Splashing the cash

As competition heats up, where should marketing place those hard-won funds?

By Julian Fenwick, Blake Dawson Waldron

The partnership model has always defined the place of marketing within law firms, especially the larger ones. When dealing with the diverse demographic of a large partnership, it is rare to see other than lowest-common-denominator policies applied to the funding of professional-services marketing. The issue centres on the lack of retained earnings and the willingness to apply vital funding to ensure that the firm has a committed and differentiated long-term strategy.

If you use a broad brush to divide the partnership demographics of any major firm, there will be segments who are keen to develop their firm and those who are keen to run lean. Those who are new to partnership and have high personal expenses, such as mortgages and school fees, would rather see earnings returned to the partnership. This demographic also has an overly optimistic view of its future and, as such, has a greater sense of belief in its own market-making abilities. Those at the other end of the spectrum nearing retirement will have a similar view on investing in the business. However, their reasoning is clearly centred on maximising their personal income before retirement. What is left is the mid-section of the partnership, who have a few years behind them, and a fair few more in front. This group is keen to see new strategies put in place, which will increase earnings in the mid to long term, increase the value of their equity, and enhance their personal reputation.

As competition heats up in the global legal market, firms must take time to consider where to best place scant resources to effectively compete. It is no longer appropriate to set ‘me too’ strategies in place; marketers must look for innovative and effective ways of ensuring that their firm is clearly differentiated in today’s market, and well positioned for the future.

If we accept that there will always be limited resources set aside for marketing, then it is the responsibility of the marketing professionals to ensure that these funds are spent in the most effective manner. This is not only vital to the positioning of the firm in the wider market, but also to the reputation of marketing within individual firms.

A recent survey released by BTI consulting, of 240 Fortune 1000 companies in the US, measured client satisfaction against their willingness to hire a new law firm over a five-year period. In most years, more than 60 per cent of clients interviewed stated that they had hired a new firm in the previous year. As expected, there was an inverse relationship between the two factors. As satisfaction levels went up, churn in providers went down.

Improving client satisfaction
So, it begs the question, how do we position our firms to be part of the 60 per cent that are hired, and how do we prevent our clients from dropping us in favour of a new firm? The answer is obviously around improving client satisfaction, but how?

Too often we look at the other players in a market to measure where our firm sits and what we should be doing, when we should really be concentrating on playing our own game. In sport, where teams compete against each other until one wins the grand final, there is an obvious requirement to understand how the other team plays and what its strengths and weaknesses are. All teams are aiming to win a singular defined goal and are playing to the same set of clearly defined rules. In business there is a distinct lack of correlation between how supposedly competing firms win a client’s work because each firm is, or should be, playing to a different set of rules. What our competitors are doing bears little relation to how we should be competing for the client’s attention. Management and economics academic Michael Porter puts it very simply, “The worst error is to compete with your competition on the same things. That only leads to escalation, which leads to lower prices or higher costs unless the competitor is inept.”

In a sense, higher-end law firms are protected here. Because they are selling their people’s services rather than a commoditised product, it would be almost impossible for a law firm to offer the exact same service as a competitor. That said, as with all marketing, it is perception that counts more than reality and, as such, there is the danger of being perceived as all being the same. The marketer’s role is therefore to uncover what makes their firm different and exploit that difference until it is obvious to the clients.

What really makes a firm different?
There are any number of factors which can make one firm different from the rest, but the key indicators are those things that the clients value most heavily:

Whether my firm has the best people for the job;
I expect my lawyers not only to have the best understanding of the area of law they are practising in, but also to have a deep knowledge of the effects of that work on my business;
Whether or not my law firm is pro-active;
Does it let me know when issues arise that I should be aware of? Is its notification tailored to my business or just a general newsletter? The likelihood that I will receive a personal call from one of my lawyers when something is critical to my business;
Does my law firm really understand my business? It is not enough just to have an idea of the sort of business I am in. I want my lawyers to understand the culture of the business, the pressures I am under, and the results the management wants to see;
What value-adds do I receive from being a client of this firm? Am I able to be introduced to other clients? Will my company receive any benefits? Will I receive any benefits?

The list could go on. The basic premise is on building trust and open dialogue with clients. We, however, are concerned with the effective use of limited marketing resources. As most marketing initiatives will involve the use of lawyer time there is often significant internal pushback, due to the high opportunity cost of lawyer time and the utilisation measurements employed to rate lawyers in many firms. As such strategies need to put in place to ensure that measurable results are achieved.

Client lifetime value
There is considerable cost in tendering for and winning work from a new client. Often, the cost may seem to outweigh the value of the work. It is important to consider that the initial investment may lead to the development of a strong relationship, which in turn can generate further work with little or no cost of acquisition. Marketers should spend time deeply researching the potential legal spend of the client over a number of years, looking beyond the scope of the initial tender.

Cross-selling
Many firms have realised the benefits of cross-selling their services to clients. However, there is still a reticence to create formal strategies to ensure that this happens. Firms that move away from the one-to-one client-to-partner relationship in favour of the many-to-many ‘Velcro’ style relationship are more likely to have improved client retention.

In addition to building cross-practice relationships, emphasis should also be given to building cross-hierarchical or cross-generational relationships with clients, as these will not only produce a less formal line of communication, but also help to ensure longevity in the relationship.

Client referrals
Testimonials are hard to ask for and hard for clients to give. However, they form the most powerful endorsement of a firm and its people. Many surveys have shown that satisfied clients are likely to tell people how satisfied they are. More so, dissatisfied clients are likely to speak about their experiences.

To maximise the value of satisfied clients, they have to be speaking to your firm’s prospective clients. Events where satisfied clients and prospective clients can interact are an essential part of professional-services marketing.

Marketing budgets will always be tighter than marketers would like, especially in professional-services firms. However, by building strategies around client retention, networked relationships, and ongoing referrals, marketers can make the most of tight budgets and have a long-term impact on firm profitability.

Julian Fenwick is national business development manager at Australia-based international firm Blake Dawson Waldron. He can be contacted at julian.fenwick@bdw.com