TAILORING A FIRM FOR VALUE-ADDED MARKETING

by Joel A. Rose

Clients retain lawyers to resolve business and legal problems and to assist them in achieving both immediate and long-term objectives. As such, lawyers must approach client marketing in a way that encourages them to understand their clients' business goals and identify opportunities that add value to the work performed.

This kind of marketing is considerably different from the "waiting-for-the-client-to-call-with-a-legal-problem" approach.

Partners in the more profitable law firms have learned that delivering quality legal services is merely the price of admission to attract and retain client business in today's marketplace. For many lawyers, the world has never appeared to be as hostile, bewildering, or unstable as it does today. These perceptions result from the complexities and uncertainties of a changing economic, professional, and competitive environment in which most law firms now find themselves.

Mergers and acquisitions have reduced the number of existing and potential clients. Many business corporate clients have experienced financial distress, others have joined with larger and better-managed organizations, and many have gone out of business. Cost-conscious clients are less loyal to established law firm relationships. In addition to retaining individual attorneys in different firms to perform specific legal work, it is commonplace for business and corporate clients to negotiate fees, seek volume discounts, and, for certain types of matters, propose flat fees and contingency/risk forms of billing.

To cope with these competitive pressures, partners must learn how to position themselves by emphasizing the qualitative differences between theirs and competing firms that are also capable of delivering quality services. To rise above the competition, partners must be prepared to tailor their marketing efforts to satisfy the specific needs and expectations of existing and potential clients.

Lawyers are being forced to adjust their attitudes about their own role in marketing the firm. At some firms, it's a change requiring palpable modifications to the firm's culture.

The Client Factor:

Consultants are perennially employed to plan and develop marketing strategies for educating attorneys about how they can use their legal abilities and business expertise to resolve clients' legal needs and to add value to their business objectives. For many attorneys, switching from the traditional method of marketing legal services to the value-added approach requires a whole new understanding of their clients.

They must learn about their clients' businesses, their expectations, and the trends affecting them and their legal problems. Further, attorneys must learn to be creative in figuring out how their expertise and the capabilities of their firm can assist clients in satisfying their goals.

Except for those fortuitous instances when highly profitable opportunities favor attorneys who just happen to be in the right place at the right time, the consistently successful rainmakers agree that marketing legal services requires the "right mind-set." To create this mind-set, attorneys must constantly be aware of their surroundings and the needs and objectives of those individuals and organizations with whom they come in contact.

In the simplest terms, attorneys must keep their antennae extended to scan the environment and be sensitive to opportunities that may be presented either directly or indirectly. Also, they must be prepared to demonstrate how their expertise and/or the accomplishments of other members of their firm can add value to the situation at hand.

Spade Work:

The successful marketing of legal services does not happen overnight. A considerable amount of behind-the-scenes effort must be invested to convey the impression that the firm’s marketing efforts follow a logical and smith progression. For example:

(1) When preparing written materials that address the firm's ability to meet the perceived needs of an existing or potential client, partners should distinguish their firm's ability to perform services of the type needed by the client from other firms, as well as specifying the additional value-added marketing that their firm will bring to this client over competing firms.

(2) When preparing for in-person meetings, partners should make every effort to identify the individuals to whom they will be speaking and learn as much as possible about their backgrounds. They should try to match the needs of the existing or potential client with the firm's capabilities.

(3) During the early stages, responsible partners should speak with client executives about what they like or dislike about the firm and how the firm may better assist them in achieving their goals. Depending on the relationship, firms will involve their clients in the planning stages of these initial discussions to a greater or lesser extent. By being involved, clients are provided with the opportunity to buy into the relationship. It shows executives that the firm values their opinions.

(4) Attempts should be made to identify the individuals who will perform the work and their suitability for the prospective client's assignment. In distinguishing the difference between your firm and competing firms, partners should stress the importance of the client to the firm, describe the attention that the firm will devote to the representation, and expand on how the responsible partner will keep the client informed about the progress of its matter.

(5) In today's specialized legal environment, partners need to be concerned about preserving clients and planning for the orderly transition of the client work before those senior partners who have personalized the relationships begin to phase-out of the practice. From the firm's point of view, a team effort for marketing and servicing larger and mid-size clients is almost always preferable to the Lone Ranger approach for generating and preserving client relationships.

