Mastering Your 2024 Law Firm Marketing Budget: A 7-Step Guide
The ability to strategically allocate finances and resources to marketing efforts has become an indispensable skill for legal marketing professionals in law firms seeking to thrive in a competitive environment. With clients’ needs evolving and the digital landscape continuously reshaping how legal services are sought, crafting an effective marketing budget is not simply a financial exercise; it must be a strategic imperative.
In this post, we explore the essential steps to crafting a marketing budget and mastering the budgeting process. Whether you’re a seasoned legal marketer or a law firm leader looking to optimize your firm’s marketing efforts, this guide will provide you with the essential steps to prepare a strategic marketing budget.
But first, the Big Question
The most frequently asked question we receive when it comes to law firm marketing budgets is:
How much money should law firms allocate to their marketing budgets?
According to HubSpot, companies generally spend 7 to 10 percent of their annual company revenue on marketing. However, according to Statista, in an early 2023 survey among chief marketing officers (CMOs) from business-to-business (B2B) companies in the United States, respondents from corporations offering B2B services allocated, on average, 10.33 percent of their annual company revenue to marketing activities.
Despite these benchmarks, legal industry data routinely indicates that law firms spend approximately 2 to 5 percent of annual revenue on marketing, representing a repetitive approach to budgeting in our industry. Breaking that down by firm size, in 2018 ALM’s Law Firm Business Development and Marketing Survey reported that Am Law 100 firms allocated 1.66 percent and Am Law 200 firms allocated 2.5 percent of the firm’s annual revenue to marketing their marketing budgets.
In our experience, several factors contribute to the low average percentage of revenue that law firms allocate to marketing compared to other service industries. The primary factor is the lack of perceived value associated with strategic marketing and business development activities within many law firms. Many in-house departments still grapple with demonstrating the tangible and intangible benefits delivered by these efforts. In some instances, law firms undervalue the time and resources required for developing and implementing strategic, impactful marketing efforts. Additionally, law firms frequently prioritize allocating resources toward legal talent, technology and infrastructure, relegating marketing initiatives to a position of limited resource availability.
These factors collectively lead to marketing and business development becoming one of the first departments to encounter budget cuts and resource constraints in times of financial uncertainty.
What is well-known among legal marketing and business professionals is that allocating resources proportionally to marketing, particularly in increasingly competitive markets, is wise and necessary.
Investing in marketing plays a pivotal role in various essential efforts that have a direct impact on a firm’s financial performance. These include differentiating a law firm from its competitors and enhancing its brand visibility, which, in turn, leads to heightened client loyalty and trust, increased lead generation, recruiting successes, and ultimately, increased revenue. In addition, firm leaders must recognize that marketing investments impact business development from new clients, efforts to expand existing client relationships, and client retention.
In Part 2 of this series, we’ll further address building a strong business case to support budget and resource allocation but first, let’s look at the data law firms need to start budget planning.
- Assess 2023 Performance
Assess your past performance including that of strategic partners. This will provide valuable insights into what worked and what didn’t. Review your previous budget, initiatives and their outcomes. Engage in open and transparent communication with your strategic partners to discuss progress, challenges and opportunities for improvement. Ask: Were the goals achieved? Did the firm face any unexpected challenges? Did a specific initiative garner exceptional results?
By assessing past performance, you will identify trends, strengths, areas for improvement or opportunities to increase or reallocate resources. This assessment will help you make informed decisions when planning the firm’s 2024 marketing budget and to develop supporting business cases.
- Review the Firm’s Strategic Goals
What are the firm’s goals for the coming year? Your budget requests should be clearly aligned in support of those goals. Consider what the firm is trying to achieve, whether it’s increasing brand awareness, developing or increasing its presence in specific geographic markets, growing revenue in a key industry, acquiring talent, or even a merger or acquisition.
The firm’s objectives should serve as the foundation for your marketing budget decisions. Each goal may require a different allocation of resources, so it’s essential to prioritize them based on their strategic importance to your law firm.
