When starting a new project at any business, the question of “how much is this going to cost?” is typically the first thing that needs to be addressed before you can move on to the actual game plan. This is a great place to start, as deciding your budget should be the first thing you consider before you make any major decisions regarding your marketing strategy. At Digital Logic, we specialize in law firm marketing and are here to help guide you through the legal marketing landscape as well as gain a better understanding of how you can effectively market your firm. In this post, we’ll weigh in on your question of “How much should a law firm spend on marketing?” and more.
How Much Should You Spend on Legal Marketing?
If you’re asking yourself this question, you’re certainly not alone. In fact, most lawyers that we speak with actually look to us to obtain a better understanding of how much they should be spending on marketing their firm. We’ve seen both ends of the legal budget spectrum: those who have such a large budget that they throw money at their marketing team blindly and those who believe that pure word of mouth is going to carry their firm into retirement. Neither of these are routes we would recommend.
The truth is, the amount of money you spend in marketing your firm online will vary significantly, depending on where you’re located geographically, the practice areas in which you work, and the types of cases you generally take.
Cost Per Lead: Lifetime Value
In order to determine your marketing budget, you’ll first need to determine what your average client lifetime value is. What we mean by this is whether the client will bring in a one-time lump sum or whether they will continue to obtain your legal services. This number will vary greatly depending on what type of law you practice. For example, a family law attorney may take on a divorce case now that eventually leads to a child custody case later on. This also takes into account any future referrals from the client.
Once you have a general idea of what your average client’s lifetime value is, you’ll need to determine how much you’re willing to pay in order to acquire a new client. In the marketing world, this is called cost per acquisition.
(If you’re starting a firm from the ground up, you probably won’t know your current cost per acquisition right away. This number will change as your firm grows, but in order to establish and grow brand recognition, you’ll need to pay a little more to get the ball rolling.)
Below, we’ll provide some examples of what an average cost per acquisition might look like:
Say your case is worth $2,500, and you spend $1,000 in acquiring that lead. That means you’ll still make a profit of $1,500. That’s the brass tacks of the matter. Remember, however, that you’re valuing your client on his or her lifetime value, not their one-off number. So, with your $1,000 marketing budget, you may actually be getting that $2,500 case in addition to every other case that comes from them or anyone they may refer to you.
For criminal defense attorneys, the average fee is typically between $3,000 and $5,000. In order to break even on a $3,000 monthly marketing budget, the lawyer would need to convert one new client per month, and though they’d only be breaking even in this case, they will still gain the lifetime value associated with that client. So, although one would hope that their client doesn’t get into legal trouble again, statistically speaking, they’ve got a 20-65% chance that they’d return for future services.
Cost Per Lead: One Time Percentage
If you’re an attorney who has already been established as a top contender in your field, you’ll likely already have an idea of what your target cost per lead should be. Because the legal market is so competitive, it’s important to remember that the more value the client brings in, the more you’re going to need to pay in marketing to outrank your competitors who are also targeting that high-value client.
Here’s an example of a satisfactory one-time percentage case:
Say you’re a personal injury lawyer who collects 33% on your case and you represent a client whose payout could be anywhere from $30,000 to $200,000 or more. As a result, the client’s value for that case specifically would fall anywhere between $9,000 and $60,000+.
In summary, by acquiring a one-time, high-value lead, you may end up covering your advertising costs for 6 months or even several years.
What Does the Typical Law Firm Spend On Marketing?
Most business advisors recommend spending 2-18% of your gross revenue on marketing. For the legal sector, however, this number falls closer to 7-10%, though this may vary depending on your location and practice type.
Estimating the Potential ROI
For smaller firms starting out, the costs associated with marketing may be scary at first glance. But think of it this way: you paid that college tuition because you knew it was an investment. It was simply something you had to do in order to get where you wanted to be.
Marketing for the legal industry today is no different. You must invest in a successful marketing strategy in order to get where you want to be.
Law firms choose to dedicate generous amounts of their revenue to marketing every single day. Why? Because it works. If it didn’t, no one would invest in it. After all, you’re a group of very educated professionals specializing in law—not exactly the type of demographic to be easily conned.
Most studies indicate that business-to-consumer markets allocate the highest percentage of their revenue, about 18%, to marketing. Practice areas such as personal injury, divorce, family law, and criminal defense are going to fall directly into that business-to-consumer market. As a result, firms that need to acquire new cases from sources other than referrals will often need to spend somewhere within the range of 15-20% of gross revenue to achieve desirable results.
Transparent Marketing for Law Firms
However, just because online marketing is often a necessary measure and brings a wealth of possibilities doesn’t mean you need to sign off your checks blindly. At Digital Logic, when we run online marketing campaigns for attorneys, we build out custom spreadsheets so that our clients don’t need to guess what their overall marketing costs are or what their current cost per acquisition will be. We use tools like Google Analytics and Call Tracking to measure each client’s cost per case acquisition and use this to optimize future campaigns around the best cost per acquisition.
