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How Much Should You Expect To Earn On Advertising?

Lawyers are often as afraid of advertising as playing Roulette. Try it for a month and if there’s no winnings, cut your losses! The casinos aren’t worried. To them it’s all business. They know they will lose big every now and then, but overall, they know, and control, the exact percentage of profit on each game.

Just how much of a return on investment should you earn from advertising? Do you expect to spend $12,000 a month on advertising and earn $50,000 every month? After watching the CBS News “Sunday Morning” show about drug advertising, I decided to take a look at what their happy with.

Sunday Morning says that “the United States makes up just a measly 5 percent of the world’s population, but it accounts for a whopping 42 percent of the world’s spending on prescription drugs “. Even advertising executive Jerry Della Femina takes pills every day for problems he just worries about. Jerry Della Femina said on Sunday Morning, “You don’t know how sick you’d be if you didn’t take it”.

Why is the US consuming so much more drugs than the rest of the world? The only other country which allows drug advertising is New Zealand. According to Sunday Morning, the average US TV viewer sees an estimated 10 prescription drug ads every day for various brands. Obviously, advertising works.

Sunday Morning said that every dollar spent on advertising, produces approximately $4 in retail drug sales. If we are to assume a 25% retail mark-up by pharmacies, then the approximate return on investment to the drug companies is $3.20 in gross sales for each $1.00 spent on advertising. Of course, the drug companies have expenses. Out of $3.20, they have to cover research and development (their largest cost), overhead, salaries, insurance (in addition to normal business insurance, we know what else they have to cover) and other expenses.

I have no idea what their net profit is, but lets compare their gross sales to gross personal injury fees (not settlements), to see how lawyer advertising fares.

I will make several conservative assumptions based upon past experience:

1) A cost per call of $120 (I have seen costs range from approx. $80 to $160 depending upon various factors);

2) An average of 7% of calls converting to clients (depending upon the office, I have seen conversion rates from 5-20%);

3) An average case settlement value of $34,796 (According to a study by the U.S. Department of Justice Bureau of Justice Statistics, looking at tort cases in 15 states during 2001, the median case value was $34,796.);

4) Case expenses of $1,500 per case;

5) A legal fee of 1/3 after deduction of case expenses.

At $120 per call, one month of a $12,000 monthly advertising budget for personal injury cases will yield 100 calls resulting in your law office obtaining 7 new clients. These 7 cases are worth a total of $243,572 in gross settlements with $10,500 in total case expenses. Total legal fees after deduction of expenses are $77,690.66. This amount doesn’t reflect that fact that your new clients will refer other new clients.

Returning to the comparison of personal injury advertising to drug advertising, personal injury advertising is far more lucrative. The advertising example used here amounts to a return of $6.47 in legal fees for every $1.00 spent in advertising, more than double that of the drug industry average of $3.20.

There are many factors which will vary your results (to be covered in another article), but this should give you a good idea of what to expect from investing in your law practice with an advertising campaign.

There are always good months, mediocre months, and slow months. Overall, a committed investment in advertising will substantially grow your business. Just look at the big law firms. They increase their advertising budget every year. Of course, you need to advertise smartly, but advertising for a month to see if it works is not advertising, it’s gambling. Like the casinos, every business that regularly advertises knows that advertising must be looked at as a continuing cost of doing business, not just a gamble to see if it works.

If you don’t have the time and experience to know what works and what doesn’t, find a good advertising agency you feel comfortable working with for a long time, but just get started today and don’t stop if it’s slow. If it’s not working at all, try figuring out what you’re doing wrong and change it. If it still doesn’t work, try a new advertising agency. Since lawyer advertising only started in 1976, the industry is still in its infancy and is changing fast. Don’t get left behind.


6 Comments »

  1. I have been advertising for my Denver Law Firm on all major search engines and it has really paid off! I believe 100% in advertising to all Attorneys.

    Comment by milton — 10/2/2008 @ 10:14 am

  2. The thing to remember when advertising such a service as a law firm is – You are building top of mind awareness in the event that someone needs your services at some time. You're not selling cola. Being a Law Firm – you need to be the first person that individuals in a marketplace think to call when a need arises for your services. How do you do this?? – Repeated Compelling Messages. Repetition and frequency are KEY!

    Tony Vogds

    President
    http://www.bestradiocommercials.com

    Comment by bestradio — 10/23/2008 @ 7:20 am

  3. In an Internet marketing, online advertisement plays an important role. There are many types of online advertising programs available in online marketing. It's really nice to that how much one should expect to earn on advertising with an example. This information would be helpful for the readers.

    Comment by Steve Allan — 12/29/2008 @ 7:05 pm

  4. One thing I have suggested to clients before is take how many people, whether it is radio, print or TV you will reach and dial it down that percent too so you can see how many people you can expect will contact you. In this case it's avg is 7%. Take that number you are shown based on the reach and see the build up over the months. This can help you better understand expectations and results. Convert your impressions to how many unique users to get an idea of whether those impressions really mean more reach or more frequency with the same people.

    Comment by jessica_s — 1/13/2009 @ 10:27 am

  5. The internet represents an amazingly efficient advertising channel for attorneys. The ability to measure ROI and track what is working and what isn't is putting incredible pressure on offline advertising (a big reason why so many newspapers are heading towards bankrupcy). Too many attorneys focus their efforts on Google – which is the most expensive place on the Internet. Online directories that produce case leads are another great source. We have attorneys that are generating 5X the leads at 50% of the cost when compared to Google. Learn more at http://www.experthub.com

    Comment by slombardi — 1/22/2009 @ 4:09 pm

  6. Tracking is crucial to the success of your campaigns. Our agency recently wrote an article, "Mine Your Marketing" for The American Trial Lawyer Magazine, and I think the most important section of the article was on tracking. I won't explain the entire article but if your interested in receiving a copy of it email me at JustinH@netaff.com. It really is insightful!

    Comment by Justin H — 6/11/2010 @ 12:43 pm

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