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5 posts from March 2008

March 26, 2008

The most important trends in legal business development (Part 3 of 5)

Loyalty.  For lawyers, the reduced importance of client loyalty first became apparent with the rise of the DuPont legal model. In 1992, DuPont established a “convergence process” to increase efficiency, reduce the number of law firms they used, and to work only with firms who treated DuPont as a strategic partner.  Within a few years, DuPont had reduced the number of law firms it used from 350 to 42.  To put it another way, DuPont stopped working with 308 firms.  If loyalty counted for anything, it wasn't much.

By 2006, Business Week (9/18/06, p. 42) estimated that this approach had saved DuPont “$100 million...through automation, outsourcing, and reducing the number of outside law firms it uses.” 

DuPont has publicized their success, and even set up a web page with everything other companies need to get started on this process, including a 5 page downloadable RFP template (at www.dupontlegalmodel.com).   Variations on the DuPont model have spread widely, and now RFPs and competitive bids have become standard operating procedure at large law firms.

Some competitions have been even tougher than DuPont’s.  A few years ago, when Tyco applied the DuPont model, they started out with 167 law firms handling product liability cases.  By the time they were done, they were using just one firm:  Shook Hardy Bacon.  And we know loyalty was not a factor in the decision, because they had never worked with the winner before.  They won by proposing an approach that Tyco judged as the best price and the best value.   As Edward Schechter, Chief Marketing Officer at Duane Morris, summed it up in a 2005 panel at the New England Legal Marketing Association, very simply “The DuPont model is changing the profession.”

Relationships.  Even in an age of convergence and RFPs, some rainmakers swear by the personal relationships they have been cultivating for many years at baseball, football, basketball and hockey games, not to mention all those steakhouse dinners.  There is no doubt that in the past, social relationships have made a big difference in keeping clients happy and in getting new business.  But there is also no doubt that in the future, the importance of social relationships is headed down. 

In a panel at the 2007 national meeting of the Legal Marketing Association, Mary K. Young and Norm Rubenstein (of the Zeughauser Group), and Leigh Dance (ELD Project Marketing International) described “Ten client buying trends and how to leverage them into wins for your firm.”  Many were related to value and cost. 

In my view, the most interesting trend they discussed was the growing influence of procurement professionals.  Over the last ten years, procurement professionals have substantially increased their influence at large corporations, by becoming extraordinarily skilled at reducing costs throughout the supply chain. The good news for lawyers is that they were among the last to get squeezed. The bad news is that the squeezing has just begun.

“Procurement managers tend to look at legal service purchase like buying widgets,” said Dance. And the way to get the best price on widgets is to force suppliers to compete more directly by issuing RFPs.  Anyone who has worked in legal marketing for the last few years will attest to the radical growth in the number of RFPs, and in their importance.

Are social relationships still relevant to new business?  Of course.  They always will be.  It’s human nature to want to work with people you know and trust, especially in a sensitive and critical profession like the law.  The smaller the client, the more important these social relationships are likely to be.  But every time a client professionalizes the buying process, the value of social relationships goes down just a little bit more. 

Next week, I will have more to say about process and price.

This series of posts is an expanded version of an article I published in the March 2008 issue of Marketing the Law Firm, titled "Legal Sales & Service: The Most Important Trend in Legal Business Development."  To download a .pdf file that includes all five parts of this series, go to the Free Resources section of our web page.

March 19, 2008

The most important trends in legal business development (Part 2 of 5)

Last week, I introduced the idea that trends in five areasloyalty, relationships, process, price, and valueare transforming the legal profession.   

The same trends are affecting many other businesses due to the pressures of an increasingly competitive global economy.  Indeed, in the last twenty years most other businesses have already felt these trends far more than lawyers.