- Know Your Target Audiences
In 2024, client needs are likely to continue evolving, influenced largely by technological advancements and market changes. Identify opportunities to stay informed about your clients’ preferences, needs and habits by leveraging a combination of conversations with your partners and key client teams, client feedback interviews, content in requests for proposals (RFPs) and industry news.
Utilize this information to address the specific needs and preferences of your target audiences whenever possible. Presenting this targeted approach to resources that address the needs of your target audiences can help you build a strong business case for expenditures.
- Leverage Tools & Technology (Including those of your strategic partners)
There is no lack of available technology options to create efficiency and support measurement. Make a list of the tools and technologies that work well to streamline your processes and that provide valuable data and insights. This list should include the tools and technology utilized by your firm’s strategic partners to create a comprehensive view of the resources available to the firm.
By aligning your technological capabilities with those of your strategic partners, you can create a more holistic and integrated approach to resource management. Regularly reviewing and discussing your combined toolsets can yield valuable insights into shared efficiencies and opportunities for further collaboration. Examples of this include project management software, chat software and media tracking tools. This collaborative approach can often lead to cost-saving measures, as it helps identify and eliminate redundancies in spending, ensuring that both your organization and your partners maximize the value of your technology investments.
- Allocate Resources
This step will vary for each law firm. Some opt to begin with last year’s budget, while others choose to take a zero-based budgeting (ZBB) approach. Either way, begin by categorizing your marketing expenses. In some cases, budgets may be categorized by effort such as advertising, communications, technology, events, email marketing, SEO, etc. In other cases, budgets may be categorized by practice or industry group.
Once you have established the correct categories, determine the appropriate budget allocation for each based on your goals and target audiences (determined in Steps 2 Review the Firm’s Strategic Goals and 3 Know Your Target Audiences). Consider setting aside a portion of your budget for experimentation and innovation. This will enable you to test new strategies and technologies without impacting other areas of your marketing budget.
Use the information gleaned from Step 1 (Performance Evaluation) to assess which efforts have historically delivered the best results and adjust your budget accordingly.
Remember to be flexible and willing to reallocate funds as needed throughout the year to optimize your performance. As history has demonstrated time and again, the legal landscape can shift rapidly, and unexpectedly. The ability to pivot to capitalize on unexpected or opportunistic marketing opportunities is key. Marketing budgets (or any budgets for that matter) should allow for agility and adaptation. (Part 3 of this series will address budget review and reallocation of resources.)
- Collaborate with Other Departments
Ensure that key stakeholders are aligned on budget goals and expectations. Talk to peers representing other key departments (IT, recruiting, professional development, etc.) regarding their budget plans as part of your discovery efforts. Regularly update them on the progress and performance of your marketing initiatives.
Encourage open dialogue and the sharing of ideas from those on your team. Their insights and feedback can lead to more informed budget decisions and innovative marketing strategies.
- Document Key Data and Lessons Learned
If your law firm is not in the habit of capturing data and feedback in real-time, begin now.
This practice can significantly impact the efficiency and success of future budgeting as it captures insights to help the firm make more informed and strategic decisions during the process.
When data, feedback and lessons learned are documented and analyzed as they happen, they remain fresh in the minds of decision-makers, making it easier to identify what worked, what didn’t and why.
Implement a system for tracking the performance of your marketing initiatives in real time. Metrics should align with your objectives and include data points that demonstrate the overall performance of each effort. Examples of data points can include website traffic, conversion rates, event attendance, proposal opportunities and value, and new client or matter acquisition.
This process also promotes a culture of continuous improvement within a law firm, and it encourages teams to be proactive in identifying challenges and opportunities, rather than waiting until the end of a budgeting cycle to assess performance.
In Part 2 of our series, we will address how to build a strong business case to help secure necessary resources by aligning specific anticipated financial spending with strategic objectives and potential return on investment (ROI).