Lawyers study the law to serve people who are in need of a zealous advocate. They typically don’t study the law in order to become internet marketing gurus. But when they start building a solo or general practice, the ability to attract a reliable stream of potential clients becomes critical to keeping their practice running.
Traditional marketing options include television, billboards, radio, and the yellow pages. These media channels have significant barriers to entry related to cost, but are otherwise straightforward. Then came the rise of the internet and with it digital marketing, which democratized advertising by lowering the cost of entry. The negative, however, is that it left lawyers with a significantly more complex media landscape to navigate.
It’s not necessary to understand the nuances of online marketing in order to leverage its benefits. It is, however, necessary to understand the difference between branding and direct response and the key performance indicators for each. In this article, we will explain the difference and then examine direct response marketing in depth. We will walk through each stage of the advertising funnel and explain key analytics to focus on to ensure an optimal return on investment.
There is no single roadmap to success for marketing online. However, with this primer, we hope to empower lawyers with a basic set of analytical tools that can be used to better manage marketing vendors, in-house marketers, and the ever changing digital landscape.
II. Branding Versus Direct Response
Before advertising online, it’s important to understand whether the goal is to generate direct responses immediately (i.e. a stream of inbound clients) or to build a brand. Both are important, and both can lead to a lot of new clients. However, these are different tactics, with very different time frames.
Branding at its simplest is anything that makes your business entity beloved, familiar, and at the forefront of a potential client’s consciousness. Branding shows ads to a target audience wherever they are in the sales journey, often before that person needs a lawyer. The hope is that when they do need a lawyer, the brand is already in their consciousness. Brands take a long time and a lot of money to develop, but eventually a brand can be worth millions and lead to a steady stream of new clients. A great thought experiment (or party trick) is to ask a room full of people to close their eyes, say the phrase “red soda can,” and then raise their hands if they imagined a can of Coca-Cola. Most people will raise their hand. That’s the power of a brand.
In contrast, direct response ads aim at closing a transaction as quickly as possible and are shown to an audience that has already shown intent to act (i.e., hire a lawyer). This is done by offering ads in response to particular search queries and/or browsing history. The goal is to create a positive return on investment (ROI; also referred to as “return on advertising spend” or ROAS) as soon as possible. Direct response marketing is very effective for goods or services that satisfy a specific need that cannot be postponed. As will be discussed below, this is what happens when a potential client types their search query into a browser indicating that they’re looking for a lawyer. The potential client is shown an ad responding to their intent, which the law firm hopes will initiate a “direct response.”
In the world of online marketing, search engine optimization (SEO) and display ads tend to be more effective for brand building while search ads are a more effective tool for direct response.
III. The Advertising Funnel Explained
Advertisers often use a funnel to describe the customer journey. The top of the funnel is where a prospective client first learns about your law firm. The bottom of the funnel is where your firm gets paid and your client’s matter is resolved. A good advertising funnel will ensure the client’s journey from the top of the funnel to the bottom is seamless, which will prevent potential clients from seeking legal representation elsewhere.
The specifics of the advertising funnel will vary by advertising channel, but the concept is transferable. The most common direct response advertising channels for lawyers online are pay-per-click advertising (PPC), local service ads, and online directories. In this article we’ll focus on PPC, given it is the largest of the bunch.
At the very top of the PPC advertising funnel are impressions. Impressions are the number of times an advertisement is displayed. Said another way, impressions measure each time an advertisement appears in search results. A law firm is not charged by a search engine for impressions. They are only charged for clicks on the impression (aka the advertisement). The click is the second stage in the funnel. The third conversion stage occurs when someone who clicks on the advertisement actually inquires with the law firm. This is commonly referred to as a lead.
Too many vendors frame their performance as the leads they generate without differentiating between relevant and irrelevant leads. A law firm with a properly working marketing funnel will not fall for this, as the fourth conversion stage will make readily apparent what percent of leads are relevant to the firm’s practice. The fifth conversion stage is what every lawyer wants to know: how many signed cases the funnel yields. However, we’re still not at the bottom of the funnel. The last conversion stage of the funnel must account for the number of signed cases that actually monetize.
The time it takes for a click on a legal advertisement to monetize into a resolved case is very long. This is what makes legal advertising so difficult. In the case of a personal injury attorney, the full conversion funnel can take years to go from an impression to a monetized case (e.g., see Figure 1). In contrast, clothing retailers, home service providers, or car dealers are able to convert online traffic to revenue within weeks or months at the longest.
This fact highlights the importance of being very methodical about the data a law firm aggregates and the metrics used to track performance. It is the only way to connect a click that occurs today with the revenue it generates several years from now. With this in mind, we’ll now turn our attention to the key performance indicators a law firm should focus on when optimizing an advertising funnel.
IV. Key Performance Indicators
Understanding each phase of the conversion funnel and the applicable metrics is essential for both improving performance and diagnosing problems. This is not a comprehensive list, but an overview of what we deem to be the most important metrics. A law firm that is in control of their advertising performance will have these metrics at their fingertips.