Last summer, a reader of a Business Week column (Aug 13, 2007, p 92) by Jack and Suzy Welch (of GE fame) asked, “Is customer loyalty dead?”  Their answer: “Not dead, but different.  Time was you could ‘earn’ a customer’s loyalty with tickets to a big game... [and] a few nice dinners.”  Those days are over, according to the Welches.  In “today’s fierce economy” there is a greater emphasis on price and on a “two-way approach” in which sellers are “fervently committed...to making your customers win big in the long haul, rather than just meeting their immediate demands.”

Sales gurus have been preaching the benefits of these types of client partnerships for more than 20 years, starting with two classic books:  Robert Miller and Stephen Heiman’s Strategic Selling (1985), and Neil Rackham’s SPIN Selling (1988) which summarizes his twelve years of systematic research on over 35,000 sales calls.  (For details, see my post “What lawyers need to know about SPIN Selling.”)

In 1994, when Larry Wilson published another book along these lines (Stop Selling, Start Partnering), he compared the changes in the business climate to “churning white water,” which is harder and harder to navigate due to globalization and the growing client perception that everything is a commodity. He began that book by arguing that all companies need to think differently about service and create “powerful relationships with your best clients (p. 1).” Selling is not about pushing services onto clients, Wilson said, but about “trying to understand and help clients solve their problems.”  Value is in the eye of the beholder, so the only way to provide it is to genuinely understand what clients want and need, by asking good questions, and acting on their answers.

And that challenge just keeps getting harder.  Last year, Tom Snyder and Kevin Kearns wrote in Escaping the Price Driven Sale that “Brand allegiance is virtually nonexistent in today’s hypercompetitive market.”  They argue that to succeed in this environment, sellers must learn how to have a positive impact on one or more of five crucial financial measures: revenue, cost of sales, margin, expense, and/or profit.  In essence, the seller must learn so much about the buyer’s industry that he can demonstrate problems, solutions, and opportunities before the buyer becomes aware of them.  There’s nothing easy about it, but this approach will allow sellers to resist commoditization and charge a premium price.  Indeed, this is the only way, as the title of the book puts it, to “escape the price driven sale.”

Are the harsh trends which have been transforming other businesses for the last 20 years really coming to law firms?  Next week, I’ll begin to review the evidence for the first two areas:  loyalty and relationships.

This series of posts is an expanded version of an article I published in the March 2008 issue of Marketing the Law Firm, titled "Legal Sales & Service: The Most Important Trend in Legal Business Development."  To download a .pdf file that includes all five parts of this series, go to the Free Resources section of our web page.

March 12, 2008

The most important trends in legal business development (Part 1 of 5)

A few weeks ago, I had lunch with the general counsel at a Fortune 500 firm, and we got talking about some of his best, and worst, experiences with law firms.  Maybe it was just the questions I asked, but he seemed to have a lot more experiences in the worst category. 

His central message was that “Social events and personal relationships just don’t matter like they used to.  These days, if a firm wants a steady flow of new business, they must deliver value.” 

In a transparent world where every GC is held accountable for results, and you’re only as good as what you accomplished last week, golf outings and tickets to Yankees games just don’t have the power they used to.  This GC’s best relationships were with firms that delivered value, that were open and honest about anticipating cost, and that sought his advice on tactics, so that he could choose the best course based not just on legal strategy but also on their financial implications.

For each new matter, his company selects a law firm based on their expertise, their history working together, the amount at risk, and their billing rates.  Several times, he returned to the idea that there are a number of firms that do excellent work, but their prices are too high for routine work.  So he relies on the high priced firms strictly for cases with a great deal at risk, and “bet the company” matters.

I was not surprised that his stories kept coming back to money, and discussions of the potential return on investment.  But I was surprised at how many firms he had worked with who did not seem to understand this very fundamental point.  They just wanted to maximize revenue in the short term, and did not consider how much better they could do in the long term if they paid more attention to giving clients what they want and need.

Some of the firms he talked about always wanted to win the case.  They couldn’t care less how much it cost, as long as they won. “It’s easy to get carried up in the moment with the need to win,” he said.  “But sometimes we’d be a lot better off if we settled sooner.” 

