Best Practices for Calculating and Spending Your Marketing Budget

Do you worry over how much to spend on marketing?

By Pam McDonald

“One of the many things keeping senior housing owners and operators awake at night,” says Paul Flowers, President of Circa 46, an advertising agency with a speciality in senior living and a Senior Housing Forum partner, “is worry over how much to spend on marketing.”

There are a number of rules of thumb to use as a guide – a standard percentage of revenue, a figure based on competitive spending activity, or your average charge for one month’s rent. But Paul recommends you start by looking at the number of vacancies that need to be filled – since every empty bed represents lost opportunity for revenue, both immediate and long-term.

Calculating The Numbers

Paul notes, “There are a lot of ROI formulas floating around for calculating the value of new residents. What appears to be an accepted – and reasonable – supposition is that roughly 30% of a new independent living resident’s monthly fee goes to covering the community’s increased operating cost – assuming the community is operating at breakeven or better. The rest of that fee goes to the bottom line.”

He points out that using this premise as a starting point, the argument can be made that one additional resident at $3,000/month will deliver as much as $25,200 to the bottom line over a year ($3,000 X 12 months = $36,000 X 70% = $25,200). If you extend that to a modest two-year resident stay, the lifetime value of that resident is $50,400. And, if there are ten beds to fill, a lot of revenue is being left on the table!  

How much courage do you have?

Paul says, “Assuming you buy into the logic above, you will probably agree it won’t require many move-ins to payout an advertising program that brings prospects into a community. But in order to get the payout, an operator must take a step of faith and reinvest some hard-earned revenues. The amount to invest should correspond to the number of move-ins you reasonably think you can secure.

“Recognize it can take 5-10 inquiries to generate one move-in,” Paul continues, “so the advertising program must be sufficiently robust to produce the necessary number of inquiries. Without a sufficient budget, a marketing effort is doomed to failure.

Picking ‘Low-Hanging Fruit’

No matter how bold you might be, no one has an unlimited budget for marketing. So the challenge becomes where to spend those precious dollars you have available for marketing. Paul says, “It is always best to start with the ‘low-hanging fruit;’ that is, focus those dollars where they can have the greatest potential for success, then expand that focus to broader audiences as the budget allows. Paul provides the following suggestions:

1. A good starting point is to make sure your marketing team has the sales tools they need to win over a prospective resident. After all, they are selling to people who have already expressed some degree of interest in the community – or, at least, are exploring the idea of senior living.

2. After your marketing team has been well armed, make sure your website is delivering a compelling sales message. Visitors are expressing interest in your community simply by the act of clicking to the site. Recognize that 87% of people will check out a community online before making contact.

3. The next layer of marketing support should be a presence on search engine directories like Google, where people are actively searching for senior housing options – though not necessarily your community. Seventy-nine percent of prospective senior housing residents start their search using a search engine. So, make it easy for them to find your community’s website!

   Most prospects will not go past the first page of search engine listings, so it is important your community shows up there. Paul states, “If your website is not listed there organically, it will behoove you to invest in pay-per-click search marketing – like Google AdWords – to ensure your first page presence. (And, if you are not already doing so, make sure you are taking advantage of free listing opportunities, like ‘Google My Business’.” You can find information about it at www.google.com/business.)

4. Once sufficient resources have been committed to make it easy for active prospects to find your community, begin reaching out to potential residents who are not presently considering senior living. Focus your marketing communications both demographically and geographically, establishing the community in a prospect’s mind via media like targeted direct mail or geographically focused publications such as community newspapers. The goal at this level is to get the community onto prospects’ radar for that time when they begin considering senior living.

Paul states that no company in any industry has all the marketing resources it can use but says the key to success is to take the marketing dollars available to you and fully exploit the greatest opportunities for success – the “low-hanging fruit” – before investing at the next level.

He cautions, however, that this approach does not suggest that it is okay to withhold the budget necessary to deliver the prospects needed to achieve census goals. He concludes, “When you limit marketing dollars, you prevent potential residents from making knowledgeable decisions about your community by default. And that will usually result in them choosing somewhere else to live.”