January is when most law firm marketers (in fact, most marketers in any industry) start putting budgets and marketing plans together for the next financial year. It’s also when I share on social media – slightly pointedly, I’ll admit – one of the most wonderful quotes ever about company boards, accountants and marketers. It’s from the great Tim Ambler RIP, who wrote in Marketing and the Bottom Line:
“Company boards do three things: make money, count it, and spend it. Any idiot can count and spend it. The hard part is making it and that’s marketing. Too many accountants not only join company boards, but become CEOs. They promote the belief that the more you count a pile of money, the bigger it gets. At best, accountants keep the score. They do not make the runs.”
I’ll admit that this year I was a little nervous, since my boss is a former accountant who became a CEO. So I decided to go hell for leather and also stick the boot (extending the metaphor) into the PwC annual law firm survey, which benchmarks what percentage of turnover the top 100 UK law firms spent on marketing the previous year.
For reference, this is what the 2021 survey said:
Firm Rank % Turnover Spent on Marketing
Top 10 1.7%
11 – 25 2.1%
26 – 50 2.2%
51 – 100 2.2%
It’s probably no exaggeration to say that the survey is the bane of many law firm marketers lives.
Having put together well thought through budgets, they’re then told by their finance director how much money they can have by reference to where they rank in the top 100 and what their peers spent last year (although, interestingly, only when they want to spend more – I’ve yet to come across an FD who said “I don’t think you’re spending enough, here, have another 70 grand”).
Below are my thoughts on why using the survey as a benchmark is folly, and a simple way to prove it to your board.
Numbers numbers everywhere, yet no-one stops to think
Here, in no particular order, are seven reasons why using the the PwC annual law firm survey to set marketing budgets is folly:
- You never design for average because average doesn’t exist. Saying that, on average, firms ranked 26 – 50 spend 2.2% of turnover on marketing and business development just means that some firms spent a lot less, and some firms spent a lot more. To use a ludicrous example, it’s 100% accurate to say that, on average, people in the UK have one testicle.
- It puts the tactical cart before the strategic horse. You should set your budgets according to what objectives you want to achieve, which should be linked to your firm strategy. As the saying goes, form follows function, not the other way around.
- It’s a recipe for stasis. Unfortunately, the reality is that budgets matter. All things being equal, spending £2m on a campaign as wisely as £1m will have a disproportionate impact – principally because you’ll be able to reach more people, more often, across more channels.
To illustrate the point, the firm ranked 51 in the Lawyer’s 2020 report (Womble Bond Dickinson) had UK revenues of £106m. The firm ranked 100 (Greenberg Traurig) had UK revenues of £33m. If they each spent 2.2% of turnover on marketing, WBD – already bigger, better known, with more clients – would be spending £2.3m while GT would be spending £725k. See the problem? It’s partly how big businesses stay big, and small businesses stay small.
- It ignores context, and context is key. All firms are dealing with their own unique issues and challenges, as well as the broader market context. Businesses and markets aren’t lists of tables.
- You don’t plan for the future by looking at what everyone did last year. Marketing is about the present and the future. How are we going to grow this year? Where are our clients going to come from next year? How do we build and then exploit pipeline? How will be generate and then capture demand? None of these questions will be answered by looking at what your peers spent on marketing 12 months ago.
- It destroys market orientation. The PwC annual law firm survey is a great example of the insular nature of the legal industry. Rather than looking at the market and clients, it encourages people to look internally and at their peers. As the great Terry Leahy of Tesco said: “We became successful when we stopped following the competition and started following the customer”.
- It’s the enemy of differentiation and distinctiveness. Building your budgets (not just for marketing, but for IT and other operations) based on the average of what everyone else does, will just drive you towards being the average of everyone else. And why would you want that?
From the sublime to the ridiculous
The points above will be obvious to most marketers. But how do you prove them to your finance director and board?
Well, let’s imagine you’re a £75m turnover firm with ambitions of growing to £100m.
The board has set a revenue target for next year of £80m, based on the number of fee earners you have, their charge out rate and the number of hours they’ll work (we’re already seeing the problem here, aren’t we).
Based on the PwC survey, they say you can have 2% of that turnover to spend on marketing – so £1.6m.
What the board is saying – with no regard to the firm strategy, objectives for the year, what it will take to achieve them, market forces or client need – is that if you spend £1.8m on marketing you’ll grow to £80m.
So the argument back to board is simple.
Give me £2m to spend on marketing and, by the same rationale, we’ll grow to £100m. Boom. Growth target achieved. We can all go home.
In fact, even better still, give me £4m and we’ll grow to £200m. Heck, why not spend £6m and go all the way to £300m turnover?
Do you think the board will go for it?
Absolutely not. Even though you’re just applying their own logic to the process.
Does the argument make any sense?
Not at all.
But it makes as much sense as saying that spending £1.6m on marketing will help you grow from £75m to £80m.
With great budgets should come great accountability
It’s important to be clear that this isn’t a call for marketers to be given carte blanche to spend whatever they want in the face of dastardly FDs who don’t understand marketing.
In fact, quite the opposite.
My call is for marketers to be more accountable, just accountable to the right metrics, and to link what they want to spend to those metrics – revenue, profit, market share, new client wins etc.
To give you an example from our Home Property Lawyers brand, one of the segments we want to target is what we call Experienced House Searchers. Through our research, we know the total potential value of that segment, how many people are in-market each year, and our current share of that market.
And because we know what the purchase funnel looks like, and our levels of awareness and consideration etc. (again, through the research), we can predict that if we spend £x on a campaign to deliver y objective, that should lead to £z in new revenue.
The good news for my boss, the board and our FD is that they can now see what sort of return we’re going to get for our investment.
And even better, they can hold me accountable to it at the end of the year.
Build your budget this way, with three or four really clear objectives, backed by solid research, and you’ll completely transform the budget conversation you have with the powers that be.
And you can finally throw that PwC survey in the bin.
Lee Grunnell is the Director of Marketing and BD and Langleys Solicitors. Visit www.langleys.com.