Does your personal injury advertising feel like gambling? If you don’t know your numbers, that might be the reason.
An article about the two critical numbers every personal injury law firm must know about their advertising prompted me to write about why that is a little too simplistic.
The first number mentioned is the average Cost Per Lead (CPL) and the second number mentioned is the average Cost Per Client (CPC).
The article by the Rainmaker Blog, a marketing agency for lawyers, also provided their definition of what a lead and a client is which is likely most lawyer’s definition so I won’t go into that here.
The 2 Critical Numbers You Need to Know
The average Cost Per Lead is easy to figure out. If you spend $5,000 and receive 25 leads, your cost per lead is $200. $5,000 divided by 25 = $200.
The average Cost Per Client is also easy to figure out. If you spend $5,000 and the conversion rate your accident leads is 20%, you will have retained 5 accident clients at a cost of $1,000 per client.
Why Are 2 Numbers Too Simplistic?
If you only look at CPL and CPC, you may overlook or intentionally avoid other types of media or target populations which look expensive on their face but are extremely lucrative.
We advertise in a niche motorcycle magazine for motorcycle accident clients. The magazine seems expensive because it has very few readers and results in few clients.
If you just look at the CPL and CPC, the motorcycle cases cost more than our other cases (see below). But the cost is deceiving because motorcycle cases have the following attributes which offset the higher CPL and CPC:
- Substantially increased conversion rate (90% of motorcycle leads become clients);
- More valuable injuries with larger legal fees;
- Settle faster producing faster cash flow;
- Require much less work;
- and higher ROI.
We have had many motorcycle cases settle for $100,000 with just three hours of work.
Of course, we also look for other types of personal injury cases. But we keep the easy cases which can be settled quickly with very little work and refer out the cases which will require a lot of work to another personal injury law firm.
We also pay for leads generated from someone who operates a truck on the street and sells leads to lawyers. We are emailed the names, phone numbers and email addresses of people who come to the truck looking for a lawyer.
When looking at the CPL and CPC, the numbers are worthwhile but these truck leads result in a lot of crazy people; people with injuries too minor to retain; many people who we can’t contact; and a few good cases. All of those cases are referred out because they require a lot of work. These leads require so much of my partner’s time before a case is retained that he wants to discontinue paying for the leads. The leads from our website are of a far higher quality.
Our system allows my partner and I to earn a substantial income on the cases we keep while working out of our houses with very little overhead. We’re highly computerized and can work anywhere. I’ve even worked from my balcony on a cruise ship in the Mediterranean and my partner has settled cases on the beach.
We also earn a substantial income on the cases we refer out.
Motorcycle Accidents Have Higher CPL & CPC but Are More Valuable Than Car Accidents
The following shows how one type of accident costs more money per lead and more per client but has a lower total investment cost and more legal fees resulting in a higher ROI.
$25,000 annual advertising budget yields 50 leads. The Cost Per Lead is $500 but motorcycle accident leads have a 90% conversion rate yielding 45 clients at $555.55 Cost Per Client. They have an average settlement value of $120,000 each and $40,000 legal fee each at a 1/3 retainer = $1,800,000 total legal fees.
Cost of advertising = $0.0138 per $1 of revenue
$1 interested in advertising yields $72 with much less work than other accidents.
$30,000 annual online advertising budget yields 300 leads. The Cost Per Lead is $100 and have a 20% conversion rate yielding 60 clients at $500.00 Cost Per Client. They have an average settlement value of $50,000 each and $16,666.66 legal fee each at a 1/3 retainer = $1,000,000 total legal fees.
Cost of advertising = $0.03 per $1 of revenue
$1 interested in advertising yields $33.33
Motorcycle Accidents vs Car Accidents
Cost Per Lead $500 vs $100
Cost Per Client $555 vs $500
Total Investment $25,000 vs $30,000
Total Legal Fees at 1/3 $1,800,000 vs $1,000,000
ROI 7,100% vs 3,233.33%
Obviously, car accident cases are very lucrative and shouldn’t be ignored but if you were only looking at the Cost Per Lead and Cost Per Client, you might decide not to pursue motorcycle accident cases. That would be a big mistake.
Besides 2 Numbers, What Else Do You Need to Know?
Besides the two critical advertising numbers, you should also evaluate the following about the leads you are generating, especially for contingency fee cases such as personal injury:
- Quality of the leads acquired from the advertising campaign;
- Amount of time to settlement for the cases retained; and
- Amount of work required for each type of case retained.
Besides CPL and CPC, determine which advertising campaign produces the following:
- Lots of crazy people vs mostly people with good cases
- Amount of time required to call back leads
- Leads which convert better (more people retained)
- Leads with bigger injuries
- Leads with cases that are easier to settle
- Leads with cases that require less work
- Leads with cases that settle faster
- Leads which produce larger legal fees
Additional time and work results in higher overhead and reduced cash flow. Although these cases are still worthwhile, it’s beneficial to think about targeting the cases that are more financially productive.
Over What Period of Time the You Need to Evaluate Your Advertising?
You also need to decide what period of time to evaluate. While evaluating each quarter is a good idea, depending upon the type of media used, results should be looked at a period of 6 months to over 2 years.
6-12 months is sufficient to evaluate an online campaign but where branding is used, branding typically takes two years to achieve its results.