Brand power

Managed carefully, brand can be the basis for sustainable competitive advantage and strong, profitable bonds with clients. By Laurie Young

Suppose there was a business process that could ensure that the price your practice’s lawyers could charge for their hours would always be thirty per cent higher than any other in town and, better still, the clients were happy to pay those higher prices. Or what if there was a way to ensure that, when the owners of the practice were ready to sell, they would get a queue of interested buyers offering high multiples of earnings. And imagine, in these days of ‘the war for talent’, if droves of ‘generation Y’ youngsters were keen to join the practice.

Yet there is a realistic, proven business process which is able to deliver all of these advantages. Over the past century, in industry after industry, organisations large and small have shown that brand management can do this for the owners of almost any business. Moreover, for the sake of doubt, professional practices have also achieved this highly profitable trick. Partnerships such as McKinsey, Bain, Deloitte and Russell Reynolds have earned higher margins by differentiating themselves in their own corner of the professional service industry. Others (like Goldman Sachs, Accenture and Heidrick & Struggles) have demonstrated the enormous power of a successful brand in making a generation of partners fabulously wealthy as they have gone public.

It is surprising that brand management is not more generally recognised in the legal profession to be the powerful tool that it is. It certainly has more impact than many things attempted over the past 20 years by different leadership teams. During that time practices have looked to passing fashions, such as ‘globalisation’, the ‘multi-disciplinary practice’, cross selling or client relationship management systems, as a means to create profit. These fads, exaggerated by interested pundits and gurus, have come and gone with dubious impact on the professions. By contrast, a vast number of firms have shown that it is possible to turn their reputation into a famous entity which appeals to a group of clients and, over time, becomes a very valuable asset. It is astonishing that more leaders have not invested attention into this proven technique.

Missed opportunities
Unfortunately, many legal practices dismiss brand work as just a tedious but necessary design process for their practice’s ‘public face’. More on why this may be later. They limit it to the appearance of their office, the impact of their stationary, the style of their website, or the glossiness of the company brochure (or its equivalent). As a result, many have ignored, to their detriment, the precious role that brands can play in the life of both their practice and their clients. It is entirely possible that much of the UK legal profession might not only miss out on a proven source of profit, but be damaged in the future by this ignorance.

An effective brand is much more than design or high-minded ‘values’, which client service staff are somehow expected to reflect in their work. It is an entity that engenders an emotional response from a group of human beings so that they pay more than they probably should for the purely rational components on offer. It is a changing, multi-faceted entity, which creates a variety of impressions in the minds of different human beings through many different stimuli. As Jeremy Bullmore, director at WPP, says, “Brands are fiendishly complicated, elusive, slippery, half-real/half-virtual things. When chief executives try to think about them, their brains hurt.”

A brand is also a very valuable intangible asset comprising the goodwill of buyers and nurturing their future buying intent. Or, as Tim Ambler of London Business School has commented, it is “… the future cash flow of the business”. Brand can differentiate an offer from competitors’, create a price premium, enhance margins and encourage client loyalty. Moreover, its effect is enduring. There are several brands in existence today that were created well over a hundred years ago.

It is beyond dispute that an effectively designed image rests in the memory of people and helps them to buy. If that image is carefully managed, a product or a service will appeal time and again to a group of interested buyers. It becomes a familiar part of their life, giving them consistent benefits in their day-to-day life. As a result, they will pay a premium for the offer and develop a loyalty towards it.

This does not mean that this incremental cost is not valuable to them; quite the opposite. Over time, they become fond of these entities and, if they think about it, regard them as part of the landscape of their life. What starts as simple reassurance about quality or consistency becomes, on a deeper but difficult to measure level, an emotional bond in a hectic modern lifestyle. As a result there are people in our country who feel warmth towards a tin of paint, a sugar filled drink or sports shoes. In fact, these items mean so much to them that they can be as upset and unforgiving if they think a favourite brand has been damaged, as when a favourite soap character is killed off.

There are, similarly, business buyers who proudly announce to shareholders that McKinsey helped construct a defence strategy or that they are audited by a ‘big four’ accountancy firm, despite the higher day rates that these firms charge. And a similar effect is seen in the attitude of in-house counsel of larger companies who are proud to have firms like Clifford Chance or Allen & Overy on their panel.

