The struggle to be unique

Which of the many available new marketing technologies should law firms choose in order to create competitive advantage, and how do they build a programme that offers the best balance of risk versus return. By Jason Parkman

While every law firm likes to think its services are unique, the reality is that in the current legal climate there are significant difficulties in trying to achieve a level of differentiation that sets one firm apart from its competitors.

The rate of merger and acquisition (M&A) activity among large law firms illustrates why differentiation is becoming increasingly difficult. There are around 120,000 fee earners in the UK, 47,000 of these in the top-100 firms, and that number is going up by many thousands every year. In 2005, in firms with more than 30 lawyers, there were 49 mergers globally and this rate is continuing to rise. In effect, this means each year the large firms become dramatically bigger and the smaller firms, unless they are niche players, are acquired by larger ones. In a recent survey undertaken by financial-services group Smith & Williamson, a resounding 100 per cent of respondents thought the level of merger activity would increase or stay the same in the year ahead.

The result of this activity is that the expertise particular to each firm and the culture of its work place becomes increasingly more difficult to articulate. Faced with the difficulty of clearly expressing what is unique about their business, most firms settle for extremely generic descriptions. These often encompass such phrases as ‘full service’, ‘global provider’ and ‘collegiate’ – labels that, to a prospective client, quickly lose traction once they have encountered them on the first
two or three law-firm websites they happen to visit. To the outsider, many firms appear to provide the same service.

Increasing competition for the legal consumer
As law firm clients become more sophisticated in the way they buy legal services, firms today regularly face clients who use preferred provider lists when selecting outside counsel – a fact that compounds the difficulty to gain differentiation. As a result of this mandated selection process, organisations are using less external counsel. According to a 2004 European survey by the Association of Corporate Counsel, over 50 per cent of European general counsel have fired or were considering firing one of their law firms during the year.

Increasing client consolidation adds to this effect and puts long-term lawyer/client relationships up for bid. While in the past it was true to say that law was relationship based, these days that may be enough to get a foot in the door, but it doesn’t guarantee success.

A strong relationship and good track record with senior management can be eroded suddenly when a bigger player acquires that client. The strength of the prior relationship will not create much traction within the new organisation and it certainly will not be enough to get on their preferred provider lists. US giant General Electric fired 80 per cent of the law firms it worked with last year alone, and a similar pattern can be seen among many large UK corporates.

Strategic shift in the role of marketing
To counter these trends there has been a strategic shift in how marketing is undertaken within law firms, or to put it more precisely, a better alignment of the role marketing plays within law firms when compared to the way marketing is used elsewhere in the world.

We have seen a shift towards much more strategic use of marketing and better alignment of the marketing function with the business aims of law firms. Ten years ago, marketing consisted of pulling together brochures and creating collateral – which, once assembled, were often not revisited or updated to match any change in strategic direction.

Today we see many more marketing directors working alongside senior partners. They are being drawn in to offer strategic advice on how a firm can implement measures to become more competitive within a regional or global market context.

Concurrent with their rise to the top table has been an increase in the type of technologies available to these marketers, giving them a range of ways to implement their marketing plans to give their firms a unique position amongst their competitors. As a result, the reach of marketing has expanded and, more than ever before, marketing is taking control of a broader range of business activities.

For example, at Thomson Elite, we are working with more and more marketing teams who are managing law firms’ intranets. This activity used to be strictly controlled by the firm’s IT division, but today it is seen as so central to the way firms develop their business and communicate with one another that it now falls within marketing’s auspices.

New ways of managing information
Law firms need to look at novel ways of managing information that is generated during the course of their day-to-day business. Global firm Jones Day provides a good example. Using its Experience Management system, the firm organises 11,000 separate pieces of experience-marketing information and makes it available online. The repository is comprehensive, up-to-date and searchable, so is a powerful tool for promoting the skills and success of the firm.

Most law firm information lives in word documents, spreadsheets and in people’s heads. Good experience marketing and full programmes around delivering that information brings this information to heel and organises and publishes it in a way that enables a firm like Jones Day to explicitly articulate why they are different.

Other tools gaining in popularity are proposal and packaged content generators. Software that can accurately identify relevant content and automate its assembly into targeted content packets, or place it into pre-defined proposal generators, can radically improve the turnaround time for new business proposals.

Exploring new ways of targeting clients can also improve business-development success rates. Chief among these is the way firms tie together information to suit particular audiences.

In the corporate world, sportswear giant Nike executes this type of marketing extremely well. It has a specific targeted website and marketing message for all the different interest groups that form its market. For the running-shoe sector alone, it has around 50 completely different websites servicing all the geographies and demographically unique groups it does business with. A targeted website with relevant content specific to a law firm’s audience will capture interest and build loyalty.

