Believe it or not many people can’t answer this question.
The definition we like best is:
- “Marketing is a term that describes the process used to identify, create and maintain profitable relationships with clients.”
Each word in this definition is carefully chosen.
“Marketing” is a term. It’s just a label. Why is that interesting? Because many people get hung up on verbiage. Have you ever known an attorney to get hung up on a single word in a deposition? The term itself is unimportant. It’s just a word. I don’t care what you call the process of identifying, creating and maintaining profitable relationships.
More important is the fact that marketing is a “process”. It is not a program. It is not a plan. It is not a strategy or a tactic. Marketing is a process. This is critical because a process has no end. It is on-going. Marketing must be continuous.
If marketing ends, your business ends.
In this process we “identify, create and maintain relationships with clients”.
Many people who proclaim to be great marketers only do one of those things.
You need to do all three…all the time.
You must first identify who your ideal clients will be. Next you need to begin a relationship with them and finally you need to maintain that relationship for as long as it is profitably possible.
How many times do we do some work for a client and then forget that they ever existed after that case has concluded?
Now I understand that your business is different. Everyone says that. For example:
Once someone gets divorced, they are probably not going to get divorced again for a long time….or once someone is injured and their case has settled, you are certainly not going to be able to successfully represent them again….or once you handle an estate matter for someone, they are not going to die again so why would you keep in contact with the family….
Does this sound stupid yet?
Well, I hear this kind of thing all the time. Being a professional, I respond with:
“I understand. That is different. But what about referrals?”
You clients, their families or their friends can refer people to you for work in your area of specialization. Even better, they can refer work to you – outside of your area of specialization – that you can refer to other attorneys and you can collect a referral fee for passing the work along.
Everyone benefits from long-term relationships with clients.
That is what marketing is all about…identifying, creating and maintaining profitable long-term relationships with clients.
Image marketing (also known as “institutional marketing”) is what most people think of when they hear the term “Marketing”.
Simply put, image marketing is creating a presence for your brand and leveraging that presence to create customer relationships.
This works if you spend a lot of time money and effort on it. The challenge is that it is almost impossible to measure the effectiveness of this type of marketing and most firms don’t have the millions of dollars necessary to launch large image marketing campaigns.
Most of what you see, hear and read in publications, on radio and television, inside almost every envelope, and on most websites is image marketing.
It doesn’t inform the audience about the benefits, advantages and results they can expect from your service or firm.
It doesn’t educate. It doesn’t grab attention. It doesn’t create urgency. It doesn’t make a compelling case. It doesn’t capture a targeted client’s interest. It doesn’t ethically persuade and provide reasons-why a prospect would be smart to work with you. It fails to motivate the audience to respond immediately.
The worst part is that this form of advertising does not demonstrate why your firm will provide better results than other firms.
With image marketing, the client is left trying to figure out why you are better than everyone else and how you are different from everyone else.
In summary, image marketing:
- Is expensive
- Is almost impossible to measure
- Takes time to work
- Doesn’t educate
- Doesn’t inform
- Doesn’t differentiate
- Doesn’t create urgency
The best rule of thumb I ever learned about marketing was: “If you can’t measure the results, don’t do it.”
Ninety percent of the time, you will not be able to measure the results of an image marketing campaign.
Direct response marketing is defined as sending a carefully crafted offer directly to your prospective client. You can send the message via traditional mail, email, radio, television or even on the telephone.
The marketing message in direct response campaign is designed to solicit a specific action from the target audience. The delivery of the response is directly between the prospective client and the marketer, that is, the client responds to the marketer directly.
There are five main components of a good direct response marketing message. They are:
1). An attention getting device (this could be as simple as a well crafted headline).
2). Sufficient information for the consumer to make a decision whether to act
2). An explicit offer with a “call to action”
3). A deadline or limiting factor
4). A response vehicle (typically multiple options are given such as a toll free number, web page, return post card or and email address).
Direct response marketing is easy to measure because it is highly targeted.
Image marketing is about the slow crafting of an image in the marketplace; it’s not about getting immediate results and sales.
Direct response marketing is all about producing leads, driving client traffic to your firm, and getting immediate revenue in the door.
Image marketing is about feel, brand development and the impression your firm creates in the mind of the client.
Direct response marketing says “Call Now!”
Image marketing says: “I’m cool. Love me. Remember me.”
Direct response marketing is measurable. You can look at the specific costs of any given direct response campaign, look at the number of clients that came from it, do some simple math and figure out how effective that campaign was.
Image marketing is not measurable beyond tracking the total amount of money spent on it.
Large companies with big marketing budgets can potentially benefit from the focused development of a positive image over time. Small firms with limited dollars often prefer to invest in a marketing campaign that will produce measurable results rapidly.
