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Here’s What Your Pharmacy Should Spend on an Advertising Budget

Here's What Your Pharmacy Should Spend on an Advertising Budget by Elements magazine |

January 24, 2018

Inside: You know your pharmacy needs to advertise, but you don’t know how much to spend. Here’s what you need to know about setting a pharmacy advertising budget.

You already know why you should advertise your independent community pharmacy.

It attracts new patients and reminds current patients why you’re better than the other guys.

But how much money are you currently wasting on advertising you don’t need?

Or, how much revenue are you losing because you’re not advertising enough? (That’s one of the most common pharmacy advertising mistakes, by the way.)

You can’t easily measure the direct effect of every dollar you invest in advertising, so it’s hard to know how much to budget. Sometimes, spending money on advertising can feel like dropping coins into a slot machine and crossing your fingers for a payout.

But with the right strategies, you can set a pharmacy advertising budget to spur growth.

You’ll need to engage in some serious self-evaluation to find out how much your pharmacy should spend on an advertising budget. Answer these business questions to learn how much money your pharmacy should budget.

What growth stage is my pharmacy in?

A startup’s advertising budget will look different than a long-time business owner’s budget.

A newer pharmacy will prioritize acquiring new patients because it needs to get its name out there and start gaining patients.

Established pharmacies, on the other hand, will need to invest more in retention to preserve their solid patient base.

Early on, pharmacies may need to stretch the advertising budget and take some risks.

Later on, pharmacies may have to refine their advertising budget to reap consistent returns.

What are my pharmacy’s growth goals?

Your pharmacy’s long-term and short-term goals affect your advertising budget.

The more aggressive your growth goals, the more you’ll allocate to advertising.

For example, if you want to double your revenue in three years, you’ll need to escalate advertising to generate that surge of revenue.

And, if you plan to launch new services soon, you’ll also need to increase your advertising efforts.

What does it cost to acquire a new patient?

Before you can know how much to budget for advertising, you need to know the cost.

Advertising is about acquiring new customers. So, the cost of advertising depends on the cost to acquire a customer.

The customer acquisition cost includes what you’re paying to run the ad and all other incurred costs, like what you’re paying the marketing agency to create the ad, mailing costs, placement costs, and so on.

You need two data points to calculate an advertising campaign’s customer acquisition cost:

  1. How much you spent
  2. How many customers you acquired


Calculate the total customer acquisition cost by dividing the amount you spent on advertising by the number of new patients you gained.

For example, if your pharmacy spent $1,000 for the year on Facebook ads and converted 10 customers through those ads, the customer acquisition cost would be $100.

The more data you have, the more precise your customer acquisition cost calculations.

Because you have so many different ways to advertising, you’ll get the most accurate advertising budget if you calculate the customer acquisition cost per advertising channel.

Advertising channels your pharmacy may use include:


The data for some of these channels is harder to retrieve than others. And some of it you can only acquire through customer surveys.

For example, it’s difficult to trace the effectiveness of a billboard or radio ad without asking the patient how they found out about you. You can ask the billboard company for the number of vehicles and pedestrians that pass by the billboard on average but that only measures impressions. Not people converted to visit your pharmacy.

But the more data you can dig up, the more accurate you can measure your customer acquisition cost.

What’s the lifetime value of a new patient?

How do you know how much to budget for customer acquisition costs?

Is spending $500 on direct mail to get one new patient going to make you money or lose you money?

If that patient comes in one time for a flu vaccine and doesn’t return, definitely not.

But what if she becomes a loyal patient?

The only way to know how much to spend is to get a rough idea of a patient’s lifetime value. A patient’s lifetime value is the revenue they’ll earn your pharmacy during their lifetime.

Every patient is different. One may bring you 10 prescriptions total. While another may bring you 10 prescriptions per month.

You have several ways to calculate the average lifetime value of a patient. Most of them include complicated equations. Usually, the more complicated the equation, the more precise the calculation.

But here’s one simple way to get a general idea of an average patient’s lifetime value:

  1. Total up your net profit from the previous year
  2. Divide that number by the total number of patients
  3. Multiply that number by the average patient lifespan (20 years)


For example, if you earned $1,000,000 in profit from 100,000 patients in one year, the value of one patient would be $10 for that year. Over the course of a patient’s lifespan, which we’ll say is 20 years, that’s $200.

So, in this example, a patients’ lifetime value is $200.

How does the customer acquisition cost and the lifetime value affect my advertising budget?

Your customer acquisition cost should never exceed the lifetime value of a patient. If you budget more than that, you’ll lose money.

For example, say a patient’s lifetime value is $200. If your Facebook ad campaign last year resulted in 10 new patients, it earned you $2,000 in lifetime value. That number will give you a ballpark for your next Facebook advertising budget.

You’ll know to budget no more than $2,000 on next year’s Facebook ads. And ideally, you’d budget three times less than that to earn a healthy profit, as a general guideline.

Use these principles to help you calculate your advertising budget and make sure you turn a profit. And, remember to budget in light of your pharmacy’s growth stage and growth goals.

Whew, a lot goes into a pharmacy advertising budget. But armed with the right strategies, you can set an advertising budget that’ll keep your pharmacy profitable.


An Independently Owned Organization Serving Independent Pharmacies 

PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy side of their business. The company is an independently owned pharmacy services organization based in Kansas City, Mo., that serves independent pharmacies with group purchasing services, expert contract negotiations, distribution services, and more.

PBA Health, an HDA member, operates its own VAWD-certified warehouse with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products.

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