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?

Tuesday, January 21, 2014

Measuring Return on Legal Marketing Investment: The 3 Mistakes Law Firms Make

Last week we discussed how, when it comes to ascertaining the return on their marketing investments, law firms rarely, if ever, obtain useable information Much of this has to do with the nature of selling services, the role of word-of-mouth, the difficulty in measuring certain types of marketing tools (e.g., brochures, articles) and the cost of the time involved in implementing marketing programs.

However, much of this also has to do with some faulty premises law firms make in attempting to get a true picture of the effectiveness of their marketing initiatives. 

The first of these lies in the manner by which law firms go about interpreting results. Typically, law firms will decide to implement a marketing initiative and then at some later point, assess whether this activity “succeeded” or “failed” in generating new revenue for the firm. For example, they will look at how much money was allocated for a seminar or an advertising campaign, see how many new clients came of it and how much new revenue these clients brought in. The calculations are easy to make. How much money did a particular initiative cost and how much did it bring in? If the numbers don’t meet the firm’s anticipated projections or goals, the effort is declared a failure with the odds of ever implementing a similar, second attempt dramatically reduced.

What is the mistake these firms are making?  They are assuming that each and every marketing initiative they undertake exists in a vacuum – that the seminar is the only exposure the prospect has to the firm, that the television viewer’s only contact with that firm comes through the viewing of its commercial, etc. In truth, most communications, and certainly most successful communications are in fact successful, because the prospect has been exposed to a message a number of times and in a variety of ways.

An individual who registered for a seminar may have seen an ad or a press release for the event or perhaps even been told about it by a friend. He or she then attended the seminar and came away with a positive or negative impression of the attorney who made the presentation. After the seminar, that individual went home, and in wanting to learn more about the firm, decides to check out the firm’s web site. Then, at the first appointment, while sitting in the waiting area, that potential prospect starts to read one of the firm brochures strategically placed upright on a credenza in the room.  Thus, prior to actually retaining the firm, that individual has been exposed to a representation of it somewhere between 4 and 7 times.

It’s no different for the television commercial or the direct mail piece or the press release or the Facebook page or any other type of vehicle – including personal referrals from friends and associates. Individuals can be and are exposed to a law firm any number of times. This can work either to the firm’s advantage or at times, even to its disadvantage. Consider the individual who meets an attorney at a networking event in which they engage in a long discussion on a matter of particular interest to the prospect (first exposure). When that prospect goes home, he visits the firm’s website, only to discover that the firm makes no mention whatsoever of the kinds of services in which he is interested. Here, the potential of a second quality exposure has been lost. The prospect now may have some doubts as to the credibility of that attorney simply because the firm’s expertise on the issue has not been adequately conveyed in the site. In this particular case, the web site would not have been the factor that generated the case for the attorney (that being their meeting at the event), but it might have been instrumental in turning that prospect into a client. The attorney’s probable take away from this sequence is that their encounter didn’t go as well as he had thought (and thus either that face-to-face networking is not his strength or that the prospect was not a serious lead), when in fact it was the lack of rich content in a non-awareness generating vehicle (the web site) that was responsible for the failure to close the sale.

To fully appreciate the importance of how marketing tools are intertwined, consider a situation in which one is solicited on the telephone to apply for a credit card the name of which is not well known. Chances are the response rate will be relatively low. Now consider a telephone solicitation effort for a highly branded card such as Visa or Discover. The response rate will in all likelihood be considerably higher. Why is that? It’s because the advertising has built awareness  (and credibility) for the product even though it may have not have directly spawned any direct leads on its own.  In this case, the branded advertising campaign served as a facilitator for the telemarketing effort.

Because of the misconception of measuring only direct leads/clients, law firms then make a second crucial mistake. They ask that new prospect “Where did you find out about us?”  The individual then says something akin to, “I saw your ad,” “I Googled you on the web,” or “I attended your seminar,” etc. The response is duly noted and the revenue from that new client is credited towards whatever activity was cited in the response.

What the law firm should be doing instead is prompting the new prospect/client to, as best as he can, name all the areas in which he’s seen, read, heard, learned about the firm. By “all,” we are not just referring to outreach vehicles such as ads, mailings, seminars, articles, pay-per-click campaigns, etc., but also to referral sources – other firm clients or associates of the prospect, who may have mentioned the firm.  By capturing this data, we can begin to get a much better picture of what is working and what is not and as important, what combination of activities is working most effectively together.

To implement such an intake process is where we come to the third mistake that law firms make – and that is failing to actually have an intake process and/or requiring strict adherence to one. The objection to adhering to what really amounts to a one-question survey (i.e., “Check all the ways in which you’ve learned about our firm”) is usually one of logistics as though adding this extra burden to the originating attorney, administrator, paralegal or clerical person would be unfair and cumbersome.

The net takeaway? We should not assume marketing activities work in a vacuum or that new business is generated in a single direct way. Second, ask the one right question.  Finally, demand strict adherence to this process.

Next Week: The Problems with Current Return on Marketing Investment Models

Tuesday, January 14, 2014

Measuring Return on Legal Marketing Investment: Why Law Firms Don’t Get Useable Information

If there is a single sentiment that we have heard most often in over 20 years as legal marketing consultants, it has been expressed by the question, “How do I know if this marketing effort will work?” The laments,  “We tried that and it didn’t work,” and “Most of our business comes through word-of-mouth,” would be right up there as well.

As we begin a new year, I thought it would be a good idea to explore how legal marketers can get a better handle on what strategies and marketing vehicles pay out and which are less profitable.  By accurately measuring the effects of their marketing efforts, law firms will be better equipped to develop meaningful and growth-oriented business development initiatives.

I encourage everyone to lend their voice to this discussion as determining the effectiveness of legal marketing is imperative for practice growth.  Unfortunately, it is a topic that is either often misunderstood or ignored altogether.

Why Measuring Return on Marketing Investment is Difficult
To understand where legal marketers miss the boat on measuring return on marketing investment, it is important to get a handle on why measuring such return is so difficult to begin with.

First, unlike marketers of consumer products, legal marketers do not have a wealth of measurement tools at their disposal.

Second, the large disparity in the number of clients/customers of a particular product versus those of a law firm makes traditional analysis of return-on-investment much less accurate for this latter type of enterprise.

Third, word-of-mouth referrals play a much larger role in how someone finds a lawyer, a doctor or a financial planner then in how they determine what brand of cereal to buy.

Fourth, some activities have traditionally not been easily measured. Creating a brochure, developing a new web site, writing an article for a trade publication may not actually make the phones ring, yet we know instinctively that they play a part in the overall growth of the firm.  We just don’t know how big a part.

Fifth, in legal marketing, attorney “time” is a major marketing cost element. Very few methodologies capture this significant business development expense.

Finally, and perhaps the most important reason why measuring the return on a law firm’s marketing investment is so difficult lies, as we shall see, in some faulty premises on the part of legal marketers themselves.

Next week we’ll take a look at some of these faulty premises -- mistakes law firms make that prevent them from getting a true picture of their business development initiatives.

And after that, in the weeks ahead, we will outline how law firms can get a much better handle on knowing from exactly where their business stems and how they can use this data to make informed decisions about future growth programs.

Next Week:

Measuring Marketing ROI: The 3 Mistakes Law Firms Make