Analyzing effectives of the marketing campaign

Ivan Bakhurin, MBA
wolfhair.com

"I have never seen any problem, however complicated, which, when you looked at it in the right way, did not become still more complicated"
Paul Alderson¹

The three most important elements of a hair restoration practice are: the quality of the surgery, the business model and the marketing. Often the marketing budget is the major driver which determines practice revenues and overall profitability.

According to a recent study performed by Accenture², nearly three quarters of marketing executives confirmed that their company is unable to measure and analyze the effectiveness of their marketing campaigns. There is no reason to believe that this number is significantly different, if not worse in the hair restoration industry, where the overwhelming majority of participants are small businesses by the Small Business Administration standards.

Statistical analysis of our patient database showed that the average age is 40.5 years. When structuring our marketing campaign we are targeting people in income brackets starting from $75K. It is obvious that these demographics are turning to the Internet as the primary source of any information, including of course information on the treatment of hair loss. We have also noticed that financing programs we offer are shifting average incomes of our patients downward making hair restoration more affordable. Since there is a strong correlation between income and computer ownership and, likewise, a strong correlation between computer ownership and Internet access, the fact that computer prices are falling is helping bridge the digital divide. Based on these facts it can be stated that Internet Marketing is fast becoming the most important and most effective marketing channel for hair restoration practices.

There is no doubt about the importance and effectiveness of marketing on the Internet. The cost of lead generation for different direct marketing techniques³ is:

Online Search $.29
Email $.50
Yellow Pages $1.18
Banner Ads $2.00
Direct Mail $9.94

Cost per customer acquisition (CCA) which is calculated as the marketing budget divided by the number of new patients, in the hair restoration industry was $1,000 or more. It was an acceptable number few years ago, when marketing expenses were reported at the level of 18-20% of the gross surgical income. Currently we are witnessing CCA an average of $300 or lower as a result of more cost effective marketing on Internet. In a contemporary environment business owners and managers should be concerned if more then 10% of the gross income is spent on marketing.

In the early stages of online advertising things seemed to be easy, because there were limited number of ways to spend money on Internet marketing and usually required less resources then traditional marketing channels. Since then online marketing campaigns grew their budgets and have become much more complicated. That includes paid search engine positioning, organic (free) search engine listing, presence on the major industry websites, cross-referrals, banner advertising and direct e-mail solicitation.

Things have changed significantly since John Wanamaker, a US department store pioneer said, "I know half my advertising is wasted. I just don't know which half." As a marketer, you may find yourself using that excuse with traditional media, but there's no excuse when it comes to Internet marketing.

Technology allows us to create a new way to measure marketing impact on the business and its profitability. You can not draw correlations or statistical inferences from simple data, such as how much you have spent on marketing and what happened to your gross sale and profit, because the nature of Internet marketing is complex and combines several major elements.

Search engines are the best sources of targeted traffic. Online search is unique in responding to a searcher at the exact moment they are seeking knowledge or a solution. Search engines are in complicated relationships and relay on each others' results. All leading search engines auction positions on their search sites. It is possible to buy the first position on all fifteen of the top search sites (by NetRanking). Today up to 90% of the all web traffic comes through Google and Overture. Only Google still makes unpaid ranking possible. It is very important, because Google is the dominant force in online search. It ranks websites for free using a complicated evaluation algorithm designed to produce the most relevant results to a specific search query.

Paid listings (search engines positions, paid inclusions in the directories) are becoming more and more important. There is no doubt that this trend will continue and at some not so distant point everybody will be paying something for the opportunity to be found on the Internet. It is very likely that every hair restoration practice will be forced to budget for paid listing campaigns. It is very important for a visitor (who is a potential patient) to be able to find your site when looking for HT information.

Recently it has been stated that Hair Restoration Surgery is an emerging industry. It is difficult to agree with this statement completely. It looks more like Internet Marketing of Hair Restoration Surgery is the emerging industry. Let's compare these two industries using classic definitions of the emerging industry developed by Michael Porter⁴:

It may not be clear whether surgical hair restoration is an emerging industry. It is definitely so for the Internet online marketing of Hair Restoration Surgical services.

The most critical strategic issue for business in an emerging industry is to identify how to secure a winning position⁵. The lack of established "rules of the game" gives industry participants the freedom to try a variety of different strategies which will not work in a mature industry. These are classic strategies for business to succeed in emerging industry:

• Imitation (using name similar to those already well established),
• Across the border branding (using the same brand across the I-net borders, for example on the radio and in printed media),
• Promotion of the new not yet established and tested sometime doubtful technologies

As you can see, Internet based marketing services for hair restoration surgeons employ each of these classic concepts. Unfortunately, customers (hair transplant practices) have not witnessed one strategy that is highly recommended by a classic business science⁶, an aggressive price cutting strategy adapted by at least one of the industry's leading marketing services.

The early leaders in an emerging industry such as Internet Marketing of Hair Restoration cannot afford to relax and rest on their success. They must drive forward to strengthen their recourse capabilities and build a strong position to try to protect against new entrants and compete successfully. A business with solid resource capabilities, a properly structured business model and the right strategy has a golden opportunity to shape the rules and establish itself as the recognized industry front runner. No one has done this.

