In recent months I've spoken and written a great deal about measuring ROI, or return on investment, as law firm leaders continue to face tough choices about where to spend the firm's hard-earned capital. One question I'm asked frequently is whether hosting an event is a good idea for generating visibility with existing and potential clients, or for demonstrating subject matter expertise that will influence a buying decision. Many organizations operate as if the notion of hosting an event is self-evidently a good idea, but some achieve extraordinary results while others can barely fill a room. Our intent here, then, is to provide a framework for identifying the relative benefits of hosting an event. How can we turn an event into a means for generating revenue? What distinguishes a good event from a poor event, or a great event? In many law firms it's not uncommon for several groups to compete for limited resources to support their pet events. Should the seniority of the requestors or the relative investment potential dictate the resource allocation?
It’s All About ROI
Measuring the investment return of any marketing initiative can be an elusive goal. Rarely can we draw a direct line between a marketing activity and a prospect’s subsequent buying decision. Law firm marketing is no less challenged than marketing in other fields in this regard. Consider that few studies have found, and certainly the intelligent among us will never admit, that seeing a television advertisement for, say, a luxury automobile leads directly to our buying decision. When queried, we refer to a reputation of safety and solid engineering; the roominess of the interior and how it suits the number of family members; we quote the gas mileage and refer to amenities such as the on-board computer and heated seats, all of which we scrupulously researched and compared with the features offered on alternative vehicles. Similarly, few of us will admit to finding a doctor or lawyer in a Yellow Pages ad or directory, except perhaps those who have relocated a great distance and have yet to establish a local referral network. Yet there are a lot of television advertisements on every station, all day every day, from these companies and many more purchase newspaper and Yellow Page ads. Are these business owners operating under a mass delusion, throwing their hard-earned money away in a futile attempt to influence our buying habits?
The operative word here is influence. Few marketing tactics summon a call to action so intense that targeted buyers drop everything and rush to make a purchase. Well, maybe late-night infomercials drive this behavior, but that results from a mystical combination of repetition, hypnosis and foreign accents to which none of us is immune! The rest of the time, advertising and other marketing activities are designed to influence our buying behavior, little by little, impression by impression, forming in our minds a good feeling that we come to associate with the product or service offered. We don’t buy the luxury vehicle because we expect this will lure the attractive and much younger companion portrayed in the commercial. We buy, in part, because of the feeling of vigor and youth these commercials conjure in our minds. The more we see of this marketing, the more we associate the product with these good feelings. No single tactic will necessarily have us leaping for our wallet, but the combined impact of many tactics, particularly a coordinated campaign of different tactics over time, will influence our buying behavior. So for our purposes here, we'll look at how to assess the relative influence of one event over another, in order to derive some measure of return on investment, or ROI.
First let's clarify why we’re hosting an event, such as a breakfast briefing on recent regulatory or legislative changes in a specific industry, or an open house for a new office location. In some cases, the objective is merely to increase visibility with a target audience, perhaps existing clients we haven't seen in some time. Sadly, while it’s considerably less expensive and onerous to simply pick up the phone and arrange a catch-up lunch with a valued client, many lawyers will go to great lengths to indulge their introversion and avoid the potential for rejection ... so let’s host an event! To be fair, it's not a bad idea to host a non-business social event merely to stay in touch with clients with no pending matters or to meet potential clients. Sports outings, whether in the sky box or on the links, are often suitable for this purpose. So long as expectations are managed and there isn't a belief that a million-dollar engagement will result from this glad-handing, this sort of event can be helpful. From an ROI perspective, this is an investment in long-term visibility with minimal expected return and a cost significantly higher in dollars than the equivalent in lunch dates. Less expensive lunches that are never scheduled obviously generate a much lower Expected Value than more expensive social events that fill a room.
But what about the business-oriented event, where we unabashedly present some meaningful content designed to demonstrate our domain expertise and influence buying behavior in clients or potential clients who ostensibly need our services? There is a great deal more in play here and there are clear metrics to help distinguish between worthy events and wannabes. Most skilled event planners employ an event project plan that captures all the salient details, expectations, deadlines and costs for the event. The first hurdle is simple: If your event planner operates without a plan and/or if the lawyers are too busy to plan well in advance and provide necessary details, then don’t bother! It is quite obviously a touch more challenging to make such bold statements to law firm partners who are insistent on hosting an event, but only the partners who are foolish with their hard-earned capital will skip, or allow their partners to skip, this critical step. Establish a best practices planning model for your firm and stick to it. If you can't or won't invest the time to plan ahead, then take whatever expectations you have for the event and reduce them by half, and then half again.
