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What most law firms don’t know about their clients, Part 1

October 28th, 2014 |

Amidst the tough times for law firms there's deep insight, opportunity and hope in a new research finding that reveals what most law firms don't know about clients.

If this sounds too good to be true, it's not. It's based on analysis of the responses on 7,061 individual buyers and users of the services of corporate and commercial law firms.

Each year since 2003 Beaton Research + Consulting has surveyed the opinions of thousands of clients of law firms in a study known as the Beaton Benchmarks. For those interested, details of the Beaton Benchmarks survey may be found here in the text, graphics, PDF and trailer.

The Beaton Benchmarks survey

Our most recently reported survey was done in November 2013. The 7,061 respondents represent the clients of the 35 largest corporate and commercial law firms in Australia. The respondents come from the ranks of the law departments (GC down), c-suite ( CEO down), boards (chairman down), and senior general and functional management of Australia's public and private companies and governments.  

In our survey we measure and represent the respondents' reported experience with their law firm in a composite score. This score captures their perceptions of five outcomes, namely overall performance, value delivered, and organisational bond, and their intentions in respect of re-use and recommendation of the firm. The scale on which they provide their answers ranges from 0 (extremely poor) to 10 (excellent). In the course of the survey each respondent is also asked which practice groups of the firm they have experienced in the last 12 months. 

By combining these two results we are able to analyse how clients' overall experience varies with the number of practice groups to which they have been exposed.

The findings show what most law firms don't know about their clients

Of the 7,061 respondents, 57.2% used only 1 practice group, 24.8% used 2, falling steadily as one might expect through 10.9%, 4.3%, 1.6%, 0.6%, 0.3%, and 0.2% for 3, 4, 5, 6, 7, and 8+ practice groups, respectively.

The first chart maps theChart1_PG v OP_BR+C copy clients' overall experience score on the vertical axis against the number of practice groups they used in the previous 12 months on the horizontal axis.

Even if the reader is not statistically inclined, this is a remarkable line in that it almost perfectly fits along the eight points. In statistical language the correlation coefficient is 0.99 – as close to a perfect 1.00 as you'll ever see.

Mathematically, the equation that represents this line is y = 0.1784x + 7.435. Translated, this means for each additional practice group used the respondents' level of satisfaction increases by approximately 0.2 points on scale from 0 to 10 or just over 2%.

Simply put, the more practices of a firm a client uses, the more satisfied they become.

Is this a stairway to heaven?

The second chart shows the same findings in a different format.Chart2_PG v OP_BR+C copy

And if you think this looks like a stairway to heaven, you are right!

Looking more closely at the findings, it's apparent that the average client using one practice group rates their law firm highly at 7.55 out of a maximum of 10. And clients feel increasingly more positive towards their providers the more they use their range of services, so much so that at 8+ practice groups the clients' rating approaches close to 9 out of 10.

Client myths are dispelled

It's now folklore in most law firms that clients use 'horses for courses' and clients don't want 'one-stop shops'. The findings described in this post say 'wrong on both counts'.

Here are three reasons why the finding that clients report increasing satisfaction with wider exposure to a firm's range of services are readily explained:

  • First, a client's transaction costs are lower if they work with one provider; less time and fewer people with whom to deal.
  • Second, clients have greater purchasing power; able to extract bigger discounts and most MFN pricing status from their supplier.
  • Third – and perhaps most importantly – the deeper the relationship, the more the provider learns about the client's business and the industry in which the client operates. Beaton's research is emphatic on this point – a major attribute in why clients choose firms and what they value in the service they receive is how firms "understand my business/industry" (check out this post for more on this subject).

It's clear clients benefit from cross-buying, i.e. procuring multiple services from one firm, but what does this mean for the firms themselves?

Questions to be answered by firms

 The findings raise many questions:

  1. What metrics are firms using to track clients' use of practice areas?
  2. Are these metrics reported and acted on regularly? Are policies regarding referral within the firm adequately inspected?
  3. Is compliance recognised and rewarded? And is hugging and grabbing discouraged and sanctioned?
  4. Should a firm keep adding more and more services to earn its clients increased satisfaction?
  5. How well equipped are firms to grow the breadth of their offering?
  6. Are firms able to maintain/improve quality while growing in this way?
  7. Is there a 'right' number of practice areas for a given firm and its core client base?
  8. Will simply adding practices turn a specialised firm into a generalist?
  9. Do clients view firms with multiple practice areas as generalists?
  10. If they do, how does this influence their buying behaviour?
  11. How do these findings apply to highly focused or specialised firms?
  12. Is a specialist, say, IP or tax firm seen by clients as a 'single product' firm?
  13. Or do the specialities within IP (i.e. many forms of patent work, commercialisation, trade marks, disputes, etc) and tax (i.e. R&D, international, indirect, capital gains, etc) make these firms multi-line providers in their own right?
  14. Are all individual firms offering only one or two practice areas lower performers than firms offering multiple services?
  15. Or is the performance of these firms being 'lost' in the way the data is presented as averages? (BTW, we have too small a sample of highly focused firms to answer this question definitively).     

Readers are invited to add to this list in your Comments on this post.

