This article was first published in Lex Witness June 2015 issue.
It has been half way through the year, and it’s time to start thinking about tracking your return on investment (ROI). Running metrics on ROI is critical if you wish to invest in branding and positioning initiatives wisely.
Most law firms 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. Branding and positioning 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.
Some firms deduct their investment amount from the earned fees when calculating ROI. Most do not. The ROI equation below displays the much-needed bigger picture:
Not only is it necessary to account for fixed expense the firm incurs on a regular basis towards a particular initiative, it also is important to consider the amount of time your firm invested in the campaign and include that as part of the overall cost.
Measuring ROI requires stepping out of your comfort zone
In a law firm, the IT department may feel upgrading to the latest hi-tech phone and CRM system is long overdue, but given the considerable expense and time needed for a firm-wide upgrade, it may require a financial analysis plotting the cost of maintaining an existing technology in place against the cost and benefits of the upgrade. A law firm branding and business development personnel asked to produce a client alert for a news item that every competitor discussed weeks ago may have to explain to the management team by demonstrating that the optimal window to maximize “click though rates” has long since passed. ROI discussions often involve the mastery of different dialects to make the case to others.
ROI is not an absolute measure
A law firm hosting a roundtable that draws 15 people versus the same law firm hosting a cocktail with a attendance of 90 odd people, which one can be determined to have a higher ROI? It’s only by comparing the ROI of an initiative to alternatives that we can ascertain whether the ROI is acceptable or not. If the 15 attendees of our roundtable represent top-level decision makers of existing and prospective clientele, this might be a much wiser piece of investment than a larger event with 90 client attendees representing junior lawyers with no input on outside counsel selection. Good firms compare the relative ROI of various initiatives and the best ideas must earn the capital investment.
ROI can only be measured over time
Law firms generally operate on counting revenues and expenses one year at a time and distributing the profits to partners annually. This encourages a year wise financial accounting and decision making mindset. However, most successful businesses operate on a gradual growth basis, which is ideal to consider investments over a longer period. By viewing ROI as a snapshot in time, we tend to make flawed decisions.
The End Goal
The end goal of collecting lead origin and conversion data is to determine your return on investment for each individual branding and positioning initiatives the firm undertakes. Many aggressive firms that invest in a number of branding and position channels may be experiencing a positive overall ROI over the desired period of time, but they may be losing money on one or more particular platforms. There may be a couple of dominant initiatives 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 your most and least effective initiatives are.
This review should then be augmented by specific metrics which track variables such as the number of new prospect calls along with the source of these leads; conference leads generated and eventual conversions; amount of firm publicity generated; the quality of the firm’s contact database as well as qualitative assessments regarding any image-oriented efforts and more. Here, feedback from prospects, clients, staff members and other contacts can prove quite valuable.
Law firm positioning and business development initiatives, is relationship-based and much more relative in terms of how leads get generated and clients are converted. Some modest metrics to measure may include:
- New matters resulting from satisfied client referrals
- RFP win rates
- Quality attendee lists at the firm events
- New matters resulting from events, seminars and CLEs
- Article placements with target audiences, and more
A Note of Caution
Certainly, tracking the branding and business development budget investment toward each initiative and activity, helps in calculating the financial ROI. But what about the effort? Existing marketing ROI calculators do little to account for the resources and time involved in marketing planning and execution. In addition to metric measurement and ROI calculations, a law firm should also track the time invested by the firm against specific projects such as proposals, communications writing projects, events and other relevant initiatives. This helps in determining where resources are being efficiently used. A holistic tracking analytics is key when planning strategy for the effective and strategic growth of the law firm. At times, appointing an outsourced service wing on a retainer makes a lot of sense and a wise decision when a firm prefers its resources to focus on their own existing expertise and core KRAs.