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.