It’s become obvious in the past few years that group practices or DSOs (Dental Service Organizations) are expanding rapidly. Some days, they seem to be taking over the dental world. I’ve been involved with quite a few conferences focused on this segment of the market and most experts in the space estimate the current group practice marketing share at 14% of the dental industry. Depending on who you listen to, that number is growing by 2-4% year over year. Some think we could see as much as 30% market share by 2022 as the group practice model speeds up. So it’s arguably the biggest trend currently in dentistry.
While there are many factors leading to the expansion, four primary drivers are creating an almost perfect storm. First, a very large Baby Boomer generation is entering retirement years and looking for opportunities to sell their investment at a high valuation. Next, combine that with a startup boom led by Millennials that would rather start a practice from scratch than buy something outdated. Third, we’re in the longest bull market ever in history, which has created a healthy dose of business (and lending) confidence. And last, as we enter the final stages of the great medical consolidation, investors are looking towards the next opportunity: dentistry.
Group practices are one of the newest trends for my company as well. We work with quite a few and it seems like nearly every dentist has a vision to be multisite. It’s no secret that group practice marketing is really bad. Often times, it’s worse than the average solo practitioner. It seems like group practices are so focused on expansion that marketing becomes an afterthought. While that may be the case now, it won’t hold true for much longer as investors start to demand real growth and the market attempts to differentiate.
So let’s look at four keys to an effective multisite marketing strategy.
1. Brand Always Wins
It’s the same for Coca-Cola, small businesses and everyone in between. Brand always wins because it captures equity in the minds of potential consumers or patients. If your entire marketing strategy is built around inbound pay-per-click ads, all it takes for a competitor to knock you off the top is for them to spend more money. But if you’ve created a brand that connects in the hearts and minds of the community, then the chances of competition winning your business significantly decreases.
Based on your group practice model, locations and expansion philosophy, branding can look different. I tend to see three different models of group practices:
A. One Brand
Some groups prefer to put every location under one unifying brand (example: Lifetime Dental). Most of the time these groups are expanding with de novo (startup) locations. They use a generic name that can scale and expand regardless of the location. Over time, the name recognition is leveraged and helps new practices grow faster.
The advantage to this model is that it typically saves marketing dollars. Paid advertising through search, radio, billboards, etc. usually benefits more than one location. Group practices can build out a single website and then add location pages with each new practice reducing long-term website cost.
B. Separate Brands
Some groups prefer to build a community centric model and brand the practices by their location (example: “Cypress Springs Dentistry”). Many times, these groups are in acquisition mode and may be purchasing practices with an already-solid brand. It would do more harm to change the name to something generic when the practice already has so much name recognition and goodwill.
The advantage to this model is practices feel very integrated into the community. They are typically positioned as an alternative to the big “corporate” brands moving into the area. They tend to rely on a solid doctor who is invested in the community.
C. Hybrid Model
While the first two models are simple and provide a straightforward branding plan no matter the growth strategy, 80% of the group practices I see use some type of hybrid model. One practice I spoke with had 58 locations with 9 different brands. The brands were grouped according to their location. For example, in Georgia, they had 11 practice locations under the Peachtree Dental brand. In Florida, they had eight locations under the Palm Coast Dental brand. Then they had a bunch of stand alone practices throughout the southeast under the Elite Dental Brand.
If they acquired a new practice, they had to make a decision on where it fit best: a well-known regional brand or a more nationally based, big brand. The advantage here is the flexibility for expansion. You have multiple options on how to assimilate a purchase or de novo into the group.
Creating a consistent brand can be incredibly complicated for group practices. In my experience, it’s the least thought-through aspect. As the group practice model continues to grow, there’s tremendous opportunity for those that want to differentiate themselves from other groups. All things being equal, great branding will give you a competitive edge.
// Action Steps // How can a group practice put branding first?
- Standardize the text and design for each of your brands. Everything should look and sound the same.
- Create a Brand Guide that gives existing practices a handbook for marketing at their location.
- Create an acquisition or de novo template to implement branding at new locations.
