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

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

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

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.

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?

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

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