax, and amortization (EBITA) of 7% of gross sales to calculate the return. The $15,000 in extra marketing expense was recaptured within three months, but that is not really the end of the story. The analysis shows that 92 of the physicians referred again and 18 went on to become loyal. After six months, the ROI is 173% ($25,960/$15,000). With 18 new loyal physicians, the return will continue. Using EBITA should be considered very conservative; one could easily argue that many of the costs of the center are fixed and would not change when the extra exams were performed. This only makes the good news better.
Gross Charges $153,000 $240,000 $140,000 $150,000 $90,000 $110,000 $883,000
EBITA (7%) $10,710 $16,800 $9,800 $10,500 $6,300 $7,700 $61,810
Credit to additional marketing (42%) $4,498 $7,056 $4,116 $4,410 $2,646 $3,234 $25,960

Figure 6 The sales-continuum paradigm has proven to be an effective tool in evaluating and managing our marketing teams. It emphasizes the goal of creating loyal relationships and allows progress toward that goal to be tracked. In addition, the underlying referral-trend analysis permits the ROI to be produced for specific marketing programs. Clearly demonstrating the ROI is the sure way to get management to increase the marketing budget.