Tracking your return on investment (ROI) and cost per case is critical if you wish to invest in marketing and advertising wisely.
We recently discussed ROI for different marketing channels with three Consultwebs.com clients. Two of the clients are TV and Internet advertisers, while the other advertises only on the Internet. They agreed that the cost per case for TV advertising is increasing, but the number of cases generated by TV advertising is decreasing. Meanwhile, Internet advertising costs considerably less per case and is producing more and more cases. They are able to use this golden data in their favor because of their ability to track return on investment.
Several Consultwebs.com clients who have mature, comprehensive Web campaigns are obtaining Internet cost per case investments of less than $350. Some are receiving more than 20 cases per month. Most TV advertisers tell us that their cost per case is more than $1,000.
Calculating ROI for Law Firms
Most lawyers know that ROI stands for return on investment, but many do not fully understand how to determine their ROI or how to use benchmark information to improve it. Marketing is essential for maintaining a successful law practice. Law firms that have managed to refine their marketing efforts to produce a positive ROI are staying ahead of their competition and earning a good living in the process.
Some marketers refer to ROI as the cost per conversion or cost per lead from their marketing campaigns. Knowing the cost per actual conversion is extremely beneficial but does not provide your firm with a number or percentage to represent your overall return on investment from a particular marketing effort.
Some firms deduct the monthly investment amount from the earned fees when calculating ROI. Most do not. In our example, we have not deducted the monthly investment amount.
The ROI equation below displays the much-needed bigger picture:
Consider a basic example with this equation: Let’s say you sign five cases this month from leads generated by search engines. Each case is estimated to produce an average of $4,000 in fees to your firm. That’s a total of $20,000 in Total Earned Fees (revenue) this month. You spend $4,000 per month in Search Engine Optimization (SEO). Now, do the math. Plug those values into the equation, and you get your estimated SEO marketing ROI for the month: 500%.
One way of looking at this ROI example is that for every $1 invested in SEO, you receive $5 in return. Ken Hardison of Hardison & Cochran stated in a client testimonial that he receives $8 back for every $1 he invests with Consultwebs.com for Internet marketing. This equation can be very helpful in determining your return on investment.
However, not only is it necessary to account for the checks that are cut each month toward a particular marketing initiative, it also is important to consider the amount of time your firm invested in the campaign and include that as part of the monthly cost. For example, if your attorneys are spending an hour to write a blog article each week to supplement your SEO efforts, consider what that hour costs your firm in overhead expenses. Add that amount to the money you are spending to represent the true investment. Additional in-house and contractor personnel should also be included in your costs.
Challenges of Calculating ROI
Firms with data-driven marketing plans are in a much better position to effectively and accurately track their ROI from marketing. But even if your firm endeavors to base its strategic marketing decisions on ROI information, there are still difficulties in the process of calculating that information.
A firm that invests in SEO marketing, Pay-Per-Click (PPC), television, billboard, radio and yellow pages advertising has much more difficulty calculating the true ROI from any single advertising medium than, for example, a firm that invests exclusively in SEO each month. This is due to overlap and synergy of multiple marketing initiatives. It becomes rather difficult to determine the origin of a lead when you have potentially touched the prospective client multiple times via two or more marketing channels.
One example of this difficulty is branded Web search. Consultwebs.com, Inc. has learned from our law firm clients’ website analytics and call tracking systems that firms that invest heavily in television marketing have strongly branded search traffic. As a result, many visitors find their sites by specifically searching those firms’ names or brands on Google.
By monitoring visitor behavior, we know these visitors have a stronger intention to convert when they search for a firm’s name as opposed to searching, for example, “car accident lawyer NYC.” They may have first seen your TV commercial, then searched your name using Google and finally converted from your website. If you are tracking your intakes through automated reporting instead of inquiring during the initial intake, you will most likely (incorrectly) associate that particular lead origin to your Internet marketing efforts.
Alternatively, someone may have found your site after searching for “car accident lawyer NYC” and then closed the browser after doing a bit of research. The next day, they may drive past your billboard and call you on their commute home. If you are tracking the number from that billboard, you will associate that lead to your billboard marketing. While you are accurately tracking which marketing effort converted the prospective client, you are not correctly identifying the origin of the lead. Knowing and understanding the difference between the two will result in more efficient advertisement spending and more signed cases.
