Obviously advertising on Facebook is lucrative, even for small brick and mortars like an independent pharmacy. Just look at the stats:
- Users are accessing Facebook on average 8 times per day and spending 35 minutes of their day perusing their newsfeed.
- 44% of moms say they purchase from a business they like on Facebook.
- 77% of businesses said they acquired new customers from Facebook.
- 51% of your Facebook fans say they are likely to buy from you.
With so much potential, why then are so many small businesses failing to see a return on their Facebook advertising?
Why are independent pharmacies struggling to see their advertising dollars turn into profit?
However, you and I know the answer…
You can’t just throw money at a problem. Even though there’s the gold to be had, it doesn’t mean anyone can get it by opening up their wallet.
If the show Gold Rush has taught us anything, it’s that you better know what you’re doing if you plan on finding gold in the Yukon because deep pockets don’t mean a thing.
The same can be said for Facebook. There’s definitely riches to be made, even by us small business owners, but you better know what you’re doing before you start digging.
So let’s dive into 3 things you better know as a pharmacy owner before you can expect to strike gold on Facebook.
Of course, your overall budget for Facebook ads is going to determine a lot of what you can and cannot do. Without a clearly defined budget, you’ll simply be throwing darts, hoping to hit a bullseye. Just imagine trying to build a new home without a clear budget in mind. How big of a disaster would that be?
The good news is that budgets as low as $100 per month can still be extremely successful on Facebook, especially for local brick and mortar businesses like independent pharmacies. With the right copy, image, and targeting, you can get engagement for as little as 3 cents.
Let’s do some quick math.
With a $100 budget at 3 cents per engagement, you’ll have the opportunity to impact 3,333 people every month. If even 1% of those engagements result in a sale, that’s an extra 33 sales per month. If the average purchase was $40 of which you profited $20, you just turned $100 into $660 in profit. Wouldn’t that be a nice boost in your monthly numbers?
But there’s more…
Lifetime Value of a Customer
There’s even better news.. That return of $660 is based on those customers only purchasing one item one time.
Of course, with exceptional customer service and knowing that a current customer is much more likely to make a purchase than a cold prospect, we can expect those 33 new customers to make more than just one purchase. In fact, if we can convert them to patients at our pharmacy, we can ensure they’re making monthly purchases via their prescriptions thereby giving us a 10X+ return.
So let’s do some more math.
Knowing that the average person gets 12.6 prescriptions annually and the average gross profit per prescription is $11.87, we can calculate that those 33 new patients have the potential to add ~$4,900 to our profit at the end of the year. Again, not too shabby of a return on $100.
Of course, that number is inflated because we’re assuming all 33 people will become patients at your pharmacy. That’s not likely. But even if just one of those 33 people convert to a patient, we make $20 from the initial sale and then $150 from their annual prescriptions. So even at that, your initial $100 investment in Facebook ads results in $170 of profit annually. There’s not a business owner in the world that wouldn’t make that investment. And remember, that’s assuming they never buy an OTC item, dietary supplement, or gift. Impressive, right?
Wait a minute though because we’re still being shortsighted. That’s just the annual value of a customer (ACV), not the lifetime value (LCV). Let’s assume your average patient stays with your pharmacy for 10 years. Worst case scenario, you spent $100 to get a patient that has a lifetime value of $1,570, again assuming they never purchase a gift, OTC item, or dietary supplement over that ten year period. Still impressive, right?
So why is knowing your LCV important before advertising on Facebook?
Because then you know how much you can spend on acquiring a lead and immediately know if a marketing campaign will be worth a shot. All you have to do is plug in the numbers and work backward and within a few minutes, you’ll be able to tell with pretty good certainty if the marketing campaign will make or lose you money.
If the numbers above are correct, assuming a 1% conversion for the Facebook ad, then a 3% conversion for a customer to a patient, and an annual customer profit of $170, you can technically spend up to $170 to acquire a patient. Any campaign that estimates higher than that won’t be worth it, while any campaign lower than that will result in a profit. Choosing the winners from losers becomes as clear as day once you know the LCV or ACV.
And remember, as marketers often say, the company that can spend more to acquire leads and still make a profit are the companies that usually win the war
Side note: Psychologically, knowing your LCV also tends to take the sting out paying Facebook for your ads monthly. Because marketing campaigns often don’t result in an immediate sale, it can be painful to see $100 ad expense vanish in thin air. By calculating the LCV, you make the expense tangible because as long as you’re hitting your marketing benchmarks, you know your marketing is turning a profit.
Now, this is going to seem to completely rebuke what I just said above, but hear me out. There will be times where your marketing campaign will lose you money, and that’s 100% fine.
It depends on the goal.
An awareness campaign will rarely result in an immediate sale. In fact, it can sometimes take up to 3-6 months to result in a sale. And, as an astute business owner, you should know that because the entire goal of the campaign is to create awareness, not make a direct sale.
Every customer you advertise to won’t be on the same level in the purchase decision chain. Some won’t even know you exist, and I can guarantee you those potential customers won’t buy from you the first time they see your ad. You have to build a relationship with them first. They have to get to know, like, and trust you before they pay for the solution you’re offering. And the only way to do that is with awareness campaigns that help build that relationship so that when they do need your help, you’re “top of mind and tip of the tongue.”
So by establishing the goal before the marketing campaign, you select the right metrics to track it and don’t overreact on metrics that don’t matter. Makes sense, right?
The Nuts and Bolt
If you want to succeed on Facebook as a pharmacy owner, which you should because it’s a goldmine, make sure you:
- Clearly state the goal of the campaign.
- Clearly state the budget for the campaign.
- Determine at minimum the annual profit of each customer, or if you can, the lifetime value of the customer.