Other firms have a reputation for producing a blizzard of paperwork, to overwhelm the other side with the cost and difficulty of pursuing a case.  This can be a very effective strategy if you just want to win, but in many cases “it works better for the law firm than for the client, because we have to pay for them to produce all that paper.”

A few firms are notorious for spending weeks, months or years preparing for a case, and then routinely “suggesting settlements on the courtroom steps.”  In many cases, it seems they could have settled much sooner and avoided much of the preparation cost. 

This GC’s comments reflect some significant changes, which are still developing momentum.   Over the next few weeks, I will write about trends in five overlapping areas that are changing the way lawyers do business:  loyalty, relationships, process, price, and value.

This series of posts is an expanded version of an article I published in the March 2008 issue of Marketing the Law Firm, titled "Legal Sales & Service: The Most Important Trend in Legal Business Development."  To download a .pdf file that includes all five parts of this series, go to the Free Resources section of our web page.

March 05, 2008

Why lawyers should ignore good ideas

A few months ago, a lawyer I’ve known for a long time asked me about his New Year’s resolution.  He wanted to develop more new business in 2008, and was looking for advice to help him succeed.  My answer was simple:  Ignore good ideas. 

Lawyers are much too busy to spend time on ideas that are only good.  To maximize the chances of success, each individual must focus on the very best ideas for their practice, their personality, and their schedule.  For example, it’s good marketing advice to volunteer for a bar association committee.  It’s an easy and enjoyable way to develop new relationships that could lead to business in the future.  But it is probably better advice to skip the bar association and volunteer instead in an industry organization whose members are potential clients. That way, the relationships you develop will lead to more new business, more quickly.

Even that is probably not the best advice.  For most lawyers, the best place to start is with current clients.  If you would have averaged an hour per week on that committee, spend it instead on your top clients.  Take them to lunch.  Listen.  Find out what they want.  Give them more.  Do things for free. 

But don’t make those client lunch reservations just yet, because there are no generic answers to the question of what’s best.  Maybe in your unique situation the bar association would be best.  Or maybe none of these three are right for you; you need to go in a different direction.

Since established lawyers never have enough time for marketing, they must prioritize relentlessly and keep returning to the question:  “What should I do today to increase new business?”  You must place the highest priority on tasks that are most likely to yield the type of clients you want to work with, and the types of matters you prefer to focus on. 

For example, I often talk to lawyers who are writing articles or books in their marketing time.  As a man who spends a lot of time writing this blog and many other things, I obviously think that writing can be a good way to increase visibility.  But there are several important caveats.  First of all, writing is way too much fun for some of us, and it’s easy to write things that do not serve the central marketing purpose.  Second, by itself publication is unlikely to bring in new business.  To be an effective marketing tactic, writing must be used to build relationships, one person at a time.  (One example:  Send copies of your article to key contacts, each with a short written note.)   Third and most important:  you must consider what else you could be doing with that time.  If an article takes ten hours to write, what else could you do with those ten marketing hours?  Would you get more results with current clients, or by strengthening relationships with people you already know?   

Success_kit_thumb2 What’s the best way to come up with the best list of activities for your unique situation?  Review things that have worked in the past for you, for your partners, and for other firms.  Quickly.  Because every minute you spend planning is a minute you are not following up with clients.  You can start from the lists of best practices in our LegalBizDev Success Kit

Full disclosure:  if you buy the Success Kit, I will make money.  You will too.

March 04, 2008

For managing partners only

Do you think managing partners will use the internet to seek advice from their peers?  Managing Partner magazine is about to find out, through their new Leadership Advisory Board, announced today Download leadership_advisory_board.pdf .  If you are a managing partner and would like input from leaders at Alston & Bird, Baker & Daniels, Dickstein Shapiro, McGuire Woods, Nixon Peabody and other firms, contact Patrick McKenna.  (Full disclosure:  I have nothing to disclose here, and no relation to this program.  I just think it’s interesting and valuable.)