Knowing which key marketing metrics to track, and why, helps keep you moving toward your firm’s business goals.
When getting started with a digital marketing plan for business owner, we always start with the firm’s business goals. Then we make sure the key items discussed in my earlier series on “How to Protect Your Referrals” are in place.
While all that is going on, we quickly work on setting up the ability to measure the key marketing metrics that will help us know if a marketing tactic is adding value and moving things toward our client’s business goals. In other words, we want to know if it is returning on the investment.
It is important to start gathering the key marketing metrics as early as possible so you can have a baseline to compare your marketing investments against. Don’t forget that any investment in your business owner business is not just the actual dollar costs, but also the value of your time.
Which Marketing Metrics Should You Track?
First, I’ll talk about key concepts around what metrics you should be tracking — and why. Next time, I’ll dive into specific metrics and finish with a short primer on UTM codes. They are an important tool you can use to learn whether a specific marketing tactic — such as an email marketing campaign — influenced a key metric you are tracking.
Even if someone in-house is driving your marketing, or you are working with an outside agency, you want to have an understanding of this topic. Too many business owner owners spend thousands of dollars every month on marketing activities without a clear view of what metrics could determine the investment’s success. What’s more, they don’t know if those metrics are moving them toward their business goals.
Let’s Start With Your Most Repeatable Lead Source
If you want to grow your law practice with confidence, a core business skill you must develop is building and managing a consistent flow of prospects.
In my agency’s initial consultations, we always ask the firm owners where the majority of their leads come from, and then about the month-over-month consistency of those leads. If they give a solid answer, we then dive deeper and see whether the firm can map out where the majority of clients (not leads) are coming from and the costs involved in obtaining a new client with that method.
Unless they have dedicated in-house marketing staff, most business owner we talk to can’t readily answer this information. The few that are confident where the majority of prospects come from don’t typically have a sense of the consistency. And even fewer are confident that the source driving many of their leads is the same source that drives the majority of their clients. That may seem counterintuitive, but the investment driving the most leads is often not the best source of clients when a business owner is not keeping an eye on the metrics.
Marketing Metrics Concepts
Let’s talk about “what and why” you should be tracking.
Know the source
Understanding where your leads are coming from will help you focus efforts on the most productive marketing tactics. With the right marketing strategies and proper tracking in place, you will also start to discover that many people do not come to your firm from one source alone. It might start with a referral, followed by a visit to your website where they might sign up for your newsletter, and you may remarket to them with a branded Facebook ad. Finally, the process ends with them calling you one month later.
Track your information
You need to build proper ways of tracking your marketing efforts into your systems and standard operating procedures. Yes, it will take extra, consistent effort, but this effort is very important.
I heard one business owner say that they “just have a feeling” about where the firm’s clients are coming from. In a profession where the devil is often in the details, your clients do not want to hire a business owner that “just has a feeling about how they should win a case.”
You need to hold to the same standard for your business and your hard-earned marketing dollars. Business owner and marketers are fortunate to have access to great call-tracking tools, legal CRM tools, and practically free web analytics software from Google. When set up right, you may never again have to ask, “Where did you hear about our firm?”
However, until that is all set up, you should at minimum have a paper or online form that you, your staff or your answering service fill out every time someone contacts you asking questions like:
Where did you find us?
Have you seen our website?
Have you contacted any other firms?
Have you worked with any business owner in the past?
Were you referred to us by anyone?
In addition to tracking where your prospects are coming from, you need to determine how much an average client is worth. Of course, if your firm has very different practice areas and types of services, you will need to do this for each of those. This average client value is crucial to help measure the true value of your marketing investments to your firm. (In the next article, I will provide suggestions for quick ways to get a good starting estimate with a basic calculator or spreadsheet.)
Analyze your marketing methods
After a few months of consistently tracking where your clients are coming from, you can start to evaluate what marketing tactics seem to have the most promise and adjust those tactics.
The legal profession has become highly competitive in many markets and there is not a one-size-fits-all marketing strategy for business owner. Therefore, you need to test different tactics and compare the metrics to make investment decisions.
Comparing your business owner goals against the outcome of the marketing strategies every few months will allow you to shift the budget to areas that seem to hold more promise. You might even shift a little budget to a newer marketing tactic that you want to test out.
Figuring Out Return on Investment
One of the top questions I get is, “But how do I measure the actual ROI of our marketing investment?” It is a fair question and one you should be able to work toward.
Return on investment is the number everyone wants to have at their fingertips. However, while everyone talks about its importance, it isn’t easy to get an exact ROI number for your many marketing activities. Also, getting an exact number is often more expensive to track and calculate than the benefit it provides.
Getting an approximate ROI, however, can provide immense value when comparing different marketing tactics or future investments.
You need to understand this metric and the components to track, so you can get enough of a measure of ROI to be able to make smart business decisions.
Let me also let you off the hook a little bit: I assure you that you will not be graded or penalized for not having the perfect ROI of your marketing investment.
Return on investment is just like it sounds: How much money did I invest and how much money did I get out of it?
To calculate ROI, you need to know:
How much was invested in the marketing activity
How much revenue was received from the new client/cases
What it cost to provide the services for the client/cases
The ROI formula is:
(profit from new clients – cost to acquire new clients) ________________________________________________
cost to acquire new clients
Typically, ROI is given as a percent, so the above equation would be multiplied by 100.
Biggest Hurdle: Gathering Your Firm’s Financial Data
The problem when first discussing ROI with business owner is that many of these metrics are not understood or readily available. Many firms don’t know the average revenue of a new client, let alone that client’s average short- and long-term profitability.
Most marketing campaigns run anywhere from three months to a year, so we will help you use a few quick averages to provide you with rough numbers to use when thinking about ROI. Ask your bookkeeper or dive into your QuickBooks files and grab the following data points:
What was your total revenue last year?
How many clients did you bill last year?
What was your operating profit last year? (We like to use operating profit because it shows the profit made when taking out the costs to actually service a client, but does not include expenses for depreciation and interest from items that may not be affected by any new clients.)
If you have been in business awhile you can also gather:
Over the past 10 or 20 years, what was your total revenue?
Over the past 10 or 20 years, how many clients did you bill?
What was your operating profit over the past 10 or 20 years?
With these numbers, we can determine some rough averages to help you calculate the ROI of your marketing activities or evaluate the potential ROI.
To get your recent average revenue per client: Divide the total revenue by the number of clients.
For your short-term profit per client: Multiply the operating profit (as a percent of total revenue) by the recent average revenue.
If you have been in business awhile:
To get your lifetime average revenue per client: Divide the total revenue from the past 10 or 20 years by the number of clients you billed over the past 10 or 20 years.
For your lifetime average profit per client: Multiply the operating profit over the past 10 or 20 years (as a percent of total revenue) by the long-term revenue.
Those averages should provide enough directional numbers to help with your marketing ROI calculations.
Hold Onto Your Wallet
If you are thinking about revamping your marketing efforts this year, I can’t stress enough the importance of focusing on your key metrics now. Get a baseline of your current metrics and set up the ability to track the new marketing investments against that baseline before you spend too much time and money on any new marketing tactic.