Measuring ROI for Internet Leads

Caring.com Digital Marketing AcademyJuly 21, 2016

Welcome

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Caring.com: The #1 Senior Care Resource

Part of Bankrate’s powerful network of websites

#1 for Senior Care Reviews

3 million monthly visitors

70,000 listings

115,000+ consumer reviews

3,000+ original articles

Dozens of online support groups

Agenda

•  What is Return on Investment (ROI)?

•  Calculating ROI

•  Using ROI to Make Business Decisions

•  Q & A

WHAT IS ROI?

How are Marketers Driving Leads?

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Source:FormstackLeadCaptureReport,2016

How Do Marketers Evaluate Their Leads?

MetricConversionRate 48%LeadVolume 47%Click-throughRate 41%EmailOpenRates 31%NewSales 22%

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Marketersacrossallindustries,notseniorcare-specificSource:FormstackLeadCaptureReport,2016

Measurement Perils

“If you bake a cake for a party and want to figure out if your recipe was good, it’s only vaguely helpful to know that guests took 20 out of 24 slices. You still don’t know how many people ate the cake or how much they enjoyed it.”

- Contently.com

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ROI is a Better Way

• ROI: The amount of money you spend doing something, compared to the amount of money you get by doing it

• Expressed as a percentage

• For marketers, allows you to quantify your value

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CALCULATING ROI

What You Need to Know

What’s a resident or home care

client worth to you?

Rent rate

Care rate

Average length of stay

Hourly rate

Hours of care

LIFETIME VALUE

Costs associated with each

resident or client

Or company-wide operating

margin

OPERATING MARGIN

Fully-loaded costs for each

marketing program

PROGRAM COSTS

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Formula for Calculating ROI

Customer Lifetime Value (LTV) – Marketing ExpenseMarketing Expense

or:

Customer LTV– Operating Expense – Marketing ExpenseMarketing Expense

**remember, it’s a percentage

What if you don’t know these things?

•  Senior Housing Companies: ASHA says–  $77,000 = lifetime value of IL resident–  Average IL operating margin = 44%–  $88,500 = lifetime value of AL resident–  Average AL operating margin = 31%

•  In-Home Care Providers: Caring.com data show $11,000 lifetime value of private-duty home care client

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Marketing ROI Calculation (AL Example)

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Average Monthly Rent $4,000 Average Monthly Care Charge $300 Average Length of Residence (in Months) 18

Lifetime Value of Resident $77,400 FORMULA: ($4,000 + $300) x18 = $77,400 Referral Agency Percentage 85% Cost of Referral ($4,000 + $300) x 0.85 $3,655

Return on investment 2018% FORMULA: $77,400 LTV - $3,655 referral expense

$3,655

= 20.18 or 2018% ROI

Translation:

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ROI Calculation: Profit

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Average Monthly Rent $4,000 Average Monthly Care Charge $300 Average Length of Residence (in Months) 18

Average Operating Margin 31%

Lifetime Profit from Resident $23,994 FORMULA: $77,400 LTV x 31% profit margin = $23,994 profit Referral Agency Percentage 85% Cost of Referral $3,655

ROI Profit ONLY 556% FORMULA: $23,994 profit - $3,655 referral marketing expense

$3,655 = 5.56 or 556% ROI

Translation:

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What If A Resident Moves Out?

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Referral Agency Percentage 85% Cost of Referral $3,655 Lifetime Value of Resident $77,400 Average Operating Profits 31% Number of referrals staying 18 months 4 Referrals who stay 3 months 1

LTV of referred residents $322,500 FORMULA ($77,400 LTV x 4) + ($4,300 x 3 months) = $322,500

Referral fees $18,275 FORMULA: $3,655 referral fee x 5 referral fees paid = $18,275

ROI on Profit from all referrals 447% FORMULA ($322,500 LTV of all referrals x 0.31) - $18,275 referral fees

$18,275 = 4.47 or 447% ROI

Calculating ROI From Cost per Lead

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Cost per Lead $50 Conversion Rate 10% Lifetime Value of Home Care Client $11,000 Profit margin for Home Care Agency 25%

Number of Leads to get a Client 10 FORMULA: 1 client / 0.1 conversion rate = 10

Total Marketing Cost $500 FORMULA: 10 leads x $50 per lead = $500

ROI 450% FORMULA: $11,000 LTV x 0.25 - $500 marketing cost

$500 = 4.5 or 450% ROI

USING ROI TO MAKE BUSINESS DECISIONS

Evaluating Marketing Programs

•  “It’s going to cost me $795 per month to advertise my community in the Yellow Pages. Is it worth it?”–  3 calls per month @ 2% conversion => one move-in every 2 years–  Marketing expense = $795 x 24 months = $19,080–  Expected profit = $23,994–  ROI on a Yellow Pages ad = 26%

•  Operating Profit – Marketing Cost / Marketing Cost•  $23,994 - $19,080 / $19,080

But what else could you do with that $19,000?–  5 community events–  5 residents from move-ins referred by Caring.com

Add: Sensitivity analysis–  What if you only get two calls a month?–  What if the conversion rate is only 1.5%?

