Understanding Diminishing Marginal Returns in Healthcare Marketing: Maximizing Profits through Channel Optimization

Healthcare marketing is a dynamic and complex field, requiring a strategic approach to maximize returns on investment (ROI). One crucial concept that healthcare marketers need to grasp is the idea of diminishing marginal returns, particularly in the context of various marketing channels. Understanding this concept is key to optimizing marketing efforts for better profitability and revenue.

The Phenomenon of Diminishing Marginal Returns

Diminishing marginal returns occur when the incremental benefit from an additional unit of input (in this case, investment in a marketing channel) decreases as more of that input is invested. In healthcare marketing, this means that after a certain point, pouring more money into a specific channel yields progressively smaller increases in marketing outcomes, such as patient acquisition or brand awareness.

 Different Digital Marketing Channels, Different Returns

The productivity phase of each digital marketing channel varies, just as it does with traditional methods. Let’s explore this in the context of different digital marketing types:

• Pay-Per-Click (PPC) Advertising: PPC campaigns often yield high initial returns. However, as the target audience becomes oversaturated or keyword competition increases, the cost per acquisition can rise, leading to lower returns.
• Search Engine Optimization (SEO): SEO typically has a slower start but can yield substantial long-term returns as organic rankings improve and continue to drive traffic and engagement over time.
• Social Media Marketing: This channel might provide significant initial engagement, but sustaining and increasing this engagement over time can become increasingly challenging, leading to diminishing returns. 
• Email Marketing: Often starts with high engagement rates, but over time, as audience interest wanes or email lists become overused, the effectiveness can decrease. Additionally, targeting individuals based on need becomes increasingly difficult with HIPAA considerations. 

Comparing Digital with Print/Direct Mail

• Print/Direct Mail: This traditional method is currently very effective and has a tactile impact that digital methods lack. However, its reach can be challenging in healthcare without sophisticated data modeling to target at-risk populations. 

Measuring ROI and ROAS

Return on Investment (ROI) and Return on Ad Spend (ROAS) are critical metrics in assessing the efficiency of each marketing channel. ROI measures the overall profitability of the marketing efforts, while ROAS focuses on the revenue generated per dollar spent on advertising. By carefully monitoring these metrics, healthcare marketers can identify when a channel is approaching or has reached its point of diminishing returns.

The Strategy of Optimization

Regardless of the channel, monitoring ROI and ROAS is crucial. Digital marketing channels can offer more precise tracking and data analytics, making it easier to identify when a channel is nearing the point of diminishing returns. New methods in print or direct mail allow marketers to track ROAS down to individual actions. 

1. Identifying the Most Efficient Channel: Start by determining which channel currently offers the best ROI or ROAS. This could be an underutilized channel with significant potential for growth.
2. Investing Strategically: Allocate more resources to this channel until you reach the point of diminishing returns. This is where each additional dollar spent brings less benefit than the previous dollar.
3. Diversifying and Reassessing: Once the optimal channel is maximized, diversify your efforts into other channels and continuously reassess their productivity phases and returns.

Conclusion

In healthcare marketing, understanding and applying the concept of diminishing marginal returns is vital . By focusing on the most productive and cost-effective channels first, healthcare marketers can ensure they are not only reaching their target audience effectively but also doing so in the most financially prudent way. This strategic approach to channel optimization can lead to enhanced profit margins and overall revenue growth, ensuring a sustainable and successful marketing strategy in the competitive healthcare industry.

Before you start pouring dollars into campaigns, make sure you have an effective way to actually measure your returns–a challenging feat in a HIPPA-protected arena.

SocialClimb’s healthcare-specific platform provides you with the ability to measure the effectiveness of any marketing campaign through increases in patient appointments. We can help you follow patients from their first click on an ad to the operating room and beyond–in a HIPAA-compliant way! This insight into the patient journey will allow you to determine which marketing campaigns deserve your dollars and prove their value at your organization. Learn more about patient conversion tracking.

The original version of this page was published at:  https://socialclimb.com/blog/understanding-diminishing-marginal-returns-in-healthcare-marketing-maximizing-profits-through-channel-optimization/