A typical event plan will identify the target attendees and the desired demographics. For example, our conference room or hotel ballroom size may dictate that we can host 50 guests, plus a modest number of partners and firm personnel, leaving us a comfortable margin before we reach the fire code limit of 75 occupants. Then typically we identify the right attendees based on the subject matter and we send invitations, tracking RSVPs until we reach the desired number, allowing for the inevitable no-shows. Poor response rates can be indicative of weak marketing, but just as often result from insufficient notice or a topic that's no longer timely. Law firms that regularly present cutting-edge topics operate events like a well-oiled machine and inevitably outdraw those that deliberate and procrastinate until the topic is played out.
Sooner or later a partner will submit a last-minute request to host an event on an aging topic. While it may be politically untenable to simply say no, a review of the event metrics after the fact may prevent repeat offenders. A relative measure that can prove helpful is revenue footprint, or the total revenue associated with the clients (or former clients) in the room. Simply identify the historical, current or expected billing revenue of the audience. Events with a higher revenue footprint typically warrant more time and attention. Events that result in half-empty rooms, with marginal clients on hand, suggest that key clients found more compelling distractions for their time.
But the value of hosting an event is better measured by the realization than by the potential. Through experience, some event organizers will establish a revenue target, a figure that clients or prospects in attendance are expected to generate in the coming months. As we’ve discussed, the event might be just one of several market tactics put forth by the firm to influence a buying decision, but for our purposes here we’ll count it. (More statistically rigorous approaches apply different weights to the various marketing tactics to deduce relative influence.) It’s also necessary to establish a sufficient time horizon, say six months, within which we expect the event to influence the opening of a new matter. Keep in mind that some opportunities take years to materialize, so there's no standard time period within which to track influence. A mid-sized law firm in the southeast periodically presents well-regarded legal updates on the shipping industry, and the firm has taken to assigning a revenue objective for each event. As an example, it might expect the October briefing to generate $250,000 in new matters within six months. Note that this refers to the total expected deal size, not the actual billings by that date.
Establishing a Target
By establishing a revenue target, it becomes a lot more palatable to establish an expense budget. A common lament of event planners is the mandate to produce a high quality event but with a very limited budget for necessary expenditures. Of course it's important to be prudent, but in context the event expected to produce $250,000 in revenue can probably withstand the extra $50 tray of canapes. The key is to identify which expenses improve the potential revenue. Hosting the event at a small, out-of-the way boutique hotel might cost less, but hosting the event in the centrally located downtown University Club might improve attendance by 50%. Good event planners will develop expertise over time as to which variables have an impact on the top line, typically by tracking multiple variables and analyzing which of these variables are present at events which have turned out to be more lucrative.
The mechanics of tracking revenue are fairly simple, though typically not automated. For the clients who were in attendance, the marketing team monitors new matter openings over time. When a new matter is, or appears to be, connected to the topic of a recent event, they will confirm with the billing partner and establish an expected matter value. The team reports monthly on the accumulated revenue generated by each event, highlighting those in which revenue exceeds expectations and revenue falls significantly short of expectations. With each cycle the team becomes better at establishing appropriate revenue targets.
As you might expect, if we’ve established both revenue and expense targets, it's no great leap to establish a profit target. And this can become the great equalizer when comparing the viability of competing events. Should we host a series of bi-monthly events that in aggregate will generate $800,000 in revenue at a cost of $72,000, or should we host a much larger event that costs $150,000 but is likely to generate $2 million? A large West Coast law firm has hosted a very elegant, all-expenses-paid weekend away outing for key clients that combines some business with a lot of recreation, and this event sucks up most of the marketing team’s available bandwidth for months and incurs huge expenses. The return, however, is minimal. As it turns out, the profit margins generated by the firm’s East Coast office for routine breakfast sessions tend to be more appealing, albeit in smaller portions. The firm audited its own performance and determined that it might generate more billables by expanding the breakfast briefing program to more offices and practices and doing away with the gala weekend event. However, firm management hasn’t yet pulled the trigger because it ascribes some of the gala investment to the aforementioned "staying in touch," which has understandably lower expectations.
The Bottom Line
This is the essence of law firm marketing ROI: making informed decisions where previously there were no data. If firm management wishes to deploy limited resources in an efficient manner, it’s helpful to know which events generate revenue, which attract key clients or targets, which are profitable and which are not. If firm culture encourages each practice group to plan its own events without regard to the financial performance, that’s fine too. However, the ability to make strategic decisions with the firm’s capital is fast becoming a competitive differentiator and increasingly business-savvy practice group and firm leaders should be pleased to know that measuring event ROI is not as elusive as it once was.
Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change. To inquire about his services, contact him at +1.609.557.7311 or at firstname.lastname@example.org.