So why hasn’t this marvellous technique been more fully adopted by lawyers? To date, a definitive answer has not been produced. Perhaps some simply have not heard of it properly or do not understand the techniques and dynamics behind the phenomenon. It could be that they struggle to get client service personnel to ‘embody their values’, demonstrating the need for powerful internal communications programmes as part of the branding process. Perhaps it is because brands are exclusively associated with consumer products (like soap or fizzy drinks) in their mind. Or maybe it is because brand work is dismissed with tacky advertising like that for personal injury lawyers on television. Sometimes lawyers are too busy delivering the technical work they think clients need, to step back and think seriously about the strategic direction their practice should take. Maybe the profession is too ‘supply side driven’ to use the jargon of business strategists.

From supply driven to market driven
History shows that truly adopting brand management often involves a major change to an organisation. The practice must become market, rather than supply, driven. Large firms do not typically have the political commitment to radically alter the balance of power in their internal operations in order to achieve this. The partnership structure and the need to gain consensus makes it difficult. They have to be driven there by relentless market forces, like regulation, often going through traumatic management change en route. Smaller practices, on the other hand, can be daunted by the world-class power of better-known brands. They forget that many were built from scratch by business leaders with very modest initial resources. However, whether brand success has resulted from vision, luck or the ravages of the market, the steps needed to succeed are well known. It is possible for any UK firm to create a brand which people prefer and pay a premium for over many years.

They must first understand what their main client groups are looking for. Some want a no-frills cheap service and others a more features-rich offer. All seek and expect their view of what constitutes value (an unarticulated mix of price and quality).

In a free market with few distortions, suppliers evolve to take enduring positions along the line of viable value. They could be a ‘market leader’, for example, setting expectations of price and quality. Or a ‘niche’ supplier; setting out its offer on the basis of distinct differences.

Right now, with the Legal Services Bill under development, there are PLCs that see law practices as inefficient, high margin, poor-quality suppliers to consumers. Several will seek to enter this market and might occupy the low price, streamlined (easyJet) position of the market with ruthlessly efficient chains. Or, worse, they might redefine consumers’ expectations by becoming significant players in the market, as has happened in other retail professions like pharmacies (Lloyd’s Chemists) or opticians (Vision Express). In either case, legal practices which have defined their brand position will be able to either survive such massive disruption or sell out with a healthier pay off.

There is a hard financial dynamic to modern brand strategy which, in my experience, lawyers find convincing. It is possible, for firms of any size and style of operation, including legal practices, to create an offer that will be different from competitors’ and earn a price premium. That is of enormous value to the professions, particularly with the significant changes affecting or muted for many. In the past, specialists have found it hard to translate brand strategies into clear numeric data which wins the respect of partners. As a result, investment in many brand programmes has been based on little more than intuition and several worthy brand strategies have not got the investment they warranted.

There is good news here. Over the past two decades, as developed economies have changed from a manufacturing to a service bias, the accountancy profession has become increasingly focused on valuing intangible assets. From this point of view, brands are simply one element in a firm’s array of assets and it is possible to use state-of-the-art valuation techniques in order to calculate their value. These include modern methods, such as ‘real-option valuation’, which are more robust than some of the older, more judgemental methods, such as residual ‘goodwill’. Using these techniques, it is possible to estimate the likely success of different brand strategies and to estimate the likely future brand value resulting from those strategies. In other words, it is possible to put real numbers behind brand strategy and calculate the likely return on investment. Or, to put it in a more direct way: by investing in a proper brand strategy over, say, three years, lawyers will be able to charge more for doing exactly the same thing.

Effective brand management is more common in the consumer-goods sector than in professional services firms. Yet professional services brands earn enormous value for their owners. They affect the price of every job the firm undertakes in every part of the world. They set expectations of quality and communicate subliminal messages of the firm’s raison d’etre. They are the firm’s major intangible asset and should therefore be one of the prime strategic issues for professional services firms to address.

It is sensible, then, for practices of all sizes to take a hard-headed look at brand management. This has been shown in different sectors of the world to produce real value over time and guard against the ravages of the market. Managed carefully, brands can be the basis of a firm’s sustainable competitive advantage by building strong, profitable bonds with loyal clients. For legal services, this means creating a branded proposition that stands out from the crowd and consistently delivers what it promises. To date, professional services firms have, on the whole, failed to get to grips with strategic brand management. With the right visionary leadership and political will, firms can manage their brand in such a way that it gives a clear direction to everyone involved in their practice.

Laurie Young is a specialist in service strategy. He can be contacted at www.lauriedyoung.com