How Much Do You Need to Invest in Your Law Firm Marketing Efforts?
Implementing an under-funded marketing plan is just as bad as not using any marketing plan at all because of the Law of 7 Touches – which means it takes 7 to 10 meaningful touches to move someone through the sales process to get them to the point where they are ready to buy from you.
If your marketing plan only has enough steam in it to produce 3 meaningful touches, it will be almost as if you never touched prospects at all because it won't break through all the other marketing efforts made by other attorneys vying for that person’s time and money, including your biggest competitors.
So how much do you need to invest in your marketing efforts?
There are a lot of variables to take into consideration when answering that question. Here are a few you need to consider:
What practice area are you in? Some practice areas require significantly more time and money to market (litigation and personal injury to mention two).
What are your profit margins? The larger your margins, the more you can invest on marketing and new business development. Some practice areas have bigger profit margins (litigation) while others have notoriously low profits (insurance coverage and residential real estate).
What are your annual revenues? It is not unusual for successful law firms to spend between 15% and 40% of their annual revenues on marketing.
Are you targeting other businesses or individual consumers? Any time you are marketing directly to consumers, your marketing budget must be bigger because of the intense competition for consumer’s attention.
What is the size of your competition? Obviously companies trying to take market share from Wal-mart are going to need a lot bigger marketing budget than a beauty salon owner. Analyze your competition— what kind of marketing materials do they put out? How are they positioning their firm?
How sophisticated are your competitors when it comes to marketing? Typical companies in service-based industries and professional services (like law firms) are a lot less sophisticated than other industries.
How much time can you devote towards your marketing plan? In general, the more time you can devote towards implementing the plan, the less money you have to use. For example, if you use direct marketing as part of your plan, you can spend less money and send out fewer messages with less frequency if you're able to follow up with a phone call.
Are you marketing directly to the end user or through a referral source? Marketing to the end users of your service is more difficult than working through an established marketing channel like a referral source.
How long is the typical marketing cycle? How long does someone take to make a decision after they have gathered all the information they need? Is it measured in minutes, days, weeks, or months? The longer the marketing cycle, the more money you need to spend on marketing because after you have given them the information they need, you still need to stay in touch with them.
What's the geographical size of your prospect base? For many professional service firms, like doctors, lawyers and accountants, it is usually limited to up to 25 square miles.
What’s the size of the average sale? How much does your average client spend with you? $500? $5,000? $500K? $5 Million? Typically, the higher the price tag, the more you need to educate your customer as to the benefits of your services and provide more evidence of your credibility.
What's the lifetime value of your average client? How much does your average client spend with you over a given time frame? If they spend $1,000 a month with you year round and the average customer stays with you for 3 years, then the average customer is worth around $36,000 to you. If you know that, you know how much you can afford to spend on landing each customer before it starts to negatively impact your profit margins. If your average client only makes one “purchase” from you and never comes back, then you will need to use lower cost marketing strategies to reach them.
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