Leap of faith
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22 January 2014
One of the most contentious questions facing brand owners as they pour increasing millions into advertising and marketing is how to evaluate the return on each pound spent. As Lord Leverhulme once famously commented: "I know that half my advertising budget is wasted, I just don't know which half."
When selling baked beans or packets of tea, it is hard to discover exactly why a customer decides to buy the product. Is it the design of the packaging, or is it a product they have used since childhood? Was it the multimillion-pound advertising campaign that persuaded them, or did it just happen to be the closest product to hand on the supermarket shelf? The big brand owners employ an army of researchers and consumer psychologists and an array of complex statistical tools in an attempt to find answers. Within big corporations, marketers have to battle for their budgets with often sceptical finance chiefs, and marketing effectiveness is usually the main point of contention.
But when the product you are selling is a professional service, it should be much simpler to work out the value of the marketing spend. It is, after all, easier to ask clients about why they chose your firm over another. Unlike the mass-market brands, law firms have the names and phone numbers of their clients. But there is still a large element of the marketing budget that cannot be conveniently assessed or offset against new business coming through the door.
As relative newcomers to the world of marketing and advertising, marketers in law firms are under pressure to demonstrate how the money they spend on public relations, brand building and business development helps the practices' business. The past five years have seen law firms following in the footsteps of other professional services providers and dabbling in the dark arts of marketing. Many of these marketers have come from other professional service companies, such as accountancy firms or consultants, and are only too aware of the difficulties attendant on proving that money spent on marketing can be neatly assigned a value.
Much may depend on the attitudes of the senior and managing partners. If they are knowledgeable about marketing, they may be aware of the problems that proving marketing effectiveness entails. Those who have little understanding may allow the department considerable freedom of manoeuvre in managing marketing budgets, but they will still want to see results.
Some law firms spend up to 3 per cent of their turnover on marketing and business development across a variety of activities, whether that be entertaining potential and existing clients, sending out brochures or newsletters, or running a branding campaign in the press. Others come in under this, with between 1.5 and 2 per cent of revenue spent on marketing activity and a further 0.5 per cent on entertaining. Either way, it amounts to millions of pounds for many firms.
June Smallwood-Rose, marketing director at Wragge & Co, says: "It's quite difficult to measure the effectiveness of marketing budgets. I split it into broadcast or communications and business development. On advertising, there are less tangible returns, but it's easier on business development."
She says that while the costs are very tangible, it is difficult to track the benefits of communications and PR. But with business development activities such as organising events, conferences and seminars, she says that it is important to carry out evaluation exercises, such as looking at cost and seeing how many existing or new clients attended.
Assessing clients' feedback, finding out what they thought of the event and the venue, discovering whether they would make a referral - or were referred themselves - are all useful data when trying to assess value for money in marketing spending. At least this activity might indicate whether it is worth running a similar conference or seminar again.
Smallwood-Rose adds that finding out about things such as name recognition, whether people know how to spell the firm's name and asking new business callers how they heard about the firm are all crucial elements in evaluating marketing.
"I think a lot of law firms are behind in marketing; they do not understand profitability very well," says Smallwood-Rose. "I work out budgets between communications and business development and between the firm's other spend, looking particularly at that spending against an increase in turnover. For each practice area, I do their marketing plan and work with them to set the budget. Based on their business plan, we sit down and look to see how much has been achieved and how much is applicable to marketing."
But there is a circular problem with assessing the value of marketing: the cost of undertaking such an exercise can be expensive in itself, and it may be that the money would have been better spent on marketing in the first place. Many believe it is wise to stick to simple methods when working out marketing effectiveness, even if these do not deliver a full account of how well the marketing activity worked.
Mat Baldwin, public relations manager at Hammond Suddards Edge, says: "Evaluation has always been a huge debate - how can you do it cost-effectively? There are ways, but none are conclusive. The way we evaluate PR is through competitor analysis. You look at the key messages. If you're doing a campaign or a sponsorship, you look at what key messages are coming through the media and you try and see whether they meet the original aim. These methods all seem to be ad hoc. We sometimes use the 'clump' factor - looking to see if we have a big chunk of press cuttings. That's the most basic way."
Baldwin says it is difficult to evaluate the value of newsletters and brochures. By asking clients what they want to see, you may find that they do not gain much benefit from newsletters at all. He adds that it can also be difficult for a company to break away from activity with which is has been engaged for some time. "In past experience, if you work for a firm that's always done newsletters, it's difficult to stop doing it," he says. Unlike consumer marketing, where branding a product "new and improved" is still considered an important marketing technique, the clients of law firms are more likely to value continuity. A firm that changes its approach regularly may be considered to have a questionable strategy.
Even so, it pays to keep all marketing activity under constant review, rather than be led into a blind alley by inertia. But such awareness, in a sense, is what marketing is all about - creating relationships with clients and potential customers and being alert to their needs. Baldwin says: "Five years ago, legal marketing was not on the cutting edge. Law firms now are on the cutting edge in terms of relationship marketing. In reality, all the professional firms have been doing that for years. They're getting cleverer at looking at the basics of relationship marketing and taking it on a step further."
He agrees that business development spending is more quantifiable than PR and marketing. "From the money you spend on research and analysis, you can see a marked increase in return on clients coming through the door," he says. "If you've got the marketing right, you should see client retention and satisfaction improve, but communications are difficult to quantify."
In consumer marketing, there is an adage that it is cheaper to hold on to existing clients and win new business from them than it is to win completely new clients. In reality, clients will respond to the treatment they receive. If they are happy with it, they will come back for more; but if not, there is little that marketing and promotions can do to get them to repeat the experience.
But in the case of mergers and acquisitions, promotional activity may be necessary to highlight a new set of skills a law firm has acquired. This is particularly so on the international side, where cross-border partnerships and business deals are expanding the reach of many law firms' businesses and their ability to offer a wider range of services in different markets.
With mergers between law firms, one of the most important marketing tasks is internal - it is about keeping staff informed of the developments and making sure they are convinced about the wisdom of the deal. Once that is achieved, they are more likely to be able to sell the idea of the merger to their clients. But such spending is even harder to evaluate than external marketing, as it involves a complex set of feelings and attitudes towards the company.
Simon Slater, director of strategy at Osborne Clarke, says: "If you invest more time in evaluation, you could probably see a result from real concerted effort, but you can't be definitive about the cause and effect. It's very difficult to be scientific; that is why we only attempt it on lead tracking. From time to time, we see that we've secured a given number of column inches with an advertising value of X. But it's pretty meaningless - the PR effort has to be ongoing. It's not just a campaign to switch on and off."
In the end, law firms will have to accept - just as major-brand manufacturers do - the difficulties involved in scientifically measuring the effectiveness of marketing. It may be possible, but the costs and complexities of doing so are generally prohibitive, and marketing effectiveness should be taken on faith..