Avoid the lull
The last few weeks have seen the global credit crunch bite hard. The volume of M&A and property deals had already fallen during the last quarter of 2007, but now capital for leveraged deals has all but disappeared. The dreaded 'R-Word' is now on everyone's lips. Although most commentators believe that the UK economy is better placed than most, and that this should lead to a 'soft landing', the market for legal services is likely to suffer a downturn in 2008. The amount of litigation may increase, but this is unlikely to offset the fall in deal-related work.So, how should firms respond from a marketing perspective, and what should they be doing to minimise the impact of the predicted economic downturn? The following 10-point plan should provide some of the answers.
February 20, 2008 at 07:10 PM
7 minute read
The last few weeks have seen the global credit crunch bite hard. The volume of M&A and property deals had already fallen during the last quarter of 2007, but now capital for leveraged deals has all but disappeared. The dreaded 'R-Word' is now on everyone's lips.
Although most commentators believe that the UK economy is better placed than most, and that this should lead to a 'soft landing', the market for legal services is likely to suffer a downturn in 2008. The amount of litigation may increase, but this is unlikely to offset the fall in deal-related work.
So, how should firms respond from a marketing perspective, and what should they be doing to minimise the impact of the predicted economic downturn? The following 10-point plan should provide some of the answers.
1. Focus on the services and sectors where the firm is strongest
When the economy is buoyant and the demand for legal services exceeds supply, many law firms pick up instructions that they would not normally expect to get. During a downturn, however, when supply exceeds demand, these instructions are fewer and they go to the strongest firms. As the downturn begins to bite, law firms should ensure that their marketing is directed towards those services and sectors where they are strongest and have the greatest chance of securing work.
2. Concentrate on servicing existing clients
Acquiring new clients is more time-consuming and expensive than developing existing clients. This is particularly so during a downturn. Firms should concentrate their efforts on building relationships with their existing clients, thereby enhancing client loyalty and protecting revenue flows. Firms should ensure that they have robust client care and management systems in place to guarantee that good client service practices are being adopted across the whole firm. Since clients become more demanding of their lawyers during an economic downturn, formal measurement of client satisfaction becomes important in order to assess clients' needs and concerns. As clients are forced to look at their own costs, they may become receptive to those of your competitors who adopt aggressive pricing policies to gain work. Your firm will have to plan its response to such moves, which may include coming up with innovative billing methods so that it can demonstrate that it is providing better value for money.
3. Improve the firm's win rate for proposals
When work is plentiful, law firms often accept a low success rate when tendering for work. There is not the urgency to win tenders when everyone is busy. During a downturn, such opportunities can become much more crucial for the flow of work into the firm. Since clients are more likely to use tendering to select lawyers when times are difficult – it gives them greater negotiating power – firms need to become proficient at this practice. Firms should review their procedures and approach to tendering in order to improve their win rates.
4. Employ the most effective marketing tactics
When a firm's profits are high, additional money is often allocated to marketing because the firm feels that it can afford to spend more. In our experience, much of this additional spending is directed towards 'feel-good' marketing: corporate hospitality, sponsorships, advertising, and general promotional activities. In a downturn, firms need to develop integrated marketing programmes that use marketing tactics that are proven to be most effective for the promotion of law firms. These are: writing and placing articles in the press; speaking at industry conferences; running seminars; circulating technical and industry updates; and, conducting 'thought leadership' studies relevant to clients. Fortunately, to be done successfully these activities mainly require time and imagination, not money.
5. Selectively reduce the marketing budget
If firms adopt the more focused approach to marketing that we advocate, most should be able to make significant reductions to their marketing budgets while improving the effectiveness of their marketing. In a downturn, the knee-jerk reaction of most firms is to slash marketing budgets across the board. We recommend that firms focus their efforts behind a few services or sectors where they are strongest. Firms should even consider increasing their marketing spend in these areas in order to deal a knock-out blow to competitors who have reduced their marketing. Certain critical marketing activities should never be cut. These are: client service programmes; client satisfaction surveys; tenders support; business development coaching and training; and internal marketing.
6. Review the level of marketing support
Over the last few years, most law firms have dramatically increased the number of staff in their marketing and business development functions. Many firms now have large numbers of marketing staff who are little more than administrators managing the large volume of marketing events and communications activities being organised by their firm. In a downturn, firms should cut back their marketing functions to a core team of specialists – customer relationship management support, sales and tenders support, internal communications, and analysts/research – who can add real value to a firm's marketing effort. Administrative tasks should be undertaken by secretaries and junior/trainee lawyers.
7. Review the role of external agencies
Most firms have external marketing agencies – public relations, advertising, design, online marketing, etc – to augment the in-house resources that they have. When times are good and the marketing workload is high, these agencies can expect to be kept very busy. During a downturn you should review the role of your agencies in the light of the more focused approach that we advocate. Where you intend to retain agencies, consider moving them to project billing rather than paying a monthly retainer, particularly if you intend to use their services more sparingly.
8. Reduce publication costs
Every firm can reduce the cost of its marketing publications. Most law firms produce a wide range of brochures, newsletters and business reports that they mail to their clients and contacts. By reviewing the purpose of these publications, the frequency with which they are sent out and who they are sent to, considerable savings in postage and print costs can be made. Most firms already distribute such publications electronically or make them available online through their websites or client extranets. If you don't, you should, and if you are already sending some materials out this way, there may be scope for doing away with printed materials completely.
9. Install a marketing planning and budgeting process
Most law firms do not have adequate systems and controls in place to manage their marketing activities. In a downturn, it is vitally important that a plan exists so that the reduced marketing resources can be channelled towards the priority services and sectors. Budgetary controls ensure that spending is kept in check.
10. Redesign the delivery of services
Many law firms have become inefficient in the way that they deliver services to clients. Partners often undertake tasks that could be done by more junior lawyers or paralegals. Up until now, the higher costs associated which such inefficiency have been borne by the clients. During a downturn, those firms that have redesigned their services, say, by passing work down to junior staff or through utilising IT, will be able to compete much more effectively on price.
In the past, many law firms have not had a good return from their investment in marketing. As we enter a difficult 2008, the market conditions will dictate that firms utilise their marketing spend much more wisely. Our plan sets out how this can be achieved.
Kevin Wheeler is principal of Wheeler Associates.
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