Recently, we conducted research into how well professional services firms such as lawyers and accountants go about winning new business. This found that law firms, in particular, were weak at planning, managing and measuring their new business development and marketing activity.
Let us consider the top 50 UK law firms’ fee income for 2002-03. The Chartered Institute of Marketing says marketing budgets are typically set at between 2%-5% of fee income. When you apply this figure to the top UK law firms, this amounts to somewhere between £15m and £40m a year being spent on marketing. Take this figure alongside our research findings and it suggests that the legal profession is making a significant investment in marketing but without real planning, management or measurement of that expenditure.
To gain a tighter control over their marketing spend and the results it brings, law firms must ensure that their investment is far more closely tied to a business development process and that they understand the different levels of marketing and what to expect from them.
Any form of business development planning should be influenced by a firm’s corporate objectives. To gain better control over their business development, we recommend that firms undertake an assessment of their client portfolios. This creates the opportunity to define the types of clients and prospective clients the firm needs to achieve their corporate objectives. By comparing these ‘ideal’ clients to the current portfolio, firms can identify which clients need to be kept (and protected from competitor advances), those that do not ‘fit’ (and need pruning) and how many new clients are needed.
Deciding which prospective clients to approach is not easy. Successful firms cross-check particular targets to a triggers and filters selection criteria. Triggers are those factors that indicate it may be timely and appropriate to develop the relationship with a particular prospective client. For instance, there may be a change in management / ownership or the business may be going through a period of significant change. Filters are those factors that make it easier / more difficult or more / less attractive to do this. For example, the firm may have a track record in their marketplace or the incumbent provider may be perceived to be too large or small to serve their needs.
From our experience, lawyers tend to try and work with contact lists that are unrealistically long. By using triggers and filters, a large mass of potential clients can be reduced to a more manageable list for lawyers to focus their efforts on. They will also have a greater chance of winning them in the first place.
The next stage is to rethink (or establish) a business development or marketing plan. This plan will define activities focused on achieving the firm’s corporate objectives and targeted at the clients the firm needs to keep and the prospective clients it wants to win.
The plan will establish the firm’s business development process. In successful firms, we have seen this process focus on generating marketing activities that are highly targeted and personalised. These activities in turn create opportunities for face-to-face dialogue with key people in our clients and prospective clients. Such a process is also continually monitored so that the tactics adopted are effective and build relationships.
To conduct highly targeted and personalised activities, we need to have information about our client or prospective client, otherwise our approach is likely to be ill-informed and unsuccessful. We have seen some firms establish a knowledge gathering system to support their business development efforts. This system helps them understand the client’s business and competition. It also identifies the current business issues that affect them and highlights key industry developments that will have an impact.
Legal marketers are in an excellent position to gain economies of scale from market intelligence and research. By identifying ‘similarities’ in the prospect and client base – for example, industry sectors – and segmenting the portfolio into groups, research expenditure can be focused on gathering intelligence about the clients the firm really wants.
As well as client intelligence, to conduct a targeted and focused marketing campaign it is important to understand that a firm’s marketing will work on three different levels. Collectively they create the image or ‘brand’ – which makes clients choose to buy the services of that firm over another.
These three levels are:
- Corporate marketing – activities that create a general awareness and understanding about what the firm does in general;
- Capability marketing – those activities that specifically illustrate its capabilities; and
- Contact marketing – these activities involve direct contact between the client / prospective client and people from the firm and demonstrate the firm’s understanding and support of its clients or prospects. They seek to add value to the client based on this understanding. Often it is these activities that differentiate a firm from its competitors.
From our research, while there is a good general understanding of marketing within legal firms, the amount of contact marketing – which is almost exclusively the remit of fee-earners – is however, quite low.
We have seen much enthusiasm towards contact marketing as a concept but the reality is often that corporate and capability marketing, which are by their nature more passive, are relied upon to generate and keep clients. Typically in law firms, tremendous time and financial resources are devoted to corporate and capability marketing while very little is spent on contact marketing.
In contrast, when you look at how hard the three levels are to measure, contact marketing, because of its direct and active nature, is the easiest. This is one of the reasons why law firms have difficulty measuring their marketing expenditure. They devote significant resources to what are the most difficult areas to measure. In turn, they also expect results which only contact marketing can deliver. Corporate and capability marketing do have a strong role to play in building awareness in the client’s mind. However, without contact marketing the client / prospective relationship cannot be fully developed and the client is less likely to buy from that firm.
While we are not suggesting that firms halt expenditure on corporate marketing, we do recommend that the marketing plan and budget is re-examined against this new understanding. Over time, a greater proportion of time and the budget can then be devoted to contact marketing.
Measurement is crucial to the success of the plan and the achievement of the firm’s objectives. From our research, it tends to be ignored or done badly. Those firms which are stronger at measuring their business development and marketing tend to examine several variables to determine the effectiveness of their efforts. In addition to changes in fee income, these clients measure client retention, new bid success and client satisfaction levels. They also match these outputs to inputs such as the people and time involved, the activities undertaken and the money spent.
By tracking both the inputs and outputs on a regular basis, these firms are better placed to take any corrective action if the results show a deviation from their aims. They are able to see a direct correlation between what they spend on marketing, the new business they win and a reduction in the clients they lose to competitors.
Our research found that while law firms are spending significant time and money on marketing and business development, they are not managing or measuring that process effectively. We believe that bringing marketing and business development closer together and focusing them on achieving corporate objectives, will help address this imbalance.
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- Making a Breakthrough Published 14th May 2009