Rapid change is a prominent feature of the contemporary business and the existing Status Quo in Internet based marketing services will change in time. Increased budgetary and political pressure will most definitely force their operators to loosen their initially introduced "high standards" and expand their customer base. The Internet marketing expenditures of individual HT practices, already substantial, will continue to grow and will attract more entrepreneurs who will offer more effective and less subjective services.

In such an intensive environment the ability to track and analyze marketing effectiveness of each marketing channel is a priority for a business manager. Marketers struggle with the new technologies that became available in the last few years. There are a lot of questions about what does work and what does not. Forrester Research survey⁷ gave a clear answer that the most concern is in the area of measuring results and return on marketing expenses.

Most commonly used term is Return On Investment (ROI).
ROI=(PROFIT/CAMPEIGN BUDGET) x 100

ROI is probably the most overused term in marketing today. In reality, true ROI is difficult to accurately measure and calculate. Most marketers use gross profit when calculating ROI and that is a great start. To calculate true ROI you should factor in a set of real complicated data, from the lifelong value of the patient to the amount of time you've spent on the phone with him discussing his latest hair related worries. Therefore, for simplicity, many marketing managers use the immediate ROI based on proceeds from the hair restoration surgery (or surgeries).

Once you've completed your calculations on ROI you can clearly see relative effectiveness of the various marketing campaigns or channels and make managerial judgments.

Measuring marketing ROI sounds deceptively simple. In practice it is not, because you have to establish the methods of tracking sources that generate leads.

One of the most attractive and important advantages of internet marketing is the ability it gives to a market manager to analyze the behavior of the prospect, track its referral source and make effective adjustments in your marketing campaign based on this information. Probably for the first time in history, the Internet provided marketers with the unique option to manage marketing campaigns in real time. In our practice sometimes we reallocate marketing budgets and change website content few times a day.

Two critical parts of tracking results are:

• Setting up data parameters to understand your customers' behavior on your website
• Using the right computer programming package that will provide you with the intelligence on the customers' activity and its analysis with the incorporated statistical tools

What metrics are to be measured? The number of visitors to a website, online/offline source of their referral, number and pattern of pages visited, keywords they have used to find site if they came from the search engine, when and where do they leave site, etc. It's not enough to know if online and offline marketing efforts bring prospects to the website. It is extremely important to know what happens to them when they get there. Measurement efforts are becoming particularly important because of pricing concerns.

The real jewel of all this data is your visitors' names and e-mail addresses. It will be up to you how to approach the customer once you can identify her, but you do have a wide range of attractive options. I would not be terribly surprised if certain participants of the HT industry who are notorious for their aggressive marketing efforts will try to solicit business from those prospects.

We have found great success with using a proprietary software package that allows us to track all these metrics. We can attest to the fact that this a wonderful tool slowly but surely becoming the most important source of information about our potential customers and their interests. To a certain degree it reflects an overall industry shift in marketing budgets, where Internet marketing channels are quickly pushing out traditional marketing techniques.

These are some of our findings:

• Online Yellow Pages do not work. Basically they were a waist of our marketing dollars.
• There are people who are spending hours on the site reading every page. Therefore, we suggest giving your visitor as much information as possible. Surprisingly, some visitors bookmark several pages of the same site.
• The highest quality leads comes from the affiliated sites.
• Quality of visitors who are referred by the Internet Hair Restoration websites are generally 6 to 10 times higher then those referred by the ISHRS site.

Micro-analysis is a great tool to measure your internet activity but it would not tell you whether you are driving ROI with your marketing. In order to do macro-measurement, a manager has to combine all the data from all marketing efforts, online and offline and run it through a regression analysis or other type of algorithm in order to determine which individual campaign is driving your business revenues and what the connections between the marketing campaigns are, so you would understand what marketing mix works the best.

What does it tell you if 70 percent of your prospects from Google are "one page and out" visitors? If prospects coming from your expensive ads never get to your contact page or did not looked at your favorite "Before and After" pictures? Or if a keyword you've spent time and money promoting keeps bringing you the wrong kind of prospects?
You have to draw these conclusions yourself. Most important - online campaign analysis is an integral part of your marketing and therefore, a core business function. It is an ongoing process that needs to be properly managed and administrated, and therefore requires significant attention and possibly may cause significant changes in the daily operations of hair restoration practices.

1. Paul Alderson, "Reductionism v. Organicism" New Scientist, Sept 25, 1969
2. Using Customer Insights to Build Brand Loyalty and Increase Marketing ROI. Accenture Study, 09/16/2002
3. US Bancorp Piper Jaffray, The Golden Search, March 2003
4. Michael Porter, Competitive Strategy, NY 1980, pp216-23
5. Charles Hofer and Dan Schendel, Strategy Formation: Analytical Concepts, St. Paul, MN 1978, pp 164-65
6. Arthur Thomson and A.J. (Lonnie) Strickland, Strategic Management, 12th Edition, McGraw-Hill, NY 2001
7. Forrester Research, Online Audience Measurement Needs Innovation, July 2002