What most law firms don't know about their clients

This research reports what most law firms don't know about their clients: Clients really like to buy lots of services from one firm.

Part 2

Part 2 of 'What most law firms don't know about their clients' will bring readers our further analysis of this data-set drilling into segments within the data.

Further reading

If you enjoyed this post, then you may also want to read these:

+ Selling professional services: Damned if you do – Damned if you don’t

+ Price is positively correlated with the value perceived by clients

We'd like to publish your comments on this and other posts on Research.Reveal. If you'd prefer to be anonymous, just let us know by emailing your comment to George Beaton at george.beaton@beatonglobal.com.

Coda

The finding that the more practices of a firm a client uses, the more satisfied they become also applies in the other professions we survey: accountancy, consulting engineering and management consulting. It's not isolated to law, which is comforting. Future posts by the Beaton team will be devoted to the same analysis in these other professions. Suffice to say now that we are certain these are universal conclusions.

 Author and acknowledgement

This post was written by George Beaton, a director of Beaton Capital and Beaton Research + Consulting. I am very grateful to my colleagues, Daria Radchenko and Eric Chin, for their assistance in preparing this article.

Posted in beatonbenchmarks, Highlight, Legal, Professional Services, Strategy | 9 Comments »

9 Responses to What most law firms don’t know about their clients, Part 1

Colin Ritchie says: October 29, 2014 at 9:49 am

Great article George.
While I only deal with small legal practices, the results of this research are totally relevant.
There is a real Catch 22 for practices in this though.
On one hand, as your research indicates, the more services the client uses, the better you get to understand them and their business and so the more the client enjoys dealing with your firm.
BUT
In order to provide those extra services you already need to have a good understanding to identify the other opportunities that you can help the client with.
One of the things that I bang on about with clients, is that they need to collect more information from a client other than just the info required to do the current matter. In doing so, they will get a greater understanding of the client, identify other issues, provide more services and get greater client satisfaction as your survey demonstrates.

Reply
George Beaton George Beaton says: October 30, 2014 at 7:36 am

Colin, excellent point. Imagine a firm (of any size in any profession) that has a central cloud-located database on clients’ businesses. Imagine this is added to and updated regularly. And imagine if, using the database, each major client was invited to a (no charge) workshop each year to discuss their business, its plans and issues. This database then forms not only the repository on the clients, but the primary source of business development ideas. Am I dreaming? Best wishes George

Reply
David Goener says: October 30, 2014 at 8:15 pm

George, this compelling research and I’m sure the findings are just as relevant to firms that serve clients from a number of offices. The principles should also focus the attention of firms that pursue a specialist strategy. Without a range of practice areas and/or offices, these firms need to position themselves as the ‘go to’ for their speciality in their target market.

Reply
Eric Chin says: October 31, 2014 at 5:44 pm

This a powerful chart for law firms pursuing a sector strategy. Being the ‘go to’ firm for a particular sector by focusing and bundling relevant practice groups on the needs of clients in a specific sector makes sense. It’s evidence-based justification to identify the needs of clients and then win by providing solutions in the spirit of the ‘job to be done’ introduced by Clayton Christensen – see http://www.christenseninstitute.org/key-concepts/jobs-to-be-done/.

Reply
paul xifaras says: November 5, 2014 at 11:20 am

No George, you’re not dreaming and are absolutely right.

SRM, i.e. Supplier Relationship Management is as fundamental to success with any provider-client relationship as CRM. And from a law firm’s point of view the level of time/cost invested should depend on the size and attractiveness, i.e. relationship/risk/growth potential etc, of the client.

Clearly for ‘attractive’ clients – whether the aim is to retain or grow them or both – the return on investment made by a law firm to better understand those clients should be significant.

In industry we often call these meetings ‘top to tops’ and we might spend a half-day or so with senior management from both parties. Not going through the day-to-day issues and tasks, but getting a better understanding of both (i) the vision/mission/values/objectives of each other, and (ii) the strategies and tactics to be used to achieve these.

The information exchange benefits both parties, but this is surely the best the opportunity for a law firm to determine ‘What other services we can provide to our client’.

Reply
Emma Patterson says: December 1, 2014 at 6:10 am

Even though we are UK motoring law specialists, we still work closely with other specialists so understanding our clients requirements is just as important as it is for a ‘one stop shop’ legal practice. Regardless of your corporate structure, listening to your clients is almost always beneficial to both you and the client.

Reply
George Beaton George Beaton says: December 1, 2014 at 8:39 am

Agree Emma; thank you for your comment. One way for a firm with a single or few service lines to look at this is to regard your firm as a portal for clients. In other words, your firm acts as a co-ordinator and, quote possibly bundles, services – your and others’ including services other than legal.

Reply
Douglas Brown says: October 20, 2015 at 7:59 am

This is a great article talking about important things for law firms to consider. Tracking metrics for clients and things like that is a great idea and I think that any firm will benefit from these tips. Thanks for all the tips regarding law firms.

Reply

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We hope the conversations that take place on Research. Reveal will be energetic, constructive and thought-provoking. To ensure the quality of the discussion, our moderating team will review all comments and may edit them for clarity, length, and relevance. Comments that are overly promotional, mean-spirited, or off-topic may be deleted per the moderators' judgment.

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