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Understanding the market in which you operate is essential to making effective business decisions. Kevin Wheeler examines how assessing the market can help you to understand clients and areas of potential growth

Assessing Your Firm’s Competitive Position

Most law firms only rely on their internal financial measures to assess their performance, including chargeable hours, hourly rates, utilisation, fees billed, work in progress, recoveries and profits.

Coupled with the many sources of comparative financial data for law firms, including those produced by The Lawyer, Legal Week and PwC, firms are then able to benchmark their financial performance against that of their peers.

However, this analysis tells firms very little, if anything, about the competitive dynamic of the legal markets in which they operate. The legal market is not homogeneous – it is comprised of many different market segments, often with different firms competing in each. For example, the market for the provision of legal services to Europe’s leading private equity houses is very different to that for the provision of private client legal services in the North East of England. Clifford Chance is a major player in the former and Dickinson Dees in the latter.

At this level, firms need to have additional market insights if they are to make effective business decisions. For each market segment in which they compete, firms need to know:

● Who are our main competitors? ● What relative market shares do firms have? ● How strong are firms’ relationships with key decision-makers? ● How effective are firms’ marketing and business development

programmes? ● Which firms are winning the most new business and why? ● Which firms are perceived to be market leaders? ● How are clients’ needs changing? ● Which firms are developing new products and services in

response to these changing needs? ● What pricing strategies are firms operating, and which firms are

perceived to offer the best value for money?

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Assessing Your Firm’s Competitive Position

Kevin Wheeler

“Firms need to recognise that to produce robust plans they will have to supplement what little market information is available with their own commissioned research”

This article sets out how firms can go about commissioning market research to provide answers to these and other questions.

Why competitive insight is importantIn the article “Finding Formulas” (LBR, July 2010), the importance of understanding how a firm is positioned in its key markets was discussed. Without an accurate assessment of the firm’s competitive positioning, business and marketing planning runs the risk of being based on flawed assumptions, which usually leads to poor decision-making.

In the legal sector, because there is relatively little publicly available market information, firms often undertake this assessment based on anecdotal market information and partners’ “gut feel”. Partners can often tend to view the world through rose-tinted spectacles and overestimate how strong their market position is, so this analysis is usually wrong.

Firms need to recognise that to produce robust plans they will have to supplement what little market information is available with their own commissioned research. Although the immediate reaction might be that this will be expensive, highly focused pieces of research can be cost effective and, ultimately, taking the wrong business decisions because the firm did not have access to reliable market information is going to cost the firm a lot more in the long run.

What about the legal directories?The reason why so few law firms commission their own market research is due in part to the existence of legal directories. Partners feel that directories give them all the competitive insight they need, making further research unnecessary.

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While the quality of the research process that underpins these publications has undoubtedly improved over the years, the insights provided are not as detailed as those obtained through commissioning a piece of research. The directories certainly do not provide answers to the list of questions posed above. At best, they provide an indication of the main players in a particular market, ranking firms in bands rather than providing accurate data on market penetration and market share.

The other main source of market insight available to law firms comes through the various syndicated market research studies available for purchase in the legal sector. While these can give a firm a good overview of its positioning in the legal market with reference to questions about profile, usage, reputation, strength of relationships with decision-makers, impact of marketing, pricing strategies and so on, their weakness is that they often fail to provide insights for the smaller firms whose market shares are low, meaning that they frequently fail to register in studies geared more to the major organisations, for example FTSE 100 companies, and the larger firms that act for them.

Some sector-based syndicated studies are starting to emerge in the legal market and they may be relevant to certain firms. However, if your firm is interested in understanding the market for legal services provided to “niche” segments, such as a Yorkshire-based manufacturing companies or hi-tech organisations in Southern Germany for example, you will have to commission your own research to provide these insights.

Commissioning a studyIn these challenging economic times, law firms face ever greater pressure to retain and grow fees and profits from existing clients, while at the same time attempting to maximise opportunities from new ones.

Your firm may have an understanding of its relative market position – and fee income and profit per equity partner figures may provide a measure of success – but are there aspects of your existing clients’ perceptions and behaviour that you need to understand in more detail? Do you know how potential clients view your firm’s brand and what could you do to encourage them to instruct your firm?

Market assessment research can help you to focus on the competitive strengths and weaknesses of your service within your target market, identify opportunities to improve your

offering, and help you to ensure marketing and business development strategies are correctly positioned to achieve maximum relevance and impact.

There are a number of stages involved in commissioning a successful market assessment study to gain such insights, which will in turn allow your firm to create a defined market proposition, develop profitable services and improve the bottom line.

Define your marketBe precise about the “market” you want to assess.

