Competition for corporate legal work is keen. Law firms vie with each other for a shrinking segment of outsourced legal work. Corporate legal departments and a growing array of well capitalized, tech and process savvy service providers now account for an almost 50% of legal spend. It’s not surprising, then, that law firms are stepping up investment in marketing and business development activities. Will this narrow the growing delta between rising demand for legal services and declining call for law firms? Short answer: not unless law firms address the myriad of reasons for client dissatisfaction as well as differentiate themselves.
A joint study conducted by the Legal Marketing Association (LMA) and Bloomberg Law found that more than two-thirds of attorneys and business development professionals agree their firm is increasing its emphasis on marketing and business development– only 6% disagree. Nearly half of those surveyed report their marketing budgets will increase more than 10% over the next two years, even as firms continue to engage in belt synching to prop up profit-per-partner (PPP).
The primary reasons firms cited for expanding marketing budgets relate to internal pressure to generate revenue, law firm convergence-fewer outside firms used by clients, and keeping pace with other firms that are hiking marketing spend. But jacking up marketing and sales spend will only yield a positive return on investment for firms if they: (1) tackle client dissatisfaction; and (2) differentiate themselves. These will be the linchpins of success.
‘What We’ve Got Here Is Failure To Communicate’
A recent study of the British legal market commissioned by LexisNexis and Judge Business School at Cambridge University contains a stark finding: ‘There is unambiguous evidence of a significant and persistent disconnect between law firms and their clients.’ The disconnect has resulted in a steady migration of work from firms to corporate legal departments as well as a growing client receptivity to service providers and other non-traditional sources for legal services.
The LexisNexis survey cites three persistent causes of the client/firm disconnect: (1) clients want solutions and law firms offer advice; (2) law firms strive for perfection while clients generally want a ‘good enough’ basis to solve a problem–this varies with the value a client assigns to a matter; and (3) law firms fail to provide cost and time predictability–they have not invested in project and process management capability that is common among their clients (and, more recently, in-house legal departments).
The divide between clients and firms is more profound than firm delivery and pricing deficiencies; it also involves a knowledge gap. A stunning 40% of clients in the LexisNexis survey noted that senior partners of their law firms lacked more than a basic knowledge of their businesses. No wonder there is convergence and a willingness to look beyond incumbent firms. Add to that client dissatisfaction with firm cost, incremental delivery improvement, and law firms’ failure to take an enterprise approach to client matters rather than a transactional one, and you’ve got quite a list of client gripes. The consequences are starting to become noticeable. It’s not just a buyer’s market–it’s also one where buyers are not satisfied by what most law firms are selling. And clients are voting with their feet.
On – 17 Apr, 2017 By Mark A. Cohen