Friday, April 11, 2014

Which Marketing Activities Are Most Influential in the Decision to Hire an Attorney or Law Firm?

At A.L.T. Legal Professionals Marketing Group, we wanted to know what types of marketing activities (including referrals and personal networking) influenced the people who, in the past, have actually had to decide on which attorney or law firm to hire.

Hence, we conducted an online survey, the objectives of which were two-fold:
  1. To determine which marketing and business development activities played a role in individuals’ decision to hire or contract with a particular attorney/law firm
  2. To ascertain the level of influence each of these activities had in the decision-making process


Wednesday, April 2, 2014

Measuring Return on Legal Marketing Investment: The Implications of Tracking the History of Client Origin

Over the past several weeks, we have outlined what we feel to be a more holistic and thereby more accurate methodology for tracking the results of law firm marketing. At first blush, employment of the History of Client Origin methodology described in these postings might appear to be just another way of calculating, analyzing, predicting return on investment, and ultimately for making decisions pertaining to the marketing activities of the firm.

But this would not be true.

The data gained through the utilization of an approach that tracks client origin is both vast and rich in detail. Among the information to be gleaned are answers to questions such as:

Which marketing tools offer the greatest potential for short-term ROI? For long-term ROI?
Because the History of Client Origin Methodology can be traced over any period of time, firm decision makers can easily ascertain which activities are most likely to pay out over the short or the long haul.

What is the relative cost vs. benefit in having specific attorneys spend time on client work vs. on business development efforts?
Let’s face it. Some attorneys are better at drumming up new business and others are better at lawyering. This can be analyzed by taking the History of Client Origin model and applying it at the attorney level. This involves tracking the touchpoints to which the individual attorney allocated his or her time. The hours spent is then multiplied by the attorney’s rate of compensation to arrive at ROI and Aggregate ROI figures for his or her efforts. These numbers can then be compared to the revenue that might have been earned had the attorney spent this time on billable work. By doing so, it is easy to ascertain whether an individual attorney’s time is better spent on originating work versus on generating more billable hours.

Which practice areas offer the best potential for short or long term revenue growth?
As with individual attorneys, this requires applying the history of client origin methodology to the practice group level. From this analysis, marketing decision makers can determine to which practice groups firm resources are best allocated. 

Should business development resources be spent on hard marketing costs (e.g., advertising) or on personalized prospecting/networking?
The History of client origin model provides a straight-forward methodology for comparing the ROI of the interpersonal efforts of firm attorneys (e.g. networking, prospecting, entertaining) to other touchpoints such as the firm website, advertising, collateral materials, PR, on-line media, etc.

Should marketing resources be spent on very direct marketing activities (e.g., direct mail, seminars, pay-per-click, etc.,) versus on “softer” image-oriented ones such as the firm’s web site, image advertising, brochures, etc?
Unlike other ROI methodologies, the history of client origin paradigm levels the playing field in terms of allowing marketing decision-makers to ascertain the relative contribution of these two different “types” of touchpoints. And it can do so, without the need for implementing testing scenarios.

What is the short and/or long term value of a specific client? What kind of exponential potential do they offer?
ROI and Aggregate ROI analyses can be run against different client segments as based upon revenue, industry, etc.

To what degree is word-of-mouth marketing working for the firm?
By considering “referrals” to be touchpoints, we can ascertain the percentage of revenue attributed to word-of-mouth versus revenue generated through other means. Because referrals are an indication of client satisfaction, it can be inferred that the greater the percentage of revenue attributed to referrals, the greater is the perceived quality of legal services that the firm is providing. This can have further implications as the greater the level of referral revenue, the less there is a need to invest firm dollars into traditional marketing channels. Of course, the converse of this is true as well.

Yet, despite the value in tracking client origin, to do so by hand would be inefficient at best and impossible at worst.  Instead, the process must be automated, with reports and analyses available instantaneously.  Next week, we will wrap up this series with some thoughts on how The History of Client Origin methodology can be applied… Yes, there’s an app. for that!

Next Week: The Practical Application of “The History of Client Origin.”