Change Imperatives:

Implementing value-added marketing may, to some extent, require modifying some of the firm's cultural patterns, as well as the attitudes of some of its attorneys. Here are some of the issues that will need to be addressed as a firm moves into this new marketing environment:

(1) Time demands. Value-added marketing will demand more time of those attorneys involved in planning and managing the firm's marketing activities, especially as each of the attorneys is charged with implementing the marketing program.

(2) Incentives offered to existing and potential clients. More firms are offering incentives to bind relationships with clients and to foster new relationships with potential clients. Examples of incentives offered to existing clients include:

  • A day at the client's business location without charge to learn about the nature of the client's business;
  • Sharing of the firm's form agreement files with staff attorneys without charge;
  • Presentations on current legal trends to business staff when appropriate and training for members of the in-house legal staff during these presentations;
  • Incentives selectively offered to potential clients, when the firm is "betting" on future engagements;
  • Free services for discounted services at the current time with the expectations that full-rate charges will be provided at a later date; and
  • Attendance at corporate meetings without charge in return for future representation when the company or a new subsidiary organization is formed.

(3) Structuring hourly billing arrangements. Clients are always interested in listening to new ideas about how to reduce legal costs. At the same time, they are smart enough to understand that fees paid for services rendered must allow the firm to make a fair profit to cover its overhead and earn a sufficient profit to compensate its attorneys.

As such, many law firms can structure billing arrangements that achieve larger marketing goals by playing with or deviating from straight hourly rate charges. For example:

  • A flat rate discount applied to all services for work performed for charitable and not-for-profit organizations.
  • Volume discounts on fees for all or selected types of work to obtain a greater volume of legal work from particular clients. These discounts are based on an overall level of fees charged for services performed. They usually take the form of stepped-up discounts, that is, fees that exceed a stipulated total may be discounted by some percentage, fees that exceed a higher stipulated total may be discounted at a higher percentage, and so forth.
  • Discounted hourly rates for work performed for the client's account when those clients are in a position to refer third parties (like financial institutions) to the law firm. With the client's knowledge, the firm then adds a surcharge to the fees for work performed for those third parties.
  • Flat retainers for certain functions and hourly rates for other transactions.
  • Blended hourly rates charged without regard to who works on the matter combined with flat fees charged for performing prescribed tasks.

(4) Compensation questions. Compensation cannot be ignored. In fact, it may be the pivotal factor that encourages or discourages the implementation of a value-added marketing program. To what extent are partners willing to pay other partners to market the firm? Some partners object to paying their colleagues for anything beyond a billable hour contribution. Other partners believe that, since marketing is the lifeblood of a firm, it should not be necessary to pay partners to develop business.

Still others may be unwilling to subsidize partners' marketing efforts, like playing a round of golf or taking a client to a basketball game, if the activities are perceived as fun, not work. Yet taking the time to meet with clients and to educate clients about the firm is an important element in today's world, no matter what the context. Firms that penalize attorneys for not recording an adequate number of billable hours because they are shaking the bushes for business may be doing their firms a disservice over the long run. The extent to which lawyers may actually enjoy shaking those bushes is irrelevant.

There are a significant number of issues affecting compensation that must be anticipated prior to implementing a value-added marketing program. For example:

  • How will origination credit be weighted?
  • How long will origination credit continue, permanently, for three years, for five years?
  • How should partners who proliferate work from the work originated by another be rewarded?
  • How should billable hourly expectations for rainmakers be budgeted?
  • How much credit should be allocated for marketing efforts, rather than producing legal work?
  • How should the originating attorney share fee credits if another attorney supervises the work?
  • How does an hour of business development time equate to an hour of solid billable time for compensation purposes?

Managing partners and heads of marketing committees who have taken their firms down the value-added marketing path agree that, if properly conceived and implemented with care, this new marketing gospel will be beneficial for the firm's clients and increase synergies among and between attorneys practicing in the same as well as different speciality areas. Clients will take note of the changes in the attitudes of the attorneys toward helping them.

Unquestionably, all that is really needed is a willingness of law firms to undergo substantial, even fundamental, change.

©1999-2015 Joel A. Rose & Associates