When it comes to using online advertising and marketing platforms like Google, Bing, AdRoll and Facebook it can be cumbersome and expensive for lawyers and law firms to manage their marketing efforts entirely in-house.
It’s not uncommon that lawyers will try to manage it on their own. Maybe, they think the cost of hiring a marketing agency is too expensive. On top of that, they don’t if they are getting the results they want.
However, someone could say the same thing when trying their own case in court instead of hiring a lawyer. After all, we all went to school and developed our skills for something. So we can understand that there can be a huge upside to hiring the right marketing professionals and consultants to manage your law firm’s digital marketing needs.
That’s fine and all, but how much does it cost to hire a marketing agency?
It’s going to depend on the agency or consultancy. We’re going to go through the different types of fee breakdowns and discuss how much each can cost.
Fixed & Tier-Based Rates
Some marketers and companies charge a fixed fee based on the amount of advertising spend you desire to spend. Let’s say you are looking to spend around $1,000 – $1,500 per month. The agency may charge around $500 in fees to efficiently manage your spend.
As you spend more on advertising, you can expect to pay more in management fees.
Other agencies will prepare a custom, fixed quote based on your overall needs. This will depend on how much work is involved in getting your entire marketing funnel optimized. After all, what is the purpose of spending any money on ads and driving new people to your website if it’s not fast, user-friendly and optimized to convert?
The entire point isn’t to just spend money on ads and produce good ads. But to convert your audience and visitors into contact form leads and new phone calls.
Percentage-Based Management Fees
Other marketers and agencies will charge a transparent percentage markup based on your ad spend. These firms typically range between 20-40% in markup fess. So if you’re spending $1,000 per month on PPC ads, you can expect to pay another $200-$400 per month in management fees, producing a total of $1,200-$1,400.
Where is your Ad Budget is Being Allocated?
However, some firms may not even realize how much a fee their agency is taking. They may say they are looking to spend $1,000 per month. In the case that an agency charges a fixed fee of $500 dollars, you will only end up with $500 ineffective ad spend. In the case that your partner agency takes a percentage-based fee of 30% and you’re spending $1,000 in total. The math looks something like this:
$1,000 / (130% / 100%) = $769.23 in effective ad spend.
That’s an extra $269 dollars in ad budget compared to the fixed budget example of $500.
At first glance, it may seem like the better option is to pay for the marketing management on a percentage basis. However, this itself doesn’t translate necessarily into any new leads or clients.
How Many Leads Should each Agency Generate?
In the example that you’re spending $1,000 per month total for your marketing (which is very slim and not recommended for law firms, unless you’re just hanging your own shingle now), let’s look at how effective the $500 fixed fee has to be in comparison with the 30% fee agency.
Putting aside the actual number of leads, for now, let’s take a different approach where we assume that both firms are going to be able to produce the exact same lead quality and the cost per lead (aka CPA which is the cost per acquisition) is the same. This could be $50 dollars, it could be $500, depending on the nature of your market, competitors, and type of law you practice.
In any case, we are supposing that both firms have equal marketing strategies and execute equally in order to produce the same number of leads quality of leads per month at the same cost per lead.
How many leads should the percentage-based company be producing in terms of the effective ad spend?
Well… some simple math indicates that:
$769.23 / $500.00 = 1.538
This would lead us to suggest that the percentage-based agency should produce 153.8% of the leads that the fixed-fee agency could produce. After all, they have a 53.8% larger budget to spend on Google, Bing and Facebook ads as the fixed-fee agency.
Let’s look a little closer. In a perfect world where the two agencies can produce the same cost per lead and lead quality, this would be a no-brainer. No two agencies will ever produce the exact same costs. Maybe similar, but they won’t be identical. No two agencies will take the same approach, create the same ads, create the same funnels.
After all, the flat-fee agency is making $500 per month from us in this example. The percentage-based marketer is only earning $230.77 per month. That’s less than half of the flat-fee agency.
So either the flat-fee agency is overcharging you or the other agency is under-charging you? Not necessarily and not so simple to know. We have to look at 2 more things in order to better understand which is truly better:
- the agency’s incentive structure
- actual services/work product being performed by the agency
So that’s why in the next section, we look at the incentive-structure for percentage-based vs fixed rates. Then we’ll discuss how to interview your potential new agency. We will give you some questions you should be asking them before signing a contract.
What are the Agency’s Incentives?
It’s not always clear what a service-provider’s mission, agenda or objectives are, aside from turning a profit of course. It’s impossible to put agencies into one basket or another based on a few characteristics of their business model. Hopefully, this section will provide a clearer understanding of what could be going on.
I do want to emphasize that before we begin. My intentions aren’t to smear all agencies and marketing firms that use this pricing model. Instead, I am simply trying to inform those who wish to partner with an agency what to watch out for.
Percentage-Based Fee Agencies
As we discussed in the above example, it can be hard to understand how agencies that use a percentage-based fee can make money on the low-end. And while there are some great agencies that operate off of this pricing model, I have heard horror stories from friends, family and clients first hand that have enlisted the help of these types of agencies before and will attempt to distill an image of what could happen once you understand their underlying incentive structure.
