Measuring your Return on Investment (ROI) is a critical part of any law firm marketing campaign. While you may have a general idea of how well your marketing is doing, i.e. ‘I am making money,’ it is important to learn exactly how much you are getting back from your various spending. Here are the steps you must take to determine what your ROI is for various marketing channels.
1. Determine All Marketing Channels
You would be surprised how many marketing channels you are actually using. Maybe you work with an SEO company like ONE400, or maybe you run small ads in the local newspaper. Any channel that you devote time and money into counts as a marketing avenue and should be considered when calculating your ROI. Once you have an inventory of everything you are doing to bring in business, you can start determining the return from each individual marketing channel.
2. Decide Which Channel you Would Like to Consider the “Converter”
With a master list of channels, you may notice some overlap. Perhaps you went to a legal conference and met a potential client who didn’t convert. Later, you sent out an email campaign and they ended up retaining you. Since this is technically two marketing messages, you should decide if you want to count the first or last touch as the converter. To lead by example, we consider the last touch as the conversion at ONE400.
3. Calculate the Average Value of A Client
This one can get tricky if you have multiple practice areas with varying case values, but you should always try and stick to one specific case type per marketing channel to help with messaging and ROI calculation. If you are not currently segmenting your efforts by category, you can do a general average. To calculate your average case value, simply add up the total revenue from closed cases and divide that number by the number of clients you retained.
For example, if you wanted to find the average of your last ten (10) clients you’d do this:
(sum of 10 client case outcomes) / 10 = average case value
The more data you can allocate for this, the more accurate your average will be – so consider looking back at your total firm revenue for the past year or more.
4. Calculate Monthly Marketing Spend By Channel
Once you have your average case value, the next step in calculating ROI is to determine how much money you are spending on marketing. Marketing can include anything from pay-per-click advertising to hiring an outside marketing team. Measure the amount of retained clients per month per channel and subtract your monthly spend, this will give you the over monthly return on your spending. If you find you have multiple channels producing negative results, it might be time to reconsider what exactly you are spending money on.
5. Factor in Leads and Potential Revenue
Many advertising and marketing channels have a “ramp up” time. Items like SEO or content marketing may take months to see a full ROI. To curb frustrations on this end, we recommend calculating the value of one lead. This type of lead is any potential client that contacted you outside of a referral. To calculate the value of a lead you will need to take you original average closed client value and divide it by your close-rate. Let’s say 10 people contact you from your website; five of them are just looking for information, two don’t respond, and the remaining three are warm leads. Out of those three, you are able to retain two and the third ends up working with another firm. This would make your close-rate 2/10 or 0.2. You would then multiple your average client value by 0.2: this is the value of one lead. You should include your lead value when determining overall ROI. This number can help you identify opportunities to increase your marketing as well as improve your sales cycle.
6. Keep Track!
Once you have spent the time to measure your ROI you should continuously keep track of these numbers to make smart marketing decisions. You can keep a master spreadsheet with month over month changes and designate one person to be in charge of closed clients and marketing channels.
We know it seems like a lot of work to measure out all of this data, but if you do your marketing will be infinitely more successful. You will be able to make informed decisions and trim unneeded marketing channels to invest in channels that are bringing your firm revenue. If you have any specific questions, feel free to leave them in the comments below!