ROI: Determining How Your Marketing Measures Up
By temperament and by habit, attorneys tend to be a detailed, meticulous lot. Most understand that “proof,” data, substantiation etc. is not only required when building a case for a client, but for any business related decision as well. Thus, the inability to measure the inexact science of marketing has traditionally been a source of frustration for many attorneys and their firms.
A lot of that however is changing.
The reason is simple. With new mediums and new technologies, the ability to track the results of a firm’s promotional efforts is now greater than ever. And with that capability comes two concepts that previously have lived only in the back burner of marketing lexicon. They are “return on investment” and “accountability”.
Clearly the goal of any marketing endeavor – be it direct mail, a branding effort, creation of sales materials, etc., is to increase the overall revenue and/or profitability of the firm. Yet when exploring the many promotional options available, it is surprising to see the overemphasized role “gut” has played for those making marketing decisions. And while certain mix selections may seem obvious in terms of their potential for business development, the level of investment required to achieve desired results has often seemed unclear. Typical of that dilemma is the age-old question of “Do I invest in some type of advertising/public relations effort or do I educate my attorneys on how to network, find prospects and close deals?” The truth of the matter is that there is a definitive, quantifiable answer to this. It is an answer worth finding, one which puts marketing on the same playing field as finance and one which, if done correctly, can lead to a more profitable, growth-oriented organization. While the goal here is not to offer a diatribe on marketing metrics, there are some “dos” certainly worth mentioning.
First, any return on investment analysis should be implemented in light of the firm’s short- and/or long-term objectives. Mail order companies have long understood this concept, often sacrificing short-term profit for the opportunity to obtain a customer with long-term revenue potential. Hence, it is important to ascertain the lifetime “value” of a customer – recognizing of course that the incremental value of that customer may diminish over time.
Second, it is critical to establish benchmarks for each area of a marketing program. For example, if a previous direct mail effort yielded a two-percent return, it is clearly unwise to assume a new mailing might yield ten percent. It is imperative to maintain a historical perspective, not just on what worked and what didn’t, but to what degree a program worked or did not. Even more important, the actual percent return on investment should be determined. In its simplest form, this formula can be described as: (Gross Margin - Marketing Investment) ÷ Marketing Investment = Return on Investment Whether a percentage of overhead/labor is part of the investment figure depends on exactly what it is we are trying to discern. In order to even more accurately project ROI of future endeavors, risk factors can be weighed. For example, if we know a direct marketing effort will yield between a 2 and a 2.5% response, the relative risk is minimal, compared to an image advertising campaign where the results are less certain. Hence, we may apply a percent discount onto the projected advertising ROI. We may also wish to establish hurdle rates before embarking on a particular course, setting for example, a projected ROI of two or three as a prerequisite to implementation.
The implications of all this are quite obvious when applied to those marketing tools which lend themselves easily to quantitative data (telemarketing, direct mail, Internet click rates, etc). More difficult are those efforts often seen as being long-term in their focus. Even public relations, advertising and collateral materials have their place in the marketing mix. We all instinctively know that. Yet how can their impact be measured? In some cases, quite easily. An article placed in a newspaper that generates a lead which becomes a sale can be scrutinized for its ROI. The same can be said for an ad or commercial. But public relations and advertising go much farther than that. Much has been said and written about these tools’ abilities to create brand equity and an “environment” for greater revenue growth. To understand what that means quantitatively, one must put numbers to the sales process alone (without these programs) and then analyze what incremental revenue/profits are realized when these efforts are added to the mix. Such an analysis requires a) benchmarks, b) a recognized period of time over which the ROI is measured, c) adjustments for variables such as inflation, new competitors, etc. These incremental profits are then matched against the incremental expense that was necessary to attain them.
The same is true for sales materials. It can be argued that collateral itself never won a client. But what might have been the effect of investing less in such material, or even not at all? Developing that initial brochure means establishing credibility. The value of that credibility can be measured in incremental sales obtained and/or length of sales cycle reduced. Moreover, that value must be scrutinized from an ROI standpoint versus other, more lead-generating elements of the marketing mix.
If all of this sounds especially complex, than this article will have failed in its mission. The point is that from this moment forward, it should be a mandate to track, not just all prospecting and marketing investments, but their returns as well. From this, truly educated decisions can be made about future business development programs. The positive of this is that it should lead to more successful endeavors. Of course, with that comes what may be marketing’s next key catchword: accountability.
By A.L.T. Legal Professionals Marketing GroupABOUT THE AUTHOR: Les Altenberg, President, A.L.T. Legal Professionals Marketing Group
Law Firm Marketing & Public Relations Consultants
Law Firm Marketing & Public Relations Consultants
Les Altenberg is the President of A.L.T. Legal Professionals Marketing Group – a full service marketing firm dedicated to the business development efforts of law firms and those who serve the legal industry.
Copyright A.L.T. Legal Professionals Marketing Group
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.