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Comparing Marketing Programs

“Your leads are too expensive at $50. I can get leads for $5 from another vendor.”-  A Caring.com prospect

ROI on leads is the same – but other costs change the picture

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VendorX Caring.com

Costperlead $5 $50

#ofleadsfor$1,000 200 20

Conversionrate 1% 10%

Costperstartofcare-leads $5/1%=$500 $50/10%=$500

Costperstartofcare–sales ? ?

The Cost of a Vacancy

“You can hire a senior housing salesperson for the cost of 1.5 vacancies a month”-  Greg Joyce, CEO of Legacy Retirement Communities, speaking at

Tony Mullen’s Advanced Sales Summit, June 2016

Annual cost of a salesperson: $40,000 Annual cost of 1.5 vacancies/month: $41,152 (1.5 x $88,000 x 31%)ROI on an extra salesperson = 3% •  Operating Profit – Marketing Cost / Marketing Cost •  ($41,152 - $40,000) / $40,000

But do you have enough leads for another salesperson?

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What’s a Review Worth?

•  Caring client with 100+ locations got 0.9 move-ins per year from listings with just 1-2 reviews, vs. 7 move-ins per year from listings with 15+ reviews

–  Lifetime Value of a Resident = $22,994–  6 additional move-ins = 6 x $22,994 = $137,964 incremental revenue–  13 additional reviews –  Cost of each review = $0($137,964 - $0) / 13 reviews = $10,612.61 incremental revenue per review

(your mileage may vary…)

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Revenue - Highest Return In The Last Units To Fill

(85% - 100%)

The Profit

75% - 85% Marginal Profit (variable costs)

(covering fixed costs) < 75% Occupancy

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Source: DEI Sales

Matching Marketing ROI to Profitability

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Occupancy <75% 75%-85% 85%+

Margin Low Mid High

MarkeVngCosts Low Mid High

MarkeVngPrograms

Keepcurrentresidents;wordofmouthreferrals;drive-by

Yourownwebleads;professionalreferrals;communityoutreach

3rd-partyreferrals;SEMkeywordbuying;localradio

SeniorHousingCalculaVon

Matching Marketing to Profitability

In-Home Care Calculation

Fixed vs. Variable Costs–  Caregivers–  Schedulers–  Office rent

For certain clients, discounts mightmake sense

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Calculating Lost Revenue

The Other Side of ROI: Lost Revenue

•  Lost revenue is the amount of money lost when a unit/bed remains unsold and vacant

•  Units/beds can be left vacant for a variety of reasons: poor sales, inefficient marketing, not rent ready, converted to other use

•  You cannot re-capture the revenue once it is lost because it is time sensitive (daily charge)

•  Sales and Marketing is responsible to meet revenue goals not occupancy goals

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Why Is It Important To Calculate Lost Revenue?

Why it matters and why we don’t do it:•  Focus on budgeted occupancy

numbers

•  Focus on underperforming communities, not the entire portfolio

•  Month to month occupancy focus vs. annual year-to-date occupancy focus

•  Speaking the language of operations

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Calculating Lost Revenue

Total Potential Occupancy – Average Daily CensusMultiply by Average Daily RateMultiply by Days in the Month

= Lost Revenue

Calculating Lost Revenue

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Step 1: Calculate Average Daily Census Community Units 100 Days in the Month 31 Total Days that the units are occupied 2,640

Average Daily Census 85.2 FORMULA: 2,640 days occupied

31 days in the month

= 85.2

Calculating Lost Revenue (continued)

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Step 2: Calculate Average Daily Rate Total Units 100 - Studios 40, at $100 per day - One Bedrooms 50, at $125 per day

- Two Bedrooms 10, at $150 per day

Total Daily Value $11,750 FORMULA: (40 x $100) + (50 x 125) + (10 x 150) = $11,750

Average Daily Rate $117.50 FORMULA $11,750 Total Daily Value

100 Units = $117.50

Calculating Lost Revenue (continued)

Total Potential Occupancy – Average Daily CensusMultiply by Average Daily RateMultiply by Days in the Month

= Lost Revenue

100 units – 85.2 average daily census = 14.8 units vacant on average

14.8 vacancies x $117.50 average daily rate = $1,739 lost revenue/day

$1,739 x 31 days = $53,909 lost revenue per month

Using Lost Revenue Calculation To Drive Marketing Strategy

•  Strategy to off-set seasonal patterns and trends

•  Using lost revenue calculations to support sales concession strategies

•  Justifying cost of third party services to drive marketing strategy and sales

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Key Takeaways

Key Takeaways

For all:Make sure you’re

measuring the right things

For In-Home Care:

Consider Fixed & Variable costs

when establishing price

For Senior Housing:

Align marketing costs to profit

margin

Q&A

The Value of Consumer Reviews in Senior CareThursday, August 18, 2016

11:00 AM Pacific / 2:00 PM Eastern

Digital Marketing Academy - Upcoming Webcast

Thank You!

We Welcome Your Feedback and Suggestions

katie@caring.com

More Resources on Our Industry Blog:

http://partners.caring.com

@CaringInsights(650) 207-9192 company/caring-com