Written by David Blumentals
Cross-posted from Legal CRM Strategy Corner
Whether we like it or not, the current economic climate will separate the weak from the strong. For many law firms, a key factor will be how well they understand that the core of an effective strategy is aggressive client focus!
In a downturn, client assumptions about the future are driven by fear and uncertainty more than objective realities. Any decline generates the obvious and predictable belt-tightening; clients delay necessary decisions, choose more inexpensive options, and avoid discretionary spending. However, it’s critically important to recognise that, beyond these generalities, each downturn produces its own unique pattern of changes in client needs, priorities, and behaviours. As a result, an economic downturn can create opportunities for law firms that can understand these changes, think creatively, and use the situation as an opportunity to strengthen relationships with their most valuable clients.
One of the worst things a law firm can do is to take its eyes off of their clients. However, when threatened, most firms have a tendency to adopt an inwardly-focused, “survival mode,” mentality. They focus on operational and financial controls and stop investing in what appears like discretionary initiatives aimed at strengthening relationships with clients. By not being fully focused on the client, they end up accelerating client and revenue attrition while undermining their longer-term competitive strength. There are three things we recommend based on the work we’re doing to help law firms deal with this challenge:
1. The first priority is aggressive focus on and investment in your best clients and prospects. During economic decline, a relatively small number of your best clients will provide an even larger share of your profits, while the often larger ranks of marginal or unprofitable clients will create even more of a drain on the firm. The first thing to do in a recession is to clearly identify who your most valuable clients are and invest in strengthening relationships with those clients. This includes collaborating with those clients to understand and address their changing priorities, restructuring your offerings around their unique needs and, as necessary, restructuring engagement / financial terms. It also includes focusing marketing and business development efforts on the most valuable, winnable clients and making sure that you’re not wasting resources on clients that are not going to engage and that are unlikely to be profitable.
2. The second priority is watching, talking with, and listening to clients more closely in order to identify creative ways to address subtle changes in their needs, priorities, and behaviour. It’s critically important to NOT rely on your traditional assumptions about what’s important to clients. Instead you need an informed view of how your client needs are changing as dark clouds appear on the horizon. You need to think creatively about ways to meet those changing needs and address those needs in order to strengthen the relationship, generate more value, make their lives easier, or make their businesses easier to run. Not surprisingly, client actions will increasingly be driven by emotion rather than rational consideration. By getting closer to clients you can identify ways to proactively address client emotional needs and reactions.
3. The third priority is identifying and eliminating the negative experience elements that drive attrition. Most law firms unintentionally frustrate and annoy clients in ways that they can’t even begin to understand. Recent studies have shown that, while the economy has been weakening, tolerance for bad service has been diminishing. For example, a recent Customer Experience Study found that 87% of consumers have stopped doing business with an organisation after a bad customer experience, up from 80 percent in 2007 and 68 percent in 2006. 84 percent of consumers indicated they would tell others about a bad experience - up from 74 percent in 2007 and 67 percent in 2006. In fact, blogging about negative experiences is on the rise: 22 percent of consumers this year have posted negative feedback about a company, vs. only 13 percent in 2007. 58 percent of U.S. consumers said that in a down economy, they will always or often pay more for a better customer experience.
In many cases, the negative experience elements that contribute to attrition may be relatively easy to fix without major investment. The trick is to be able to clearly identify these things with an unbiased and unfiltered, outside-looking in perspective. Over the past decade, we’ve worked with many firms on rapid Client Relationship Management implementations that are designed to deliver immediate outcomes and fast ROI. Typically, over the course of 4 weeks, we can quickly deliver a solution that provides immediate benefits in knowing who your clients are, what you do for them and how you can do more. In many cases it comes back to the basics of identifying who knows whom, effective client communications and ensuring quality of data in the systems utilised. In a recent case, these improvements included new templates for introducing and recording new clients, an ongoing communications program that helped deliver higher retention and expanding the schedule of educational events and networking opportunities for clients.
The way through tough times is to intelligently create more value for others. One of the surest ways there is for making sure that you end up being the strong rather than the weak is avoiding the tendency to become self-absorbed and maintain a clear focus on the clients that are, ultimately, the source of your success.
