Do you want to compare your spending on marketing and sales to other firms? In June, Law Firm Inc reported that the average firm spends 1.1% of gross receipts on marketing and sales. When the Legal Marketing Association surveyed 864 legal marketing professionals, they reported a figure more than twice as high: 2.4%. The difference is easy to explain, since LMA surveyed legal marketing professionals, and therefore automatically excluded firms that did not have a marketing person on staff.
If you want to be conservative, you can just try to keep up with those averages. But as competition increases, spending is going up. So if you want to survive and prosper in the next few years, you’ll need to spend more. How much more? When will this upward pressure stop?
I have bad news: The end is not near.
I base this conclusion on 20 years of experience owning a small business. Companies that develop and deliver sales training, as we do, spend so much on sales and marketing that 2% sounds like a joke.
According to Don Schrello’s book How to Market Training and Information, in the training business “marketing and sales costs consume one third of every revenue dollar.” (Full disclosure: I first read Don’s book 10 years ago, and was so impressed that I hired him as a consultant. He has since become a member of my Board of Advisors, and a friend.)
When Don surveyed training firms during a 15 year period of growing competition (1997-1992), he found that company marketing and sales expenses increased from a low of 23% to a high of 35%.
Good news for cheapskates: some companies spent much less. Bad news: I think they all went out of business.
In the training industry, there are a large number of companies that do good work. Customers have many choices, and quality is not a differentiator. Excellent service is a requirement for success, but growth is based on relationships and building trust. And in order to grow relationships and build trust, companies need to invest in marketing and sales. As Don summed it up in big bold letters: “Good training products are abundant and cheap. It’s good sales and marketing that’s scarce and expensive.”
Does that sound familiar? According to surveys conducted by Altman Weil (see "Is your firm really marketing?"), “almost all clients believe their lawyers do good work.” So reread the paragraph above and see if you think it could apply to the legal profession over the next few years.
Nobody likes spending money in an arms race, especially when that same money could be used for a trip to Naples or a new boat. Then again, when your competitors start using bullets, how much should you save by shooting arrows?