How to Measure Marketing ROI

How to Measure Marketing ROIOne of the biggest mistakes law firms make in measuring return on their marketing and business development is assuming that prospects become clients through a single marketing. More often than not, prospects become clients through several exposures. Hence, it is foolish to think that any marketing tactic (even “word-of-mouth”) exists in a vacuum.

But how can one accurately measure return on marketing investment when many, if not most clients are derived from multi-channel means?

To address this question, it is important to understand:

  1. Why measuring marketing ROI is so difficult to begin with.
  1. Why law firms do not get the data they need to make informed marketing and business development decisions.

Why Measuring Marketing ROI is Difficult

Legal marketers miss the boat on ROI measurement for a number of reasons.

First, they do not have a wealth of measurement tools at their disposal. This is very different from the marketing of consumer goods where a myriad of tools offer an abundance of sales data.

Second, word-of-mouth referrals play an important role in how an attorney is hired. Again, this is not a phenomenon that most product-oriented marketers must consider.

Third, some activities are not easily measured. A brochure or an image advertising campaign may not actually make the phones ring, yet we intrinsically know that they have a role in the marketing mix.

Finally, time spent by attorneys and other firm staff is a major cost element that is often not captured by traditional methodologies.

The Problems with Current ROI Models

For law firms, the standard ROI formula of does not do justice to the “word-of-mouth” dynamic:

Gross Profit – Marketing Investment


Marketing Investment

Thus, legal marketers have a hard time determining:

  • The additional revenue each client brings in via referrals
  • How referring clients are initially obtained
  • The value of resources (including time) that have been allocated towards obtaining that client

A second problem inherent with most marketing ROI models is that the value of non-direct (or soft) marketing elements (e.g., image advertising, collateral) is usually not measured at all.

Third, many ROI models rely on a whole assortment of data and assumptions which most law practices would find difficult to obtain, let alone take the time to calculate and examine.

To underscore this, consider a situation we encountered in which one of our client law firms decided to hold a seminar for the purpose of attracting new clients. The total expense of the seminar came to approximately $15,000. Twenty people showed up of which three became clients. Client A generated revenue of about $2,500, Client B’s revenue was $4,000 and Client C represented $3,500 of new revenue. Hence, the total revenue generated by the seminar was $10,000.

Utilizing the standard ROI formula we would state that the ROI for this effort was negative 50%. If this firm had been like many, the seminar would have been deemed a failure because the revenue generated did not cover the investment.

But would this be correct? We can’t know because, until a threshold level of time has passed, we will not fully realize what the impact of obtaining clients A, B and C has been.

Where Do Clients Come From?

If one could determine the relative contribution of each marketing “touchpoint” (that medium or individual to which one is exposed to the firm in some form) to overall revenue growth, one would then be in a much better decision to determine the value of specific marketing elements. To do so requires determining how much of each new client’s revenue was due to exposure to an ad, an article, the referral of a trusted friend or of an already existing current client.

So, going back to our seminar example, if Client C referred another client (D) to the firm, additional revenue would be realized. If Client D generated an additional $15,000 in new revenue, the seminar’s ROI would be 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. And it’s certainly within the realm of possibility that Client D now refers yet another new client. That revenue must, in some way also be credited to the investment made in the seminar.

Word of Mouth Revenue

By only taking direct revenue into account, most ROI models fail to measure the word-of-mouth revenue that was also generated as a result of an activity. Data regarding such “word-of-mouth” revenue is important as it speaks to the perceived quality of the firm’s services.

The two types of revenue (Direct and Word-of-Mouth) together can be added to arrive at Aggregate Revenue. Ever changing, this is the full result of the marketing effort at any given point in time.

This same thinking can be applied at the individual attorney level as well. For example, we work with a multi-practice law firm that had an issue in its family law practice group.  The department head requested considerable financial resources from the firm, resources he put to good use in generating a significant amount of revenue. His associate generated significantly less business.

