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Legal Marketing Metrics: Part 1 - Key Performance Indicators

October 18, 2018 at 10:37 AM

CPC, CPM, CTR… the advertising business has no shortage of three-letter acronyms. Heck, we even have a three-letter acronym for three-letter acronyms: TLAs.

We set out to make sense of the jargon in a new three-part blog series. Over the next couple weeks, we’ll break down the eight metrics every legal marketer should know and shed light on another four often-touted metrics that matter little more than your decision of what you want for lunch.

Here it goes, starting with our favorites: Quality Leads, Return On Ad Spend, Cost Per Lead, and the two Conversion Ratios.


Legal Marketing Metrics in Google AdWords
 
The Key Performance Indicators: Four legal marketing metrics tied to your bottom line

These four KPIs together form the north star of any legal advertising campaign. They’ll quantify the exact impact of your investment—in both the number of new clients and in predicted settlement value. And, they’ll help you work back from the goals and estimate how much you’ll need to spend on advertising to fill your pipeline and give each of your attorneys an ideal number of cases.

1. Quality Legal Leads

Leads are simultaneously the most obvious metric on our list and the most contested. Every law firm knows they need a healthy funnel of leads, but the definition of a lead can vary greatly from firm to firm or agency to agency.

In the purest sense, a lead is anyone that “raises their hand” by virtue of contacting your firm or leaving their information with a request for you to follow them.

Someone that calls your office, fills out a “Contact Us” form, or hands you their business card with a request to follow back up with them would be a lead.

Someone that clicks on your ad, visits your website, and leaves without contacting your firm or asking to be contacted is not considered a lead -- as you have no means of identifying who they are and reaching back out, other than pixel-based remarketing.

In other words, if someone gives you their email or a phone number, they’re likely a lead.

Easy peasy, right? Not necessarily.

There’s a big difference between low-quality leads and high-quality leads, and you don’t want to be caught optimizing your campaigns for the wrong type.

A low-quality lead is unlikely to become a client. Maybe they came looking for a family lawyer when you specialize in criminal law cases, or maybe the email they leave bounces or the phone number they used is now disconnected. Either way, you’re left with leads that are doing little more than taking up your firm’s time.

A high-quality lead has intent. They did their due diligence into your firm, and they’re ready to speak with an experienced attorney.

While in-house marketing teams with a stake in the game usually yield a high proportion of quality leads, agencies remain a bit of a gamble. Pressured to deliver results, some agencies may inflate the list of leads they bring in:

  • A caller hung up after three seconds when they realized they had the wrong number? Let’s count it as a lead.
  • A prospect was misled by an ad seemingly promoting pro-bono legal aid? I’ll take it.
  • The majority of traffic is coming from India when I only serve Kansas? It still counts.

Combine this with the rise of ad fraud, bots, competitors clicking you out of business, and phony lists for sale, filtering high-quality leads from the rest can be an uphill battle--which is why it’s important to reach a consensus with your marketing team or agency early on to decide what should and shouldn’t qualify as a lead.

We generally recommend going over:

  • When should a call be counted as a lead? Most call tracking software records the length of a conversation, allowing legal marketers to easily weed out wrong numbers by only counting calls that last at least 90 seconds.
  • When should a form submission be counted as a lead? Think about if you want to consider all forms on your firm’s website or only a select few.
  • How will leads be tracked and attributed to their original source? If you’re paying by the lead, you don’t want to pay for referrals and organic leads that would come regardless. Make sure you have a way to tie leads back to the marketing campaigns that brought them in.

And if they change the subject and talk about clicks and impressions, walk away and don’t look back.

2. Return On Ad Spend

The holy grail of any campaign, Return On Ad Spend (ROAS) shows you the revenue generated by each dollar invested in advertising. A ROAS of 300%, for example, tells you that you can expect $3 in revenue from every $1 spent on ads.

The formula for calculating ROAS is simple enough: Take the revenue attributed to your marketing campaigns and divide by the total amount you spent on those campaigns over the same time period.  

Return On Ad Spend (ROAS) is king of legal marketing metrics

Back into the individual variables is a different story. The denominator can be quickly pulled from Google Ads or aggregated across multiple ad accounts, but the numerator will take a few more steps and the right analytics infrastructure. (And if this is out of your wheelhouse, don’t worry. Our next three metrics are much easier to gauge and provide a decent substitute for ROAS.)

As for calculating the revenue for the numerator, there’s an easy way and a hard way. The easy way is to take an educated guess at the revenue or contingency fees generated from your firm’s average client. For easy math, let’s say $10,000. Next, you want to take a similar guess at how likely the average lead is to convert into a signed client and ultimately a winning lawsuit (a field referred to as Opportunity Probability in Salesforce and most major CRMs). Let’s put this at 5%, assuming your firm turns away a number of cases that aren’t a good fit and a few prospective clients decide not to pursue a case.