At the end of the day, our goal is to better optimize your campaigns over a period of time. The longer Digital Logic runs your campaigns, the better your cost per acquisition should be. Now, we can’t promise this will happen after only a month, but we can assure you that our team is top-notch and highly experienced in this field. Simply put: there’s no shady business with us. You’ll know your exact numbers every single month, and if there’s another agency who can get you better results and show you those results every month, by all means, go with them. (We only say this because we’re confident you won’t.)
Digital Logic Return on Ad Spend: Examples
Here are a couple of ROAS (return on ad spend) examples from our monthly numbers through Google Search campaigns:
These are actually some of the low-end results for most of our clients. As you can see, it doesn’t always take a massive number of new clients to break even or make a decent spread through online marketing.
Marketing Budgets for New vs Established Law Firms
If you decide to go out on your own and establish a brand around your firm, you’ll want to consider exactly where you are in terms of your practice. Does the general population in your area at least recognize your name as being an attorney? Does your firm have solid brand recognition?
If your practice doesn’t have a brand that the market recognizes, you should consider investing between 15-20% of your gross revenue into marketing your firm. On the other hand, more established practices may be able to get away with spending 5-10% of gross revenue solely to maintain the brand.
Consider Your Firm’s Growth
If you’re just starting out in a fresh market, it doesn’t matter whether you’re just out of law school or previously had a monopoly in another town across the country. In the eyes of your target market, you’re simply not on their radar.
So, in order for you to gain brand awareness within your designated market, you should dedicate at least 8-15% of your gross revenue to help establish yourself. The same holds true for firms that are simply looking to maintain their brand. If you want to actually grow your practice, you may want to add an additional 8-15% to your current budget.
How Should Law Firms Budget for Online Marketing?
When asking the question of how much should a law firm spend on marketing, you must consider the many variables. Every individual law firm will have its own marketing strategy and set of objectives. However, general budgeting principles for online marketing do exist. In some instances, marketing can take time to pay off. As a result, several stages of what we call the “marketing funnel” require adequate investment, should your budget permit it. This marketing funnel can essentially be broken down into 3 categories: conversions, consideration, and awareness.
Lead generation efforts should take up 40-70% of your overall advertising budget. While it’s true that many campaigns see immediate results, residual growth will also be taking place. This occurs because a portion of your potential clients are ready to buy, or in your case, require your legal assistance immediately. This group of people will fall into the “conversions” stage of the marketing funnel.
The objective here is to drive more phone calls and increase your contact form submissions. In order to reach this audience, we recommend using SEO services and SEM ads focused on searchers that are demonstrating a high level of purchase intent. When you think of this in terms of sales, you should spend around half to even up to two-thirds of your budget on the conversion portion due to its reliability and ability to bring in a steady flow of new clients and income.
Before reaching the conversion stage of the marketing funnel, your potential clients are in what’s called the consideration stage. This is the segment of the funnel where people know they’ll need a lawyer’s services in the near future, but aren’t ready to commit just yet. They are actively scoping out the market and evaluating their options.
The overall goal for marketing to those in the consideration phase is to create a closer touchpoint, encouraging your audience to engage with your brand. We usually accomplish this by directing those people to your website by the use of targeted law firm pay-per-click ads or relevant blog content.
Although these searchers aren’t quite ready to request your services yet, we recommend devoting around 20-50% of your marketing budget here. Grabbing the attention of individuals in this segment of the funnel is a little easier, simply because most marketing agencies don’t really know how to market to this section quite like we do here at Digital Logic.
The awareness phase of the marketing funnel is the top level, or the furthest away from becoming an actual client, and for some reason, the first audience that many lawyers choose to target. We actually advise allocating around 10% of your marketing budget to targeting those who are in the awareness stage. You can do this by investing in larger spread campaigns with lower direct impact. Posting to Facebook or YouTube, using geofencing ads, or employing various other forms of brand recognition-based campaigns are a few examples of ways to increase your firm’s general awareness.
How the Budget Works
It’s simple: as you move down the buying funnel towards more conversions (more phone calls and form submissions), you’ll want to spend more of your budget on techniques that are proven to work. As you move up the funnel, you’ll spend less of your total budget.
Choose Digital Logic for Your Legal Marketing Services
By now you are well aware that allocating an appropriate amount of your budget towards digital marketing services will help ensure you stay ahead, or at the very least inline, with the marketing curve. Your next move is to hire a marketing team that knows how to implement the best digital strategies to make your investment worthwhile. At Digital Logic, we provide performance-driven online marketing for law firms across the country. We know what it takes to reach the eyes of the clients you want and to nudge them down the marketing funnel, increasing your leads and growing your firm as a whole. To learn more about our extensive law firm marketing services, or for answers to more questions like “How much should a law firm spend on marketing?” call 318-678-5020 or shoot us a message on our website today.