How to measure marketing effectiveness and return on investment (ROI) are big and important questions and require some exploration of the various issues involved:
What exactly are you measuring?
Accounts systems measure ‘value received’ (income, profits) whereas marketing, as the clients’ representative, should measure ‘value given’. This needs to incorporate client satisfaction, retention, share of wallet (compared to competitors), client lifetime value (CLV) etc and be considered by client, market etc rather than product (ie corporate, employment, litigation, tax etc).
The only real way to measure marketing effectiveness is against your business and marketing objectives which should be SMART (Specific Measurable Achievable Realistic and Time specific). Typically, marketing objectives will be concerned with income and profitability in particular markets (segments or key clients) for different products (services or areas of expertise). Most marketing plans will also have activity targets for specific areas such as media relations, events, advertising, pitch conversion, internal communication etc. There are some ‘soft’ areas of marketing activity (e.g. brand awareness, perception, cultural change etc) that will be difficult to set targets for and therefore difficult to measure against objectives.
To measure marketing effectiveness you must be alert to the long sales cycle in B2B/commercial client situations – an average of nine months. Failing to acknowledge that some programmes may take several months to implement and even longer to yield results may mean that good, effective marketing is terminated before the real results have had a chance to be revealed. This means that you may have to measure activities and process in the short term and results in the medium to longer term.
Although marketing might be responsible for initiating contacts and enquiries, the responses and client/prospect communications are generally not fielded in a professional firm at a central point where they can be measured but by the individual fee-earners. Unless there is a system that captures ALL interactions with existing and potential clients and then tracks these contacts through the selling cycle it will be difficult to measure the results acurately. Without such systems it is also difficult to measure opportunities in the pipeline, likely work prospects/future fee income etc. A good sales management or CRM system will provide considerable assistance – providing the fee-earners provide the required information.
Define what is included in the marketing budget before comparisons are made with other firms. For example, in cash terms do you include:
- Marketing staff salaries (many firms outsource to PR, advertising and other agencies)
- Direct mail costs (e.g. postage, envelopes etc much reduced if you use email)
- Web development, hosting and maintenance costs (or are these in the IT budget?)
- Training/skill developing in marketing, sales and client development (perhaps in human resources?)
- Research (market and clients, plus information services for keeping up to date with key clients and markets. Most professional firms seriously under-invest in this area)
- Entertaining (either in-house dining facilities or partners’ spend at coffees, lunches and dinners for both existing and prospective clients)
- Subscriptions to bodies where the primary aim is networking and profile raising
- Attendance at events where the primary aim is networking
- Internal communications (e.g. intranets, staff events etc – important to support branding and account management/cross selling programmes)
Rules of thumb suggest that between 2-5% of gross fee income should be invested in marketing, selling and client development. There is a separate article on budgeting – please email me for details.
The biggest investment in marketing in a professional service firm is in terms of fee-earner time – for researching, writing and presentations for profile raising activities, to time spent with existing clients to secure existing work and generate further opportunities and time spent nurturing new clients or pitching. Even time spent developing new service ideas through knowledge management and process efficiency improvements. This ‘opportunity’ cost should be captured through non-chargeable time codes and fee-earners should be targeted in this area the same as in chargeable time areas. It is more important to manage this investment than cash costs of marketing.
B2C vs. B2B
Consumer marketing (e.g. private client, personal injury, residential conveyancing etc) is often more cash intensive than B2B marketing (e.g. commercial property, employment) where the main approach is direct selling which is time intensive.
Key client programmes
Take the top 70-100 clients. Consider their fees over the past three years. Look at the range of services they buy. Get research on their levels of satisfaction and payment record. Then set some objectives based on these measures.
Personally, I think benchmarking is a little over-rated – Do you only aspire to be as good as your competitors? What if your competitors aren’t doing enough or the right things? However, there are some excellent resources available in this area, for exampe, Kevin Wheeler (a consultant) does an annual research survey on “Marketing the Professionals” and PACE do some research benchmarking on Client Relationship Management.
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As always, if there are particular topics you would like me to address in the future, please let me know. You will also find a source of more and up to date information on a broad range of management and marketing issues in the professions by checking out the blog where I also post regular reviews of books that might be helpful.