As discussed in the previous section, it can be hard for an agency to make money with percentage pricing if you have a small total budget. However, with a somewhat larger budget, this becomes decreasingly an issue for the agency on their top-line.
When you think about it though, the primary objective for them is to earn a percentage off of the money they spend on your firm’s behalf on online and PPC ads. The more they spend, the more they earn. So let’s suppose that one month, they spend $500 less than the budgeted amount. Would this mean that they won’t charge the markup percentage for this unspent amount?
This may lead to a marketing organization to have a primary focus or KPI (Key Performance Indicator) of the agency striving to spend the total amount per month. This may sound alright. But really the ultimate objective that you or your law firm has in mind is to generate more clients and cases. So it’s important that the marketers you partner with have this same goal in mind.
An easy way for your budget to be spent is by your ads being unoptimized or experiencing fatigue.
So if your agency is focused on providing an ad-centric service, you need to have a clear understanding of whether it is within the scope of their responsibility to optimize the entire funnel or just provide ad management service. If they tell you they are going to optimize the funnel, then you should understand that you should at least see some results from the ad campaigns within several weeks of partnering with the agency. If you don’t and you’re well into a month working with the agency and haven’t seen any results, then while they may say they are ‘optimizing’ the funnel, you should take this with a grain of salt.
Percentage-Based is like Contingency-based Case Law
Lawyers that practice specifically in some areas of law charge a percentage of the case winnings on a contingency basis. This itself doesn’t make the lawyer good or bad. It’s just the nature of their business model and the type of law they practice. Now, because of this, it has enticed many lawyers to jump on the contingency train and for different reasons.
Some lawyers enjoy the idea of helping their clients get more than they would have if they filed or pursued an insurance claim on their own. As a result of their hard work and the risks they take by working the case with no up-front fees, they a percentage of the winnings after.
Other lawyers see an opportunity for a healthy paycheck from their clients, without even having in mind the idea of taking the case to trial. There’s a clear difference between the two types of lawyers. One sees a win-win scenario whereby if the client can be patient and all goes well, the lawyer is prepared to do what it takes to get the client adequate compensation; either through a fair settlement or going to trial if necessary. This lawyer strives to achieve the result. The other contingency fee lawyer sees an opportunity to pocket a healthy margin of the settlement without investing a ton of resources in the work product or preparing for trial.
My point is that the fact that percentage-based agencies and lawyers exist, don’t make them one way or another. However, some lawyers wouldn’t have given all lawyers the bad rap of names like “ambulance chasers” unless some of them resorted to distasteful tactics in the first place. The idea is that from the outside, a business’ agenda and incentive systems can be hard to comprehend. It’s just something to keep in mind when shopping for a marketing partner.
Like a good lawyer puts their clients first and strives to produce great results, so can a percentage-based ad agency.
A good ad agency will protect your budget, be closely monitoring your campaign’s performance in terms of CPC, keyword impressions and clicks and updating any new loopholes in terms of negative keywords. They should be protecting your ad spend from fraudulent and competitor clicks. Most importantly, they should be producing solid results for you.
Fixed Fee Agencies
When I say fixed fee agencies, they may offer rubber-stamped pricing packages. Others may offer custom pricing based on your firm’s particular circumstances, market, objectives, and budget.
At the end of the day, it’s harder to tell if you will encounter the same issues that you may experience with percentage-based agency pricing. While the pricing signals are less clear about the agency’s incentives and agenda, you can ask them how they landed on that number. Is it a fixed number or an estimate based on what they project they need to bill in hours every month?
Whatever the case may be, below is a set of questions you should ask any agency before you engage in a marketing contract with them to ensure you partner with the right agency. But moreover, so that it doesn’t cost your firm time or put it in risk in achieving its specific goals in a timely matter.
Questions to Ask a Marketing Agency Before Hiring Them
- Do they work off a flat fee or is there a percentage-based fee included in the quote?
- What work are they going to do every month that justifies the spend?
- What are the components of the funnel they will implement for you?
- How are they going to optimize your funnel?
- What aspects of the funnel are they going to perform tests on?
- How are they going to optimize your funnel?
- How many new leads per month do they claim/estimate they will generate for you?
- What calls to action will they put in place to convert more traffic into phone calls?
- Will they give you monthly progress/expense reports
- Will they give you access to google analytics to show how much traffic they’re generating, bounce rates, average session time, etc?
- Do they share access/report on the ad management accounts to show your CPC costs, CPA costs, MCAC, etc?
- When will you start to see results?
- What will they do if you don’t see results at that time?
Wrapping Up
Part of making any worthwhile investment comes with taking a risk. It’s only natural. In this article, we discussed the risks that you run depending on the potential incentive structures that agencies may have when you engage with them. Understand that if the deal seems too good to be true, then it may be because it is.
Finally, we looked at some of the questions you should be asking to better understand the agencies you interview. This should ultimately reduce your risk before making the investment in PPC advertising.
