ROI or “return on investment” is a widely used term by executives in companies today, the only problem is it is a metric that is somewhat difficult to compare across industries and companies consistently. Return on investment will use profit, then will factor in the costs. This method of calculating return on investment is difficult when it comes to law firms and what they are getting for the money they spend on marketing as so many other factors will come into play. Using the revenue to cost ratio is the best method for measuring your return on investment for an SEO strategy as it uses gross revenue instead of profit. So, essentially answering the question of what did you pay, and what did you get? That pretty much breaks it down in to the simplest of factors.
An example of the revenue to cost ratio could be: if your law firm spends $2,000 on marketing, and it results to an increase of $10,000 in gross revenue then your law firm ROI for SEO campaign was a 5 times return (10,000/2,000). This helps determine what your exact return on investment would be as the ratio to cost model does not take into account other costs such as rent, salaries of employees and other types of expenses.
Now that we have discussed the best method for measuring return on investment for a search engine optimization strategy, let take a look at what the general benchmarks are for a good revenue to cost ratio.
What is a Good Revenue to Cost Ratio Benchmark?
Every firm will determine what benchmark they want when starting a campaign for SEO, these benchmarks are the ones that are generally accepted and aimed for by marketers.
- A 5 times revenue to cost ratio is – good
- A 10 times revenue to cost ratio is – outstanding
- A 20 times revenue to cost ratio is – Absolutely incredible
Digital marketing agency sites usually make the claim that they were able to procure an 8-12 times return for their clients. Now just assuming these were the returns for their best clients will validate the accuracy of these benchmarks.
Now let us take a look at why some firms get more out of their marketing than other in regard to returns. We will look at returns that are below that 5 times threshold.
Digital marketing and SEO campaigns will not instantly produce big returns when they are first getting started. It takes time for a campaign to set in, Search engine optimization campaigns could easily take 1-2 years before a firm starts seeing huge returns, some PPC or pay per click campaign can take months. Also, you must take the market you are targeting into account, if some markets are saturated with competition, it will be more difficult to see larger returns on your marketing dollars starting out as these other firms have been campaigning longer than yours. The hourly price your firm may charge for a case will vary from other firms, so the returns you get on those cases compared to others will be different.
Another factor that can play into why you are not or are getting more returns than another firm can also be your practice area. When it comes to digital marketing, some practice areas have historically done better and worse than others. One example that has been heard to have consistent issues with returns for marketing campaigns is within the debt relief arena. Reason being is when a firm only practices in debt relief, it does not usually give you high returns due to the low average of that practice areas client value.
There is also the case that the campaign itself has an overall poor strategy. If you look at social media for example, years ago this was all the rave within the digital marketing arena because everyone thought you had to be on social media since it was so popular. Come to fins out this was not the case; social media did not drive the returns first expected and unfortunately firms ere throwing their money away on it for years.
Lastly, it sometimes is the case where there is not a problem with the campaign, but a problem within the firm itself. Poor conversion rates are a great example of this, your marketing dollars might be getting you calls but if you cannot convert them into clients then it was all for nothing.
In conclusion, getting returns for your digital marketing dollars can be a not so easy thing to calculate. If you are looking to start marketing your firm, you should contact an online law marketing agency today.