What Is The True Value Of A Lead? | Richard James

What is the true value of a lead?

Several times each week my clients ask me a similar version of the same question: “I’ve been offered a marketing service that worked for a friend who owns a firm in another city, and I’m wondering—should I commit to it?”

Not to sound like a lawyer, but the truth is it all depends.

Here are the facts. Just because a lead generation service, be it a direct mail service or a pay-per-click lead generation company like Total Attorneys, Lead Rival, or Nolo worked for your friend’s firm does not mean it will work for you.

To determine whether a lead source works or does not work, we require more information than for whom the service worked for in the past.

I can’t tell you how many times I’ve seen clients use a particular lead generation service in one city, have it work like gangbusters. Then, another client uses the same service for the same practice area in a different city, and it flops.

Calculate the ROI

My advice is to run a “test” that starts with your end goal in mind.

Like any process we intend to test, we need to start by identifying what defines a “good” lead source. For me, as I was building up a law firm in Phoenix from a two-man operation with $0 in gross sales to a large practice with $3.5 million in annual gross sales, it was all about the return on investment, or ROI.

What is the best way to evaluate the ROI of a particular lead source? We need a few pieces of information to do so:

 

Cost per client (CPC) = To determine the CPC, divide the total cost for the lead source by the total number of cases you’ve received as a result of that lead source.

Value per case (VPC) = To determine the VPC, divide the total gross sales value generated by the total number of cases.

I personally prefer to measure lead sources as a multiple of the cost per client. Here is that formula:

ROI as a multiple = Divide the average value per case by the cost per client. Your answer is the ROI as a multiple. Here is an example:

Lead source cost: $900.00

Total client value: $9,000

Number of cases generated from lead source: 3

Cost per client: $900/3 = $300

Value per client: $9,000/3 = $3,000

ROI as a multiple: $3,000/$300 = $10

 

Having this data gives you the transparency you need to make educated decisions regarding testing your lead sources. Now that we know how to calculate the test, let’s discuss how we should go about testing each lead source.

Here are the items you’ll need:

  1. Unique tracking format
  2. Lead tracking sheet
  3. Inspection policy

The unique tracking format is when you have a unique phone number, website address, web form, or chat widget that tells you where the contact originated. Most firms determine this information using a “report” feature, which means they ask the client—either on the phone or on the initial consultation sheet—“How did you hear about us?” It’s important to note, however, that this “report” method is both insufficient and flawed.

Clients, for example, often tell us they came to us via our direct mail piece, but they actually called the phone number on a pay-per-click ad. Which lead source gets the credit? The number they dialed. If the website address didn’t convince them to call, they likely would not have called. Potential clients are often confused. They receive several direct mail pieces and might not remember that it wasn’t yours that inspired them. The bottom line is to make sure all your lead sources are track-able so they can measure how the potential client arrived at your door. You’re marketing budget will be happy you did.

Start tracking every lead

A lead tracking sheet is a simple data harvesting tool. We recommend using Google Drive data sheets because several people can share these materials simultaneously. But, whether you use something like Google, more sophisticated client management software, or a simple legal pad and pen, the key is to follow the most important rule: ensure that every single piece of information about every single lead is harvested—every single time. If you’d like a free copy of our lead tracking sheet template, click here, and we’ll send it to you.

The inspection policy is where the rubber meets the road. As my grandfather always advised, “Inspect what you expect!” Ask your bookkeeper to document lead source costs separately in your P&L so you can receive a report each month. Ensure that the person answering your phone is harvesting data from every potential client every time. And don’t forget to measure the results each month. If you do not, you’ll never know which marketing techniques are working, which means you’ll be subject to the old saying “I know 50 percent of my marketing is working; I just don’t know which 50 percent.”

Now that I’ve revealed how to determine your ROI and how to track your lead sources, you are ready to test a new lead source.

Building a better practice, one tested lead source at a time.

Richard James

As a result of his track record for achieving what most describe as “phenomenal” growth rates for his clients, Richard James, CEO of Automated Business Results, LLC, is quickly gaining a national reputation as “the Legal Systems Expert.” His secret to success is simple. Richard has devised a seven step system for designing and implementing automated marketing systems that grow your business FAST. If you’re looking to develop a practice that supports your lifestyle rather than completely undermining it, call Richard James today.

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