There’s a hole in my bucket
There’s a hole in my bucket
Leaky bucket theory says businesses are always losing customers.

By Luc Wade, Management Consultant at Hive Business

Leaky bucket theory says businesses are always losing customers, so to stop it emptying you have to win an equal number of new customers. To fill it up you have to be especially good at new customer acquisition, or you have to slow the leak.

Encouraging loyalty has long been a goal of marketers, and most consultants will tell you that it’s cheaper to retain a customer than recruit a new one. But is it? I question if this really is the best use of marketing resources. Why? Because in dentistry, loyalty alone won’t generate strong profits.

Usually dental patients become less valuable as the big ticket treatments are finished and they move to a maintenance programme of check-ups and hygiene. So the strategy should be to fill the bucket with valuable new customers at a faster rate than it leaks.

A plan customer might be worth £150-£400 a year and cost £50 to acquire whereas a new Invisalign or implant patient might be worth £2,500-£5,000, then £400 a year and cost you £150-£200.

A basic pattern of dynamic growth is that brands tend to grow by acquiring more customers (penetration) rather than getting more out of existing customers. So growth and profits actually depend largely on your ability to outperform your competition in acquisition and brand penetration within your catchment.

I accept that in dentistry loyalty is a key ingredient of growth activity (after all, word of mouth referrals are often the biggest new enquiry source), making it an effective way to increase penetration. But while no special efforts are needed to ensure that patients stay loyal, turning off advertising, or turning it in the wrong direction, will only trigger a decline in your big ticket treatment sales, the key to your profitability.

So to support referrals and sell high value treatment plans you must make your business more memorable than the rest, which must involve advertising and brand development. You need reach and penetration, making your brand “mentally available” as Byron Sharpe, author of the hugely influential book How Brands Grow, calls it.

Sharpe, contentiously, believes targeted marketing is on to a loser, arguing it’s all about sophisticated mass marketing, and that while a lot of advertising in recent times targets heavy users, it neglects new customers and gives you diminishing returns.

Your brand name is the key thing that someone has to remember after searching for you or seeing a piece of advertising, and there can be no question of what the brand is for. If you don’t get this part right it doesn’t matter how great the message or targeting is, it just won’t be remembered when they decide they need your services.

To put it simply, a focus on broad reach, frequency and availability will get you more business. Get too targeted and inward looking and you will increase loyalty among people who love your brand already, but there are only so many treatments they can buy. On the other hand, a broad reach will bring you new customers and help word of mouth referrals find you and understand how you can help them.

It’s easy to waste money on ineffective marketing activities because of the proliferation of choice and, worse, if your competitor is spending badly, it’s tempting to mirror their poor strategy for fear of missing out. Think about the last five marketing activities you have commissioned: how many of them:

  • got your brand noticed?
  • engaged in sophisticated mass marketing?
  • promoted your high value treatments?

If it’s less than five, you might need help building your reach and picking your media. Get in touch if you want to stop wasting money.

Luc Wade
By Luc Wade Management Consultant
If you have any questions or comments about this article, please get in touch.
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