The image of your firm is important but building a client base is more important. Your image will develop as a byproduct of your outstanding work on your clients’ behalf.
Grabbing the attention of your target audience is critical component in marketing.
We use the term “attention getting device” to describe something that catches the eye of your audience and compels them to pay attention to your message.
This can be a headline in an ad or in a direct mail letter or it can be a scantily clad woman holding a sign promoting a car wash.
Often the physical package can serve as an “attention getting device”. For example: A letter delivered by a messenger in a gorilla suit will definitely be read. More common is a letter that is delivered by FedEx as opposed to arriving via the regular mail.
The bottom line is that people are busy and they are bombarded by hundreds of marketing messages all day long. You need to make sure your message stands out and the first part of that process is to attract their attention.
A call to action is specifically showing your clients “the next step” they need to take if they are interested in doing business with you.
This is important because giving clients (or potential clients) specific instructions is critical to moving them up the marketing ladder. You must tell them what to do, when to do it and why it is important for them to do it.
Your call to action must fulfill one or both of these promises: “Take this action and get these benefits” or “Take this action and avoid this pain”.
If you don’t give your prospective client specific instructions, they will likely not do anything.
Client lifetime value (CLV) is the profitability of your law firm’s relationship with the client throughout the lifetime of their work with the firm.
Measuring client lifetime value gives you a number that represents the present value of the future profit dollars attributed to the average client relationship.
We use client lifetime value as a marketing metric to determine how much to invest in acquiring and maintain client relationships.
As a ‘back of the envelope” calculation for one client:
Estimate the profit for the engagements you expect to have with the client over the period you expect to do business with him or her. If this is an unknown long term, use five years.
For example: If your average profit from a client on retainer was $10,000 per year and you expected to do business with that client for five years the CLV for that client would be $50,000.
Although this rough calculation is better than nothing, it doesn’t take into account a couple of significant variables – the discounted value of money in the future and potential risk that the client will defect.
Method of calculating CLV for the firm:
We like to use a discounted cash flow method of calculating client lifetime value because money collected today is worth more than money collected in the future. We also like to use an infinite time horizon because the use of a retention rate will account for the average customer lifespan.
In order to accurately calculate the CLV we need to know the average retention rate of clients at the firm. Simply put, retention rate is the percentage of clients who stay with the firm year over year. We recommend using a three year average for client retention rate.
We also need a discount rate to apply to the future cash flow. The discount rate is the value of the money in the future. This is typically determined by using the rate of return you would have received from that money if it was invested in a low risk investment vehicle - rather than sitting in your client’s pocket.
The calculation then looks like this:
- CLV = P x [r /(1+d– r)]
p = profit
r= retention rate
d= discount rate
So if we had an average client profit of $10,000, retained 80% of our clients and used a discount rate of 5%, the calculation would look like this:
- CLV = $10,000 x [.80 / (1+.05-.80)]
So for this firm the lifetime value of a client is $32,000.
This may seem like a complicated calculation but once you become familiar with the thinking behind it, the calculation becomes second nature. We are looking to determine how much money our typical (average) client will be worth to the firm. It is the long term thinking that is as important as the actual calculation itself.
Client churn which is also known as client turnover is used to describe the rate of permanent loss or turnover of clients.
Keeping track of client churn is important because acquiring new clients is almost always more expensive than initiating new work among an existing client. Every client who defects cost the company a significant amount of future income.
Client acquisition cost (CAC) is the expense associated with convincing prospects to become clients. Acquisition costs reveal the efforts and resources involved in sourcing and recruiting potential client into the firm. This figure should also include research, advertising and entertainment expenses that are not related to or targeted at existing clients.
Understanding CAC helps to set a budget for soliciting new business. It can also serve to refocus attention on client retention, service and support.
A Unique Selling Proposition (USP) is the reason that you or your firm are different from and better than your competition. This is the compelling reason why a client should choose you over everyone else.
A USP could also be a way of describing the chief benefit of working with your firm. Unique Selling Propositions can be (and have been) built around any number of things. Your USP could describe a common theme that runs through your business. This includes price, specialty and expertise, positioning and service delivery style – just to name a few.
The marketing ladder is a model that describes how relationships are initiated, developed and nurtured throughout the client lifecycle.
The rungs on the marketing ladder are:
Suspects are people (or companies) you believe could potentially be a client for your services.
Prospects are individuals (or companies) who have expressed some interest in your firm, your services or your specialty.
Clients are individuals (or companies) who have done business with your firm in the past year.
Evangelists are clients who are so loyal and dedicated to your firm that they work with you on multiple engagements. Evangelists also frequently refer new clients to your firm.
Individuals (or companies) are said to “climb the ladder” when they move from one level to the next. When a suspect shows interest in your firm, he becomes a prospect and when he pays for your services he becomes a client. This is referred to as “climbing the ladder”.