Using Call Tracking and Conversion Data to Invest Wisely
Comprehensive, informative call tracking technology is available. If your firm is not tracking all telephone conversions that are coming into your office, you are missing a wealth of data. Firms that use call tracking and make adjustments based on the data collected have a significant competitive advantage. It is one thing to collect data and see which form of marketing generates the most phone calls during any given month. It is even more effective to use that information to determine which marketing effort needs to be discontinued and which needs to be expanded.
Some firms still advertise in the yellow pages despite diminishing returns each year. Most are able to use a unique call tracking number in these ads. A significant concern is that if they leave the yellow pages, competitors will get the calls instead. However, if firms are basing decisions on what competitors are doing rather than making decisions based on their own conversion and ROI data, they are missing the boat. Don’t get me wrong. Some firms are getting a return on their yellow page dollars. But if they are not tracking those phone calls all the way through to signed cases, they are likely throwing away good money regardless of the marketing channel they are using. It is critical to watch the conversion data closely. Then, at the end of the day, make decisions based on what is working and what is not.
Also, do not forget the other methods of contacting your office: live chat and online contact forms. Be sure to include these two conversion methods when compiling your ROI data. Each month, determine how many leads and how many signed cases were generated from each marketing effort. Some cases may not be signed immediately, so depending on how your firm operates, quarterly metrics may be more beneficial and efficient.
Allow me to reiterate that call tracking and conversion data allow you to determine how the prospective client contacted your office. Call tracking does not always accurately tell you how the prospect first heard about your firm. Knowing and differentiating the two are important. The former is typically more accurate. The latter is often flawed because some prospective clients may not remember the first time they heard about you. Regardless, the best way to independently collect this data is through call tracking and through your intake process.
Using Your Intake Staff and Processes
During the initial phone calls, does your intake staff consistently ask prospective clients how they heard about your law firm? If not, you should hold them accountable to do so. The information is worth its weight in gold. Once your staff learns the origin of the lead, that lead should be added to your conversion database. This gives you two separate sets of information: 1) how the prospective client heard about you and 2) how they contacted you.
Ideally, at the end of each quarter, these two sets of data will be consistent with one another. However, you may find that a large percentage of your visitors are hearing about your firm through your radio spots, but only a small fraction are converting from that channel. This discrepancy may naturally lead you to improve your call-to-action in the radio ads to increase case sign-ups. You may also see better success by mentioning your Web address at the end of the radio spot and monitoring the conversions from the Web to see if they increase beyond the norm. This requires close analysis, testing and adjusting. This can naturally lead to improved ROI quarter after quarter.
Your intake staff and processes may have a negative (or positive) impact on your ROI. This should always be considered. Tracking the number of sign-ups per intake specialist, over a period of time, will also give your firm meaningful data. This information will help you to determine who is most successful in handling and closing prospective clients. You can learn a lot from this information and adjust accordingly. Determine what the successful intake specialists may be doing differently from the other intake professionals. Then, replicate the successful practices across your entire intake staff.
Continue to track, monitor and adjust. You will naturally strengthen your ROI from this practice alone. Most call tracking services allow you to record intake calls, but always first make sure that your state allows you to do so. Many law firms have started taking advantage of this service and have made positive strides toward dramatically improving their intake systems and bottom line.
Knowing When It’s Time to Pull the Plug
“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” – John Wanamaker
The end goal of collecting lead origin and conversion data is to determine your return on investment for each individual marketing effort you undertake. Many aggressive firms that invest in a number of marketing channels may be experiencing a positive overall ROI each month, but they may be losing money on one or more particular marketing platforms. They may have one dominant marketing effort that produces well enough to make the others look favorable and worth continuing. However, without tracking each one separately, you will never have the data to prove which are your most and least effective marketing efforts.
Imagine what 2013 will look like for your law firm if you begin tracking each marketing effort closely and base decisions on that data. You have the potential to dramatically grow your business and outpace your competitors. With this information, you have the ability to double down on the marketing channels that are producing results and eliminate the platforms that are costing – as opposed to earning – money. I encourage you to make 2013 the year you begin effectively tracking your law firm’s ROI and reap the benefits for years to come!
For more information and tips on how to analyze and determine your true return on investment, contact our team of law firm marketing professionals at email@example.com or call us at (800) 872-6590. Please feel free to share your own experiences with tracking your ROI in the comment field below. We would love to hear what has and hasn’t worked for your firm.
(Many thanks to: Kenny Harrell, a partner at the Joye Law Firm; Bruce Millar, a partner at Millar & Mixon; and Ken Hardison, a partner at Hardison & Cochran for sharing your suggestions and data with us!)