Consider where the bulk of your firm’s business comes from at the moment, and/or where you realistically have opportunities to grow. Focus your research budget here

and do not dilute the power of the research by trying to canvass the whole world. If your firm operates in a handful of key areas and

budget is tight, develop a rolling programme undertaking one research study a year, so that

each area is covered every three to four years.

Who to survey?To provide a reliable overview of your competitive

position, the research must be based on a representative sample of the market that you have

defined. This means going beyond your own clients and contacts. It can be tempting to use in-house marketing databases for this type of project, but that will provide a skewed result, unless you know for certain that you hold

records of all the relevant industry players. If you only measure awareness of your brand among people who already receive communications from you, you may overestimate your position relative to your competitors.

Use an independent, comprehensive business list to sample from and you will obtain a far more reliable picture of where you stand.

Make sure that you research both the users of legal services as well as those decision-makers who have influence over which law firms their organisation uses. Usually these are the same, but with the increasing involvement of procurement departments in the selection of external law firms you would not want to overlook these in any market assessment study. Also, operational staff, such as HR and property directors, often have considerable autonomy from the in-house legal department when it comes to appointing legal advisers, so their views will be important.

What to ask them?Key elements of a market assessment study include:

● Awareness, usage and perceptions of you and your main competitors.

● Buyer needs and expectations. ● Satisfaction with current sources of supply, against those

needs and expectations. ● Issues/changes that will affect buyers in the future.

“Make sure that you research both the users of legal services as well as those decision-makers who have influence over which law firms their organisation uses”

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With this information, you can plot where you currently stand (against the competition, and against market expectations) and prioritise where action needs to be taken to ensure you are meeting market needs as effectively as possible, now and into the future.

Other question areas you can weave around this core might include – how decision-making structures work, how often buyers change suppliers and what “push” and “pull” factors influence this, and what kinds of marketing and business development activity buyers are exposed to and what has most impact.

How to do it?As noted above, the research must be representative in order to provide you with a reliable set of results. This means that any method of data collection that would potentially skew the findings should be avoided – potential clients who don’t know much about you (yet) are as important here as existing contacts, so an online survey that some recipients would have no interest in and see no value in completing will not be robust.

Equally, you will not be able to measure awareness and perception levels accurately if your name is connected to the approach up front.

An independent telephone survey will often produce the most reliable results, introduced anonymously (your identity as the research sponsor can be revealed towards the end of the interview, at which point more detailed perceptions of your strengths and weaknesses specifically can be explored).

With firms looking to save money, there has been a tendency among law firms to take market research projects in-house. This may work in relation to gathering, say, client satisfaction feedback, especially if the interviewer is somebody from the firm not involved in the day-to-day provision of services to the client. However, for this sort of market assessment survey where you are trying to gather feedback on your competitors, and often from non-clients, an in-house approach will not work.

Decision-makers will not be prepared to divulge this sensitive information without having the “buffer” of an independent market research house involved and their anonymity protected.

What to do with it?The results from a market assessment study should be used to map out where you currently are, where you want to be, and what needs to be done to get there.

Taking a systematic approach like this to understanding your competitive position will enable you to base your

business and marketing plans on fact rather than gut feel or anecdote.

It is quite possible that while some of the results confirm what you already suspected to be the case, others may run counter to internal beliefs regarding your firm’s

brand position and/or your clients’ priorities. If the research has been done properly, then the

findings will reflect the reality of what the market is thinking, and should be accepted as such.

It can be helpful to get buy-in from key internal stakeholders like the managing

partner (who will be responsible for acting on the results afterwards) from the start, to ensure that they are in a position to

take ownership of the outcomes.You should also consider sharing edited

highlights of the research with existing and potential clients, as part of your ongoing marketing

activity. The study’s respondents will already have been promised such a document as an incentive to them taking part in the research.

The fact that you have been prepared to invest in finding out what the market thinks and needs, and to take business decisions on the back of this, will carry its own PR value.

Wake-up callIn all other industries, commissioning market research to understand how an organisation is positioned in its key markets is recognised by management as essential.

The legal sector is slowly waking up to the competitive benefits of having deep and accurate insights into clients’ needs and their perceptions of different law firms.

As we come out of recession, law firms looking to grow are advised to invest in this important business activity.

Kevin Wheeler has been advising law firms on all aspects of marketing and business development for 16 years both in-house as a marketing director and now as a consultant. He can be contacted at kevin.wheeler@wheelerassociates.co.uk

“The legal sector is slowly waking up to the competitive benefits of having deep and accurate insights into clients’ needs and their perceptions of different law firms. As we come out of recession, law firms looking to grow are advised to invest in this important business activity”

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