Yet when the firm undertook an analysis of their respective efforts, an interesting finding was discovered. Although the senior lawyer had generated more revenue, he did so using a multitude of expensive traditional and online marketing means (e.g., advertising, search engine optimization, public relations, etc.).

His associate, on the other hand, generated revenue through client referrals – work-driven efforts that cost considerably less.  By being able to integrate multi-channel data and by quantifying word-of-mouth revenue across several generations, the associate was actually found to be more valuable to the firm. Side note: Shortly thereafter, he became head of the department.

What does it take to garner this information? It takes integrating a holistic mindset and more specifically, it means asking the prospective client at input, to name all the ways in which they learned about the firm versus the more typical question of “Where did you hear about us?” The problem with the latter is that it usually elicits only a single response.

How to Measure Marketing ROI?

Examining the history of each client’s origin offers a more robust methodology for tracking the results of legal marketing. We have labeled this exercise Etiometrix. It is an approach that accounts for the many ways in which each client was exposed to/became aware of the firm. Hence, a client may have been exposed to firm advertising, a friend, visited the firm’s website, and finally read its brochure while waiting to see the attorney. In this particular case, four distinct exposures led to his hiring of the firm.

In addition, the Etiometrix methodology incorporates the variable of time. For most law practices, the investment of attorney time represents one of, if not the single largest business development expense. By capturing this data, legal marketers are able to ascertain the best use of the organization’s human resources.

The data generated through Etiometrix also enables business organizations to compare the effects of not just one marketing vehicle to another, but also of personal networking to traditional marketing, and the contribution to firm revenue by each staff member’s client-specific work versus their work on business generation.

Whereas Etiometrix accounts for exposure to all marketing tools and human interactions, it also avoids the trap of comparing dissimilar metrics (e.g., click-through rates vs. seminar attendees vs. magazine circulation vs. page ranking) that often directs legal marketers away from the most critical metric — dollar ROI.

Implications of Tracking the History of Each Client’s Origins

Among the information to be gleaned are answers to questions such as:

  • Which marketing activities offer the greatest potential for short-term and long-term ROI?
  • What is the relative cost vs. benefit in having specific individuals spend time on client work vs. on business development?
  • Which practice areas offer the greatest potential for revenue growth?
  • Should firm resources be spent on hard marketing (e.g., advertising) or on personalized prospecting/networking?
  • Should resources be allocated towards direct marketing activities (e.g., direct mail, seminars, pay-per-click, etc.) or on softer image-oriented initiatives such as the firm’s web site, image advertising, brochures, etc.?
  • What is the long-term value of a specific client?
  • To what degree is word-of-mouth marketing working for the firm?

Unfortunately, with law firms engaging in scores of marketing and business development activities, with business often generated through generation after generation of referrals, and with more than one individual usually tasked with the responsibility for bringing in new business,  calculating ROI in the manner described above, becomes a tremendously laborious if not impossible function to perform by hand. Fortunately, programs do now exist that can provide such analyses.

By measuring marketing ROI through a prism such as Etiometrix, legal marketers gain enormous insight into how their firms can improve the ways in which they go about business generation at the organization, practice group and even individual attorney levels.


Les Altenberg is a Partner at Etiometrix, LLC, a service that develops ROI reports for law firms based on its proprietary methodology. He is also the President of A.L.T. Legal Professionals Marketing Group, andbrings over 25 years of experience to the challenges of marketing law firms. His articles on legal marketing have appeared in the National Law Journal, Law Practice, Texas Bar Journal and the Legal Intelligencer among others. He can be reached at laltenberg@Etiometrix.com or via phone at 856-810-2127.

Les Altenberg

About Les Altenberg

Les Altenberg is President of A.L.T. Legal Professionals Marketing Group, an agency he founded in 1993. The agency provides marketing counsel and services to law firms throughout the country. An avid writer and speaker on legal marketing, he can be reached at 856-810-0400 or via email at laltenberg@legalprofessionalsmarketing.com.


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