UK financial institution Halifax uses this approach to good effect. It has created the Halifax Price Alert, an application that enables users to automatically receive regular updates on share-price movement of up to five FTSE 100 stocks on their PC desktop It is prompting more trading among Halifax customers and increases its customer acquisition as word of mouth encourages non-customers to use the tool.

Similarly, UK law firm Lovells has a dedicated graduate career site that targets recruits looking for their first job out of law school. Because clients use website searches as a way of reaching out to a law firm, these sites provide firms with a clever way of gaining early mindshare. Connecting the firm’s name with a particular sector often provides a high ranking in any website search a client undertakes.

New technologies provide value-add opportunity
The tried and trusted marketing approach of using e-mail marketing is no longer a sufficient differentiator. Around 90 per cent of firms with more than 50 lawyers are now running a baseline e-mail marketing campaign. A large corporate like General Electric, which uses around 94 different outside counsels, is probably receiving e-mail from at least 80 of those firms. So, if it isn’t specifically targeted and perfectly timed, it will be going directly into the junk-mail filter.

One good, cheap way of delivering timely information that enables clients to opt in or out at their own will is really simple syndication (RSS). Essentially, it enables people to subscribe to newsfeeds from a firm’s website as they see fit, as opposed to content being pushed at them.

A slightly more risky marketing approach is podcasts – audio files that clients can subscribe to and listen to on the move if they so desire. A few firms, including Osler, are experimenting with this technology and have developed in-house audio-recording technology to produce updates from senior personnel on a weekly basis. There is a novelty factor and freshness in this approach, but ultimately clients will judge them on whether the content actually provides any value.

A further extension of this, which again some firms are beginning to explore, is video updates, whereby partners are filmed offering their thoughts about M&A and other areas of law. This is obviously more costly and time consuming, but once again if done well can be a good differentiator, as the firm will quickly gain a reputation for being unafraid to experiment and for being technologically savvy. Building a reputation as being an innovator is in itself a highly valuable piece of public relations.

The internet enables firms to experiment with the way they offer and deliver services to their clients. The act of placing a service online may make it easier for clients and potential clients to access and use. This provides additional value to the client and the firm may find it gets an increase in demand for that type of work as a result.

How do you prioritise and invest?

With a plethora of different technologies and literally hundreds of different ways of using them, how does a firm decide on what is the best marketing approach to use? Potentially, all of the options may seem like a good idea, but some are also extremely risky.

Our advice to firms is to adopt a portfolio approach as a way of negotiating the choices that need to be made. Firms should divide their potential interest in these technologies depending on the specific goals they are trying to accomplish, and they should analyse these in the same way an individual would analyse an investment portfolio.

Following this rule, it is sensible to have a diversified set of investments in your portfolio. Technologies that are new and unproven but have the potential to provide real differentiation, such as video podcasts, need to be balanced with more solid foundation investments. The key is to evaluate your portfolio on the return it provides as a whole, not just on the success or failure of single elements.

Often marketing departments want to take a chance on a new technology, such as RSS, but are forced to justify these opportunities purely on the basis of whether they can guarantee success. Unfortunately it cannot be guaranteed from any one investment, so marketing choices assessed in this way will never empower a firm to do anything with its technology that provides tangible differentiation. By the time you can prove it, every other firm around you will also
be doing it.

Just as a potential investor will plot his or her investments by balancing potential return against potential risk, a firm’s marketing-technology investment portfolio should be approached in the same way (see Figures 1 and 2).

In the lower left-hand quadrant are activities that represent, simply, the cost of doing business, such as running a basic company website. This is low risk, but also has a low return rate, because everyone has one and it no longer adds significant value for a client.

On the other end of the scale are possible breakthroughs – those technologies that are very risky but offer great potential and value. However, the sweet spot where most firms should look to invest are those technologies that offer low risk but the chance of high return.

One obvious area to avoid is high risk matched with low return, and the most recent example of a technology that falls into this category for many firms is client-relationship management (CRM). For the amount of money it costs, CRM has not offered anywhere near the returns it should have up
to now.

All of the technologies discussed above live somewhere in this matrix and the business aims of the firm, together with its size and culture, will determine how the matrix is populated in terms of risk and return.

While individual marketing and business-development investments can and should be measured for success against clearly-defined criteria, a programme should be considered and planned as a whole, based on risk tolerance and desired results, and it should be judged by taking a long-term holistic view of the programme.

Jason Parkman is a legal marketing expert at Thomson Elite. He can be contacted at jason.parkman@thomson.com