2. Focus on Organic Growth
The current trend in group practices is expansion. Like Million Dollar Listing agent, Ryan Serhant says, “Expansion always, in all ways.” It’s no secret why. A solo practice is often valued at 3-5 times EBITDA while a group practice of ten or more locations can be valued 8-10 times EBITDA. Why wouldn’t you want to put together a group to take advantage of the increased valuation?
Depending on your model, it might be a race to acquire ten practices and make a quick sale to a larger, mid-size group. Or the goal might be 50 startup locations over the next ten years fueled by a private equity firm underwriting the expansion. Regardless of the goals, it can be easy to overlook organic growth.
Acquisitions create growth that looks sexy to investors. A $28 million group adds the purchase of a $12 million regional practice and now $40 million looks way better than $28. While those numbers look compelling, they don’t actually answer the question of organization health. As purchases continue the question becomes, “Are we just adding practices to increase the valuation of the organization? Or are we focused on organic growth at the local level?”
You can usually answer this question easily by looking at the marketing budgets at each location. If there is no budget or if the budget remains unchanged after an acquisition, chances are the group is in expansion mode. If there is a proven marketing strategy and budget put in place post-acquisition, then most likely the group is focused on growth.
// Action Steps // How can a group practice focus on organic growth?
- Implement a patient referral program to generate word of mouth for new patients.
- Create an online review system that consistently generates Google reviews.
- Set aside a community involvement budget and encourage local teams to participate in community events.
3. Build the Culture
I’ve attended quite a few group practice conferences across the country. One in particular had Stanley Bergman, the President of Henry Schein, as the keynote speaker. In the middle of a large ball room full of driven entrepreneurs, talented doctors, and industry innovators, he said,
“Don’t stay up all night thinking about your business. Stay up all night thinking about your culture.”
In other words, Bergman was admonishing the room to not ignore organizational culture. If you take care of that, you won’t have to worry about taking care of the business. He’s 100% right.
Culture is vital for one very important thing: hiring and retaining talent. A group practice that does not have a strong culture will never retain talented clinicians and team members. They will be in a constant recruiting and onboarding cycle with a revolving back door from which employees exit.
In order to break out of that cycle and retain superstars invested in long-term growth, group practices will have to create a management organization or Dental Service Organization (DSO) that leads with big picture vision. The recruiting, hiring and even acquisitions should all happen through this organization. By communicating values and engaging with dental professionals in the area, you’ll allow team members to find security and fulfillment in a larger, growing organization.
// Action Steps // How can a group practice build culture?
- Establish and create an identity around a management organization or DSO.
- Use social media to create engagement around the group’s values and vision.
- Create a system for having fun.
4. Direct to Consumer
A tremendous opportunity for growing group practices is to leverage specialities and market directly to consumers. As your number of locations grow, you can at some point employ a full-time periodontist, endodontist, oral surgeon or orthodontist. They can rotate between locations and give your patients the added benefit of handling more treatment “in house.”
A certain amount of treatment will organically be generated internally, but launching a digital campaign direct to patients will establish your expertise and accelerate growth. I estimate that 55% of patients are still following decades old referral patterns and seeing the specialist their doctor recommends, but at least 30 - 40% of patients are up for grabs through online search. And that number will only grow.
// Action Steps // How can a group practice market directly to consumers?
- Build out landing pages (micro sites) focused on specialty treatment (e.g. dental implants).
- Create videos around speciality procedures that educate the patient and establish your expertise.
- Build a digital ad campaign designed to drive inbound leads to the landing pages.
One thing’s for sure, the group practice space is exciting. Expansion is happening all around us, fueled by an almost unending supply of investment capital. In the middle of such accelerated growth, it can be easy to ignore solid marketing strategy. When valuation rates are inflated, the focus becomes size. However, bigger is not always better.
At some point, things will start to level out and the main question will surface, “What makes this group practice different from the rest?” Whether it’s a question from patients in the community or possible investors eyeing an opportunity, size won’t be the main motivating factor. They want to know your story.
What makes you different?
Why should I work for your organization?
Why should I trust you with my family’s care?
Why should I sell you the practice I’ve worked so hard to build?
The groups that can create a compelling brand and engage with their community will win long-term.