​Everything You Need To Know About the Lifetime Value of a Dental Patient

Like all businesses, dental practices need patients (customers) to survive and grow. Unless a dental practice is able to constantly generate more new patients than it is losing, there is no way the practice can survive in the long-term.

It is of utmost importance for a dental practice owner or dental practice manager to understand the lifetime value of a dental patient, so that marketing budgets can be planned accordingly.

With the knowledge of how much a new patient is worth to your dental practice, you will be able to know exactly how much you can spend to profitably acquire a new patient through marketing activities.

Two types of dental practice owners:

#1: You understand the lifetime value of a dental patient

Dental practices that know their patients’ lifetime values are able to track the ROI of their marketing activities effectively.

You understand that sometimes it takes money to make money and you are ready to invest into effective marketing activities such as Google Ads and SEO to grow your practice profitably.

#2: You have never even thought about the lifetime value of a dental patient

Dental practices that don’t track the lifetime value of a dental patient oftentimes underestimate the value that a new patient would bring to their bottom line.

If you don’t understand the value of a new patient, you may decide against using any type of marketing activities or keep them to a very minimum. By doing so you limit your dental practice growth by relying mostly on word-of-mouth and referrals to generate new patients.

What is the lifetime value of a dental patient?

In simple terms, the lifetime value of a dental patient is the cumulative amount of money the patient will spend throughout the period he/she remains under the care of a dental practice. It can be regarded as the worth of the patient to a dentist over the entirety of their relationship.

The lifetime value of a dental patient is an important factor for many reasons. Since most patients that walk through the doors of a dentist’s office are expected to return from time to time for comprehensive dental care, knowing their worth will help each dentist make better marketing decisions.

How do you determine the lifetime value of a dental patient?

To be honest, determining the lifetime value of a dental patient is never easy nor an exact science. The fact that you can’t authoritatively predict how many years a particular patient will stay under your care makes it very complicated.

Additionally, the required treatments and actual value of an individual will vary from patient to patient, as some might require a full teeth reconstruction while other patients may only come in for a preventive check-up and a teeth cleaning once a year.

With all these variables coming into play when determining the lifetime value of a dental patient in your dental practice, you can only rely on average values.

Depending on who you ask, you may get very different results when it comes to determining the lifetime value of a dental patient.

Formulas to calculate lifetime value of a dental patient

Below are two formulas that dentists can use to find an approximate value or an indicator for the lifetime value of a dental patient in their very own practice.

Life time value = Avg. transaction value per visit X Avg. number of visits per year X Avg. patient retention in years

If this formula sounds too complicated or abstract, you can do an alternative calculation. Simply calculate the value of an average patient value per year and multiply it times 7 years.

Step 1:
Annual revenue / active patients = Avg. value of 1 patient

Step 2:
Avg. value of 1 patient X 7 years = Lifetime value of a patient in your dental practice

Let’s apply the theory to a real world example:

One of my client’s dental practice in Germany generates approximately 550,000€ in annual revenue with 2,400 active patients. If we use the second formula we can use these numbers to generate the average lifetime value for this dental practice.

550,000€ / 2,400 active patients = 229.17€ avg. Value of 1 Patient

229,17€ X 7 years = 1,604.19€ lifetime value of a patient in this dental practice

If your dental practice has been active for 15+ years you should have a lot of data and information about your patients. This will help you to get fairly accurate results in the calculation.

Dental startups or dental practices that have been in business for less than 5 years should calculate with a patient retention of 7 years. The industry wide averages point to a typical patient retention of 7-10 years, so if you include 7 years in the calculation you are sure to stay on the conservative side.

Don’t forget to include the referrals in your calculation

When a patient receives the type of dental care they desire, they usually tell their friends and family about it. That is why it is important to include the added value of referrals in your calculation.

As you learned above, an average patient typically stays with a dental practice for 7 years. If this new patient refers just one friend or family member to you every year over the 7 year period, your dental practice gains 7 additional new patients for free thanks to the word-of-mouth of your satisfied customer.

The value of these additional 7 patients should be tied back to the lifetime value of the original client that you have acquired through marketing activities.

Lifetime value of a dental patient including referrals

If we continue with the example of my client in Germany we can now calculate a comprehensive lifetime value of a dental patient by including the value of the referred patients in the calculation.