Tuesday, March 18, 2014

Measuring Return on Legal Marketing Investment: The Relative Levels of Influence of Different Marketing Vehicles

To date, we have talked about the fact that most prospects do not become clients of a law firm through a single exposure to the firm’s marketing or business development efforts. More often than not, such prospects will have been exposed to a multiplicity of “touchpoints,” that may include the firm’s web site, advertising, referrals, meeting firm attorneys, etc. We have discussed how each touchpoint merits some credit for its role in garnering that new client. But is it reasonable to assume that each touchpoint deserves equal credit? Is an exposure to an ad equal in value to meeting a friend who highly recommends a particular attorney.

We recently conducted a pilot research study in which we asked participants to rate the degree of influence different touchpoints had had in their decision to contract with a law practice. On a scale of 1 to 5 (with 5 being the highest), a friend’s referral averaged a score of 4.47 in contrast to seeing an advertisement for the firm which averaged a 1.86. Does this suggest one shouldn’t advertising or that one should rely solely on word-of-mouth for business generation?  Hardly.  After all, an ad will reach many, many more potential clients than could any attorney or group of attorneys.  But that being said, it does suggest that when a new client is obtained, credit must be allocated proportionately to each of the contributing touchpoints.

For most return-on-investment models, this matters little because they seldom are looking at marketing holistically, focusing instead on how each initiative (i.e., the ad, networking, etc.) performed individually, rather than how they performed in tandem. A History of Client Origin (of which the past few weeks’ blog posts have been all about) allows legal marketers the opportunity to ascertain exactly how they are generating new business, what activities are generating it, and to what degree.

All of this, of course, leads to next week’s post in which we will discuss the implications of the HCO methodology and what it means for law firms in determining the best marketing and business development strategies and tactics to pursue.

Next Week: The History of Client Origin Methodology – Implications for Legal Marketers

Wednesday, March 5, 2014

Measuring Return on Legal Marketing Investment: Understanding Direct Revenue, Aggregate Revenue and Revenue Generated Through Word-of-Mouth

As the last handful of blog postings have outlined what we see as some of the problems with current ROI models, allow me now to describe a real world implications of the assumptions made in utilizing some of these more traditional approaches. They can be seen in what I would consider to be in the fairly typical scenario in which a law firm decides to hold a seminar for the purpose of attracting new business. For this example, let us say that the total expense for all aspects of the seminar comes to $15,000.

Unfortunately, much to the firm’s chagrin, “only” 20 people show up of which three become actual clients of the firm.  Client A generates revenue of $2,500, Client B’s revenue is $4,000 and Client C represents $3,500 of new revenue for the firm.  Hence, the total revenue generated by the seminar is $10,000.  Utilizing the standard ROI formula {(Revenue – Expense)/Expense}, we would state that the ROI for this effort is negative 50%. If this firm is like most, the result of this effort is then reported to management who determine that the seminar was a “failure,” because the revenue generated did not cover the investment costs. 

But would this be correct ?  

The truth is that we don’t know.  And we don’t know because we cannot yet fully realize what the impact of obtaining clients A, B and C really is. 

For example, we all understand the role that word-of-mouth plays in the building of a law practice. So if even one of the clients (Client C) refers another client (D) to the firm, additional revenue is realized. If Client D generates an additional $15,000 in new revenue, the seminar’s ROI is now a positive 67%!  What’s more, what originally amounted to just $10,000 in new revenue is now $25,000. Had Client C not attended the seminar, Client D would have never entered the fold.  Taken even a step further, it’s certainly within the realm of possibility that Client D now refers yet another new client to the firm. That revenue must, in some way also be credited to the investment the firm made in the seminar.

Most ROI models and calculations take none of this into account.  This is because they are only measuring the direct return on the marketing investment – that revenue that can be directly attributed to the seminar.  What they fail to measure is the word-of-mouth revenue that was also generated as a result of the seminar. Over time, this revenue may actually far exceed that which was garnered directly.

The fact that there are two types of revenue (Direct and Word-of-Mouth) leads to a third – Aggregate Revenue or the total of both direct and word-of-mouth revenue.  This is the full result of the marketing effort and reflects both the effectiveness of the original marketing initiative as well as the perceived quality of the work the firm has performed.

