The ‘Pareto principle’:
80 per cent of your firm’s revenue is derived from the top 20 per cent of your client base
The ‘Shiny New Object Syndrome’:
The desire to play with something new rather than something you already have
Last week I read a fantastic article by Jackie Huba (consultant, co-author of Church of the Customer blog, and author of “Monster Loyalty: How Lady Gaga Turns Followers into Fanatics” ) on the Forbes website – Building Loyalty The Lady Gaga Way: Focus On 1% Of Your Customers.
The first part of the first paragraph of Huba’s article will immediately resonate with anyone who has worked in a law firm for more than five minutes:
Shiny New Object Syndrome. It’s hard to resist. Many businesses are consumed with chasing new customers instead of focusing on the ones they already have.
Yes, that old chestnut of the ‘Pareto principle’ playing against a lawyer’s belief they can do all of the legal work that is available – the ‘Shiny New Object Syndrome’ – regardless of whether or not this is on firm strategy.
There is no doubt that, as professionals, lawyers relate more to the work they do rather than who they do the work for. As a result, lawyers suffer from both of the key symptoms of ‘Shiny New Object Syndrome’ set out in Huba’s article, namely they are:
- consumed with chasing new customers, instead of focusing on the ones they already have, and
- are happy to give away heavy discounts to lure new clients without thinking about the long-term effect this has on existing clients who, if they find out, wonder why they are not getting the same treatment, if not better, as a ‘key client of the firm’.
You may be wondering why this is even matters? After all, isn’t all revenue important to a law firm?
Well, while the actual number may vary, the figure set out in Huba’s article, from research undertaken by TARP Worldwide, that it is five times cheaper to keep a customer than to get a new one, holds true for law firms too.
More concerning, however, is that a disillusioned client – one who feels they are not receiving the care and attention they deserve – is not only likely to leave your firm, but will probably tell everyone they know why they left.
It’s time to FOCUS
More importantly, however, as reported in today’s Australian Financial Review (‘Cuts, freezes and exits at top law firms‘), is that law firms in Australia are currently doing it tough. As a consequence, this is not the time for law firms to be chasing the lure of new clients, but rather it is the time to FOCUS on the existing top 20 per cent of your client-base that is producing 80 per cent of your firm’s revenue.
The key elements of any FOCUS program should include:
- Framework: undertake an audit of your client-base to determine which clients consistently provide you with the majority of your revenue (to avoid glitches or transactional matters, it’s best not to do this over short periods of 6 or 12 months but 3 to 5 years).
- Order: create order around your client delivery process by creating account teams for each of your top 20 or so clients. Make sure the days of ad hoc service to the client are ended and that you have a unified approach to client service going forward (including around value adds you offer the client, pricing, project management, etc.)
- Communicate: communicate to your top clients that they are exactly that and that you value the relationship. Make sure you let them know that the whole firm is committed to understanding their business better and to solving problems more collaboratively going forward. [Be careful though, you may find that one of your top clients doesn’t see you as a top service delivery provider, in which case you either need to work extra hard at this relationship or else find a replacement from your existing client-base.]
- Understand: make sure everyone at your firm understands your client, its business and its concerns. You should also make sure that you communicate internally, regularly, that this client is important to your business and that nothing should be done to jeopardise this relationship, including either agreeing to act against the client because they don’t currently have a matter with you or agreeing to undercut them on rates to try to win new business from a client that the firm has never acted for before.
- Share: share information you have that can help your client. This doesn’t only mean sharing information about what other practice groups your firm has, but if you are aware of an issue that will affect your client’s business, let them know. Become, as they say, the “go to” or “trusted advisor” of your client: the person they immediately think of if an issue arises.