How to Spend Your Marketing Dollars – 5 Metrics to Guide This Decision
To be successful, law, real estate and financial service firms should be running like any other type of business, which means paying attention to more than just billable hours. Analyzing the key aspects of your firm’s performance can have a major impact on your revenue and growth. By monitoring and measuring specific metrics, you’ll be able to make educated, data-driven decisions to improve your practice, versus working from a gut feeling, or taking an educated guess.
While there are dozens of metrics your firm can track, we’ve focused on five as a place to start, and ones that can boost profitability.
Where are your leads coming from?
A lead refers to a potential client or anyone that inquiries about your firm’s services. Prospects may learn about your firm through a variety of channels – referral sources, Google search, advertising or reading an article one of your lawyers published. It’s also important that you track all leads, not just the ones that turn into clients. Understanding where your leads are coming from can help you determine what marketing and business development efforts are working, or not, and make adjustments as needed.
Which leads are converting?
A converted lead means the prospect has turned into a paying client. Looking at the origin of the lead (e.g., referred by someone, professional/networking organization, online search, etc.) to identify where you’re getting your business can help guide your focus moving forward. For example, let’s say your law firm receives leads from estate planning and bankruptcy attorneys, but you’re converting more leads from estate planning attorneys. It may make sense to put forth more resources to get in front of estate planning attorneys – speaking to estate planning bar sections, writing for trade publications, advertising in those publications, etc.
How much revenue are your new clients generating?
This is a meaningful metric because you can better determine how to spend your marketing dollars, particularly with print or online advertising. If you’re running a print ad that costs the same in two different publications, and publication A brings in two clients and publication B brings in ten new clients, you should cancel the ad in publication A, correct? Maybe not. If you’re not tracking total revenue for each, it’s possible the two clients from publication A were actually larger revenue generating clients. This example holds true for networking organizations as well. If you receive a dozen referrals from organization A but they never turn into a client, and organization B produces two revenue generating clients, it’s possible organization A may be a waste of time despite the high volume of leads. However, this isn’t black and white. You should dig deeper and assess why your firm hasn’t been able to convert leads from organization A.
How much are you spending on marketing and business development?
Some expenses will be easier to measure than others. How much did you spend to run the online ad? What is your total membership fee for a networking organization? These costs are fairly easy to track. Others, such as the time and resources it took your staff to coordinate placement of the ad or time to plan an event, may not be as straightforward. In addition to billable hours, marketing and business development time for staff should be tracked because it is a cost that impacts your profit. Then evaluate what efforts are bringing in new business and eliminate or allocate less resources to those that aren’t as effective.
What’s the return on investment?
This metric brings everything together. By identifying where your leads are coming from, which ones are converting, how much revenue you’re generating from each and the cost of acquiring a lead, you can determine which business development activities are worthwhile, which need to be modified and which should be eliminated altogether.
Make sure the above data is tracked on a consistent basis and information is reviewed regularly. If you’re only looking at these metrics once a year, you’re missing out on an opportunity to improve your marketing ROI.