As we will see in ensuing posts, these are powerful metrics that offer enormous insight into how each law firm might improve the ways in which it goes about business generation at the firm, practice group and even individual attorney levels.

Next Week:  The Relative Levels of Influence of Different Marketing Vehicles

Thursday, February 20, 2014

Measuring Return on Legal Marketing Investment: Tracking Clients Through Multiple Exposures

As we have discussed, one of the biggest mistakes that law firms make is acting on the assumption that individuals or businesses become clients of a firm through a single exposure.

Is this true?
Sometimes.  But more often than not, prospects become clients through several exposures.
At our agency, we have found that some law practices are hesitant to invest in marketing or business development because their clients come through word-of-mouth.  The phenomena of “word-of-mouth” is wonderful when it happens and one which we will address in a later blog post. But it is foolish to think that even “word-of-mouth” exists in a vacuum. Even the individual who is referred to a law firm by a trusted friend, will in all likelihood still visit the firm’s website or look at the firm’s brochure. If the message conveyed in these vehicles is inconsistent with how the firm and its services was described by the friend, a disconnect is created that can limit the opportunity for a successful lead conversion. In this case, the potential client has been exposed to two “touchpoints,” neither of which is reinforcing or underscoring the other.  Similarly, when exposures reinforce one another, it stands to reason that the overall perception of the firm (and hence the likelihood of converting the prospect into a client) is enhanced. In many ways, this is the very essence of integrated marketing.
In tracking the ROI of an integrated legal marketing campaign, it is important to consider all of the ways in which each client was exposed to the firm. But taking such an approach also creates some logistical problems. For example, if one wished to ascertain the ROI of an advertising campaign, most would assume that the standard formula {(Revenue – Advertising Expenses)/Advertising Expenses} would suffice.  However, this would fail to account for all of the other ways in which new clients may have learned more about the firm. Were they aware of the recent new case the firm was handling? Did they visit the web site? Did someone refer the firm or justify the decision to contract with it? Were they introduced to one of the firm’s attorneys?
Another way to look at this is to question why millions of dollars are allocated every year for marketing materials and activities that unto themselves, may generate zero new revenue. A new firm logo is created, a strictly “image” advertising campaign is initiated, an expensive brochure is produced. Why? The answer lies in the fact that when executed well, they make other elements of the overall marketing program work that much more effectively.
The interesting thing is that if one could determine the relative contribution of each marketing “touchpoint” to the firm’s overall revenue growth, one would then be in a much better decision to determine the “value” of specific marketing elements. For example, today, creating a new web site can cost anywhere from a few hundred dollars to tens of thousands of dollars. How can the legal marketer know how much he or she should invest in that site?  How important is it that it “look right” and how much is lost if the decision is made to skimp on the expenditure?
Traditionally, there have been no ways of which we are aware, for tracking the business development process across multiple touchpoints and in such a holistic manner. Thus there is no real formula that truly captures the legal “purchasing” process. To do so would require determining how much of a new client’s revenue was due to exposure to an ad versus how much from the referral of a trusted friend.  And in more complex cases, it might require allocating new client revenue amongst a PR campaign, a firm brochure, a web site, a seminar, a referral from a trusted friend and still another referral from an already existing current client of the firm.
In the coming weeks, we will discuss more about how such a methodology might be put into place. 
Next Week:  Dissecting Direct Revenue, Aggregate Revenue and Revenue Generated Through Word-of-Mouth

Saturday, February 8, 2014

Measuring Return on Legal Marketing Investment: Tracing the History of Client Origin – Where Do Clients Come From?

Over the past few weeks, we have blogged about the problems law firms have in measuring the return on their marketing investments. As we have discussed, much of this is due to the lack of viable data to analyze, faulty assumptions that law firms make and some inherent problems with current ROI models.

Today however, I would like to discuss a methodology that, we believe offers real promise for providing law firms with the information they need to make good decisions. That methodology is called History of Client Origin (HCO).

