Do you know what the average lifetime value of your dental patient is?
Obviously your patients are the most valuable asset your practice has. Depending where you look, you might be told a patient is worth anywhere from $5,000 to $15,000 to a dental office. I’ve even seen some people say it can be as high as $22,000 or $45,000 over a 20 year period.
Since there are such large variables between estimates, we find it best to calculate what a patient is worth to your practice and ignore outside figures.
What is customer lifetime value?
Customer lifetime value (CLV) is the average value of a patient over the entirety of your relationship with them. Generally speaking, if your CLV is going up over the years, your patients are becoming more profitable, and if it is going down, your patients are becoming less profitable.
How to calculate your practices’ customer lifetime value
In order to calculate your CLV you will need to figure out the following:
- What is the average lifespan of your patients?
- How much revenue is your average patient worth per year?
- How many patients does your average client refer?
So, average annual value x lifespan + referrals = lifetime value.
Let’s break this down.
First, determine how much your average patient spends per year. For our example we are going to say that our average patient comes in 2 times per year and spends $350 per visit. This makes their average annual value $700.
Now, you need to find the average length a customer stays with your practice. For our example we are going to use an industry average of 10 years for simplicity. We take that 10 years and multiply it by $700, making our average patient’s lifetime value $7,000.
Last, you need to find out how many patients your average customer refers to your practice. In this example our average patient gives us 1 referral over their lifetime at the practice, which is worth $7,000.
This makes our customer lifetime value $14,000.
Why does customer lifetime value matter?
The obvious answer is that it is a key metric needed when calculating marketing ROI, figuring out how much you can spend to acquire a new patient and overall projected profitability. There is also another use that we find dentists often overlook and that is to calculate what they should be spending on dental reactivation and if their reactivation programs are successful.
Let’s say our example practice from above has 100 inactive patients that came in for 2 years and haven’t been in for the last year. Each one of these inactive patients has 7 years left with your practice and is worth $9,800. That’s a whopping 980,000 on the table.
Conclusion
Keeping track of your CLV to make informed marketing decisions and working towards increasing your CLV is a surefire way to increase profits and grow exponentially!
Need help with your patient reactivation? Get a free demo today and let us show you how we can get hundreds of patients back into your practice!