Commonly referred to as “CPC” or “Cost Per Click,” this is the dollar amount a search engine charges an advertiser each time someone clicks on an advertisement. Both lawyers and vendors generally overstate the importance of this metric. While CPC will indicate how precisely tailored a keyword set is, how competitive a search query is, and/or the attractiveness of an advertisement, it reveals very little about the effectiveness of a campaign. Contrary to popular belief, CPC is not the end of the story, it’s the very beginning and cannot be viewed without an understanding of the entire conversion funnel. For example, all else being equal, a firm would be indifferent to a keyword that costs $100 per click and results in a case every 10 clicks for an acquisition cost of $1,000, and a keyword that costs $50 per click and results in a case every 20 clicks (also an acquisition cost of $1,000). You need a working conversion funnel to understand CPC.
Cost per lead is the total cost paid for each person that contacts a law firm. For example, a $10,000 advertising spend that generates 100 calls yields a cost per lead of $100. Like CPC, the importance of this metric is often overstated. Cost per lead is not indicative of ad performance in itself because it doesn’t reveal anything about the quality of the lead. This is not to say this metric is unimportant. Once benchmarked, average cost per lead can be used to spot issues like how often advertisements are running, whether a website is rendering correctly, or whether the phone lines are not working. For example, let’s say for the last 12 months, the average cost per lead was $100. This month, the average cost per lead jumps to $800. This triggers an investigation: upon navigating to the domain of the firm’s website, it’s discovered that it’s not rendering correctly. People can’t call if they can’t find a phone number from the website, hence the increase in cost per lead. The firm fixes the issue and the cost per lead normalizes.
Let’s assume 30 of the previously mentioned 100 leads are relevant. This would put the cost per relevant lead at $333. The key here is to define relevance in terms of what matters to that particular law firm and then use it to consistently classify every lead. For example, a personal injury firm may define relevant as “anything involving a physical injury.” Defining relevance this way creates a benchmark for assessing the quality of the leads generated by the advertising campaign. When advertising online it’s important to recognize that those searching for a lawyer likely don’t know lawyers. People that don’t know lawyers often don’t know there is a difference between lawyers (e.g., bankruptcy, criminal, personal injury, immigration etc.). This will lead to a high percentage of irrelevant leads. Irrelevant leads are not necessarily bad. It’s a firm’s failure to understand the acceptable ratio of irrelevant leads to relevant leads that’s harmful.
The Cost Per Acquired Case - or the Cost Per Signed Client - is the holy grail of marketing metrics for law firms. Carrying forward our example, if 8 of the 30 relevant inquiries become clients, the advertising CPA will be $1,250/case. The definition of good v. bad CPA will depend entirely on each law firm’s business model. For example, a firm handling mesothelioma cases may be willing to pay $60,000/signed case, while a criminal firm handling DUIs can’t afford more than $1,000/case. This data is essential for assessing the ROI of advertising, as well as the finances of a law firm. It is difficult for vendors to accurately provide this information. The Rules of Professional Conduct limit a lawyer’s ability to share privileged information, which in turn deprives vendors of having meaningful bottom of the funnel data. This highlights the importance of having a system that knows what cases are attributable to each lead source.
To properly assess the cost per acquired case (and cost per relevant lead), law firms must be able to integrate their lead management and/or case management system with each lead source. The easiest way to do this for a direct response campaign is with designated landing pages and tracking phone numbers. A dedicated landing page is a website dedicated to a specific campaign (different from a firm’s main website). A tracking phone number is a unique number used for one specific purpose. Companies like Twillio and CallRail have made the purchase and tracking of these numbers relatively easy. By using dedicated landing pages and phone numbers people can’t find anywhere else, leads from a direct response campaign are easily attributable to that specific campaign. A good lead generator will be able to push their traffic into a firm’s lead management system. The system will programmatically tag the lead by source. This will allow the firm to assess how many leads came from a particular advertising source (or channel). Accurately tracking CPA is the responsibility of a law firm, and it is the only way to hold marketers accountable.
Not every signed case will monetize. This can be for an array of reasons: the client disappears, there’s no insurance, the client doesn’t pay their bill etc. Regardless of the reason, it is vital to understand what percent of the traffic generated monetizes. For example, if two of the eight cases signed in the above example don’t monetize, the drop rate will be 25%. This translates to a cost per monetized case of $1,667/case. Understanding cost per monetized case will allow a law firm to understand how much money they are making per case handled.
A law firm must know their average case value. Without it, it’s impossible to set CPA parameters. For example, if a solo practitioner is acquiring DUI cases for $2,000/case and earning $2,500 Per Resolved Case, their practice is probably underwater after factoring in all of their fixed expenses. In contrast, if a solo practitioner is acquiring personal injury cases for $2,000/case but earning $12,000 Per Resolved Case, they’re making a significant amount of money.
To calculate ROI, divide the case revenue generated by the advertising dollars invested. Let’s assume the 6 cases that monetize generate $72,000 of revenue. Then divide $72,000 by the $10,000 invested. This yields a 7.2x a Return on Advertising Investment. To determine what an acceptable ROI is for a law firm, we suggest utilizing current (or desired) profit margin and working backwards. As a general rule of thumb, an ROI of 5.0x is good. For example, if 5.0x is the goal, a firm averaging $12,000 Per Resolved Case would have a max acceptable Cost Per Monetized Case of $2,400.
Building and maintaining the conversion funnel is hard. However, the reward for putting in the effort is significant. Having the information discussed in this article at your fingertips will allow for good decision making, better vendor management, and an increased return on your advertising investment.