HCO is a proprietary methodology through which the genesis of every new client is traced. In most cases, such new clients are the result of multiple exposures to a variety of marketing vehicles and/or individual interactions. Such individual interactions include those a client may have had with family, friends or colleagues; firm attorneys; and/or other past or current clients of the firm.

Utilization of such an approach allows one to ascertain marketing ROI and related metrics in a much more holistic manner, including for those types of scenarios where ROI is or has not been typically measured. Some examples of these include:
  • Results from non-direct activities (e.g., brochures, web sites, etc.
  • Situations in which clients have been exposed to the firm via more than one medium
  • Situations in which clients come to the firm through word-of-mouth

Further, the HCO methodology incorporates one of the major expenses usually not tracked by traditional ROI approaches -- time. For many law practices, the investment of attorney time represents one of, if not the single largest marketing-related expense. By capturing this data, legal marketers are able to ascertain the best use of the firm's human resources.

HCO also enables law firms to compare the effects of not just one marketing vehicle to another, but also of personal networking to traditional marketing.

Because HCO traces the origin of every firm client, the ROI metrics obtained are much richer. For example, a single exposure to an ad, an article or a firm attorney may have contributed in part to the obtaining of a particular client, who in turn contributed to the obtaining of additional clients and so forth -- sometimes through several generations. By measuring the marketing ROI through such a prism, law firms gain a clearer understanding of how the marketing and business development phenomena are exponential in nature, and thus which tools (or combinations thereof) work over the short and/or the long term.

Next week, we will discuss how various marketing and business development tools work together and how HCO accounts for this phenomenon. This is especially useful when new clients have been exposed to multiple media or individuals (i.e., touch points).

In the meantime, if you have some thoughts regarding the means by which law firms track their marketing ROI, please join the conversation right here.  We are eager to hear from you.

Next Week:  Tracking Clients through Multiple Exposures.

Wednesday, January 29, 2014

Measuring Return on Legal Marketing Investment: The Problems with Current Return on Marketing Investment Models

Over the last two weeks, we have discussed how, when it comes to tracking the return on their marketing investment, law firms typically do not get useable information.  Furthermore, we outlined why part of the reason for this lies in some faulty premises law firms make in interpreting return-on-investment (ROI) data.

Part of the reason also lies however, with some of the current methodologies used to measure return-on-marketing investment.

Such a metric, at its most basic level is usually defined along the lines of: “the measure of the profit earned from an investment.”  For marketing investments/expenses, the calculation for this is represented by:

Gross Profit  – Marketing Investment
Marketing Investment

Basic ROI models don’t go very much beyond this and certainly in evaluating the success or failure of individual initiatives, most law firm decision makers do not engage in analyses beyond what such a calculation offers.

But for some service industries, including law, such an approach does not do justice to the “word-of-mouth” element that is so critical in building a practice. While we can easily determine how much revenue a specific client has brought into the firm over a particular period of time, we have a harder time determining:

• The additional revenue that client brought to the firm via referrals
• How the referring client was initially obtained
• The value of firm resources (including time) that had been allocated toward obtaining that client

A second problem inherent with most marketing ROI models is that the value of non-direct (or soft) marketing elements is usually not measured at all. Activities such as image advertising, social media, and pubic relations are typically measured through interim metrics (awareness figures, number of articles placed, click-through rates, etc.). Other marketing initiatives (e.g., a firm brochure or web site) are usually not measured at all.

To illustrate this point in practical terms, consider the question of exactly how much of an investment should a law firm make in developing a new web site. It is a difficult value to ascertain and is usually answered with guesswork based upon what seems “reasonable” and an “I know what I like when I see it” approach.

Third, many ROI models rely on a whole assortment of assumptions -- developing hurdle rates, conversion rates, repeat purchase rates – all of which most service businesses would find difficult to obtain, let alone take the time to calculate and examine. While such models may be effective for products-oriented businesses, they are less so for businesses where the volume of customers is relatively few and where the possibility of one single client skewing results (and thus influencing future decisions) is relatively great.

Next Week: Tracing the History of Client Origin – Where Do Clients Come From?