Customer lifetime value of patient generated from marketing activities:

1,604.19€

Customer lifetime value of 7 additional patients gained through referrals:

7 X 1,604.19€ = 11,229.33€

Total lifetime value of 1 new patient generated from marketing activities who brings in 7 additional patients via referrals:

11,229.33€ + 1,604.19€ = 12,833.52€

Why it is so important to determine the customer lifetime value

Once you know the lifetime value of a patient in your dental practice, you will be able to specify how much money you are willing to invest to acquire a new patient.

Personally, I always aim to generate a return of investment in excess of 10-to-1 for my clients. My recommendation for performance-marketing activities is to generate a return of investment of 5-to-1 at the very least, as this level will allow a business to grow profitably.

How much should a dentist be willing to pay for a new patient?

By using the data from my client in Germany, we can continue in the example and find out how much he should pay at the very most to acquire a new patient while maintaining the ROI targets.

5-to-1 return on investment:

1,604.19€ / 5 = 320.84€ (1 patient lifetime value)
12,833.52€ / 5 = 2,566.70€ (1 patient + 7 referrals lifetime value)

If this dentist has a goal to reach a 5-to-1 ROI in his marketing activities he should pay at most 320.84€ to 2,566.70€ to win a new patient.

10-to-1 return on investment:

1,604.19€ / 10 = 160.42€ (1 patient lifetime value)
12,833.52€ / 10 = 1,283.35€ (1 patient + 7 referrals lifetime value)

If this dentist has a goal to reach a 10-to-1 ROI in his marketing activities he should pay at most 160.42€ to 1,283.35€ to win a new patient.

What does it take to generate 100 new patients?

Let’s say the dentist wants to generate a 10-to-1 return on his investment and his goal is to generate 100 new patients over the coming 6 months. Furthermore, this dentist is very conservative, so he does not include any referrals in the calculations of a new patient’s lifetime value.

By looking at the example above we know that the dentist should not pay more than 160.42€ for a new patient who does not refer additional patients to his practice.

To find the budget that he should be willing to invest to generate a 10-to-1 return on investment we simply multiply the number 160.42€ times 100 which leads us to a result of 16,042€.

As a result, this ambitious dentist should be willing to invest 16,042€ over the next 6 months or 2,673.67€ per month to reach his goals of acquiring 100 new patients for his dental practice.

If this dentist makes use of a Google Ads expert with experience in the dental industry, he may be able to achieve the goal for less than the budgeted amount and exceed the 10-to-1 return on investment target.

Are There Ways You Can Maximize The Customer Lifetime Value?

By doing things the right way and giving customers what they want, it is possible to maximize the average lifetime value of patients in your dental practice.

Focus On Acquiring the Right Patients

As mentioned earlier, patients differ in many respects. It is important that you focus your marketing effort on attracting the right kind of patients.

If your goal is to acquire prosthetic cases your marketing activities should be aimed at patients that are aged 40+ and have sufficient disposable income to pay for high-ticket items such as bridges, crowns or dental implants.

Focus On Providing Quality Service

It is also important that you provide quality dental service at all times. No matter how well you engage in dental marketing, you will lose patients if the quality of your service is not satisfactory.

Remember the positive effect that referrals can have on your dental practice’s profitability? Be aware of the fact that it goes both ways. If a patient is unsatisfied with your work he or she will spread the word much quicker than when he or she is satisfied.

Show Your Patients That You Care

In today’s competitive landscape it can be very hard to win over new patients to your practice as there are usually multiple dentists that are fighting for visibility.

Once you have won a new patient, it is important that you show them that you truly care for them and that you have their best interest at heart. If the patient requires a larger restoration you should state your recommendation as well as give the patient 1 or 2 alternative treatment possibilities. This way the patient will understand that your recommendation might be the best solution for his or her long-term well-being.

If your sole goal is to get rich quick and make as much money as possible on your patients, they will find out sooner or later and leave your practice while publishing their negative opinion about your dental practice in several outlets. Understand that it only takes a few negative reviews on major review sites or forums to affect the attractiveness of your dental practice to new patients. So, really it is not worth it to think of short-term results when really you could be jeopardizing the long-term health of your practice.