Multiply these two numbers, and you know what each lead is worth to you:

Average Lead Value Formula For a Law Firm

Average Lead Value Example

And to find your predicted revenue, you’d then multiply the average lead value by the number of leads your marketing campaign generated over a period of time (let’s say 100). This puts you at an expected 100 leads x $500 revenue per lead, or $50,000.

If you spent $10,000 over one month in ads to bring in these leads, you’re then looking at a 500% return on your advertising spend. Not too shabby.

ROAS Example Equation

For a more granular look at this metric, you can calculate separate probabilities and values for different types of cases or locations. If you know that your average slip-and-fall case nets $5,000 in fees with a 20% probability of becoming a winning lawsuit, while your average medical malpractice case brings in a whopping $100,000 with a 5% probability, you can compare the ROAS to make a more informed decision about where to allocate your marketing dollars.

Comparing ROAS of a slip-and-fall and medical malpractice lead

In this scenario, a malpractice lead brings in 60% more revenue than a slip-and-fall lead, so it makes sense to prioritize those leads in your marketing as long as the Cost Per Lead for a medical malpractice case is no more than 10x higher than the Cost Per Lead for a slip-and-fall. In this example, it costs 3x more to acquire a high-value malpractice lead, but it's money well spent in the end.

3. Cost Per Lead

While ROAS is great as a high-level performance indicator, it can be slow to adjust for ongoing optimizations and less meaningful when it comes to driving day-to-day marketing decisions. For this, you need Cost Per Lead.

Cost Per Lead (CPL) is a measurement of how much, on average, you spend to acquire a single lead. To get it, divide your marketing spend over a certain time period (let’s say $5,000 over one month) over the number of leads that campaign generated in the same window (say, 40).

Cost Per Lead Equation For A Lawyer

Plug in the numbers, and you’ll find that each lead costs you $125.

So what can you do with this knowledge?

For starters, you can measure incremental campaign performance. If you were averaging a CPL of $125, but that new ad group you rolled out brought this month’s CPL down to $100, you know it was worth it. Inversely, if you were happy with $125 and wanted to invest more in advertising to add fuel to the fire but ended up with a CPL of $150, you’d know that you’re experiencing diminishing returns and may be reaching market saturation.

It can also be useful for comparing results across campaigns and audiences: If you see a lower CPL on Google Ads than you do on Facebook Ads, it might be smart to shift budgets away from Facebook and toward Google.

If you’re evaluating agencies or in-house marketing hires, it’s a good idea to drill them on their knowledge of Cost Per Lead. Make sure both parties reach an agreement of how a lead is defined and have a plan for measuring and improving CPL.

4. Conversion Ratios

Next up is a two-part metric that can inform you of (a) whether or not you’re targeting the right audience, and (b) whether or not your messaging resonates with that audience.

The first conversion ratio is the Leads-To-Clicks Ratio, which tells you how many paid clicks it takes to acquire a single lead. If you pay for 50 clicks and get five leads, you’re looking at a 10% conversion.

Leads To Clicks Conversion Ratio

At Spatially, we like to see this ratio somewhere between 10-15%, but it can vary significantly by focus area and channel strategy. If you see something significantly lower, it’s a sign that something’s not working--maybe you’re targeting a low-intent audience, bringing in the wrong case types, or your messaging isn’t compelling or actionable enough to get the visitor to fill out a form or pick up the phone.

The second conversion ratio is the Clients-To-Leads Ratio, which tells you how many leads it takes to sign a client. If you capture five leads and sign one client, you’d have a 20% conversion.

Clients To Leads Conversion Ratio

This metric is harder to benchmark, and some firms are very selective about the clients they take and target an intentionally low conversion rate, but it can generally tell you how good your firm is at converting a lead. This is especially important to know if you funnel your leads through a call center or another sales force, as it can help you assess their performance.

Combining these two metrics will let you work back from a goal. If your goal is to sign 200 clients a year and you have a 10% leads-to-clicks ratio and a 25% sign-ups-to-leads ratio, you can expect to budget for 8,000 clicks to build a large enough funnel.


Don’t let the wrong metrics lead you astray

With all the legal marketing metrics out there, it’s easy to get caught up on clicks, impressions, and click-through rate and lose sight of what really drives your pipeline growth. We hope this post helps you stay on track, and we hope you’ll join us next week for Part 2, where we’ll go over the in-the-weeds metrics that our campaign managers look at every day for our full-service clients.

Thanks for tuning in, and see you next week!

Revision: Part 2 is now available. Read on >> 

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