Many businesses are in the dark when budgeting for online content and marketing. Picking a dollar amount based on available funds, taking a best guess or using past budget allocations without renewed analysis does not work.
Calculate the potential return on investment (ROI) before you devote employee time or hire a vendor to produce blog posts, videos or webinars. To get started, you need to determine the lifetime value of your customers.
How to Calculate Customer Lifetime Value
Customer Lifetime Value (CLV)represents the estimated amount of revenue a typical customer brings your business over a set period time. Professional practices like law firms and doctor’s offices can also determine the average revenue per client for a typical year, even though billings may vary greatly between clients or insurance company payments.
The 2013 Survey of Law Firm Economics provides some insight on what the ROI of content marketing should be for licensed professionals in the legal industry.
- Average gross revenue per lawyer (1 to 10 in firm) = $300,000
- Average gross revenue per lawyer (10 to 20 in firm) = $400,000
- Firms spent 1.9% of gross receipts on promotional expenses (marketing)
For example, let’s say a personal injury law firm in Georgia has ten lawyers, working on 30 to 40 cases each per year. The firm earns around $4 million per year with 90% of cases yielding settlements at an average of $10,000 per settlement.
The CLV for each new client acquired through promotional efforts can therefore be set at $10,000, since the firm only takes on cases that it believes can be settled or won at trial.
How Much Should You Spend on Content to Get New Clients?
The expense of getting new clients is called the “Customer Acquisition Cost” (CAC), and businesses traditionally set this at 10% of CLV. For our example, 10% of CLV ($10,000) comes to $1,000, meaning that the firm’s CAC for each new client is $1,000.
A study by LexisNexis provides additional insight as to how law firms are spending their marketing dollars:
- Small law firms (1 to 20 lawyers)
- $155,000 per year on marketing
- $15,000 to $30,000 devoted to online
- Mid-sized firms (21 to 50 lawyers)
- $775,000 per year on marketing
- $33,000 to $80,000 devoted to online
As we see from this study, most firms devote 10% to 20% of their total marketing budget to online content.
Turning to our hypothetical firm again, the firm budgets $150,000 towards promotional efforts with $30,000 (20%) of their marketing dollars allocated to blog posts and social media content.
Given our estimated CLV of $10,000 and CAC of $1,000 the firm only needs to convert 4 website visitors to clients per year to see a positive ROI for their online content marketing dollars.
The question to ask now is: how realistic is it for a law firm to convert website visitors to customers?
How to Create a Positive ROI with Online Content and Social Media
Anecdotal feedback from consultants who develop law firm websites suggests an industry average of 1,000 site visitors per month for small and midsize law firm websites. Average conversion rates of 10% of site traffic to sales leads are an industry standard within reach of any business that optimizes the user experience on their site. Conversion in this sense means about 100 site visitors taking some action on the site (filling out a contact form, clicking to email, etc.) qualifying them as a lead for the firm.
Typically close rates on those leads will be about 10% meaning the firm can very well earn 10 new clients per month from targeted online activities. Most businesses will have a mix of media in their marketing toolbox, from online and real world display ads, broadcast spots, and online content (social media). Online media continues to outperform traditional marketing, proving a more effective means of reaching target audiences, influencing purchase decisions and tracking success.
A high designed website with SEO-infused, captivating content should be at the center of any online marketing effort. Dedicated landing pages for new clients or campaigns prove an effective means of converting site visitors to new business.
Find out how custom content can create higher ROI for your online marketing today.