Package, Position, Profit: Chapter 1
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The document outlines strategies for building a successful legal practice suitable for 21st-century clients, addressing the current state and future of the legal market. It emphasizes the importance of establishing a strong client value proposition, effective firm positioning, and strategic pricing models in the face of rising competition from new entrants and alternative service providers. The author, Douglas McPherson, offers practical insights and guidance based on extensive experience in the professional services sector.
Package, Position, Profit: Chapter 1
- 1. Douglas McPherson Package, Position, Profit: How to Build a Legal Practice the 21st Century Wants to Buy Package_positon_profit_B.indd 1 30/03/2017 10:22
- 2. Head of events and books Leah Darbyshire Commissioning editor Laura Slater Editorial assistant Edward Bowes Published by ARK Group: UK, Europe and Asia office 6–14 Underwood Street London, N1 7JQ United Kingdom Tel: +44(0) 207 566 5792 publishing@ark-group.com North America office 4408 N. Rockwood Drive, Suite 150 Peoria IL 61614 United States Tel: +1 (309) 495 2853 publishingna@ark-group.com www.ark-group.com Printed by Canon (UK) Ltd, Cockshot Hill, Reigate, RH2 8BF, United Kingdom ISBN: 978-1-78358-282-2 A catalogue record for this book is available from the British Library © 2017 ARK Group Copyright of the individual chapters is owned by the respective authors and reproduced with permission. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under terms of a licence issued by the Copyright Licencing Agency in respect of photocopying and/or reprographic reproduction. Application for permission for other use of copyright material, including permission to reproduce extracts in other published works, should be made in writing to the publishers. Full acknowledgement of author, publisher, and source must be given. DISCLAIMER This publication is intended as a general guide only. The information and opinions it contains are not intended to provide legal advice. The publishers bear no responsibility for any errors or omissions contained herein. ARK Group is a division of Wilmington plc. The company is registered in England & Wales with company number 2931372 GB. Registered office: 6–14 Underwood Street, London N1 7JQ. VAT Number: GB 899 3725 51. Package_positon_profit_B.indd 2 30/03/2017 10:22
- 3. iii About the author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Chapter 1: An introduction to today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Where is the legal market today? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 What is likely to happen to the legal market? . . . . . . . . . . . . . . . . . . . . . . . 10 Chapter 2: First steps towards building a law firm 21st-century clients want to buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Start with the end in mind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Why are those answers essential to your progress? . . . . . . . . . . . . . . . 26 The Four Ps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 How do you apply the four Ps to a 21st-century legal practice? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Chapter 3: Defining your proposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Who are you? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 What is a client value proposition? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 What isn’t a client value proposition? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 How do you build a credible client value proposition? . . . . . . . . . . . . 41 Managing the CVP process internally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Insource the expertise to run the exercise for you . . . . . . . . . . . . . . . . . 47 And a post-script…. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Chapter 4: How to use your client value proposition. . . . . . . . . . . . . . . . . 51 1. In person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 2. In writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 3. Online . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Contents Package_positon_profit_B.indd 3 30/03/2017 10:22
- 4. iv Contents Chapter 5: How to position your firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 From a legal market perspective, what does positioning really mean?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 How do you choose how and where to position your firm?. . . . . . 63 The five-tier model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 What is a brand and, in real terms, what does ‘brand’ mean for a law firm? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 What part does brand really play within the positioning process? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Chapter 6: Examples of packaging and positioning in today’s legal market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 1. ‘The sector specialist’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 2. ‘The new market entrant’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 3. Achieving growth through personal development . . . . . . . . . . . . 81 4. Creating a truly exceptional client experience1 . . . . . . . . . . . . . . . . . 86 5. Deep sector understanding and the capacity to deliver it the way clients demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 6. The right people, the right reputation, the right skills promoted in the right way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Chapter 7: How to price your services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 How do you come up with your pricing model? . . . . . . . . . . . . . . . . . . . . . 103 How will your clients react to your pricing? . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 How does your current pricing fit with the current state of your market? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 How do you charge for your services? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Why should you consider implementing alternative fee arrangements? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 How do you decide which type(s) of pricing suits you (and your clients) best? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 What are the practical steps you need to take to put your new pricing model in place? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Added value and how to use it . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 ‘Loss leaders’ and how to use them . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Epilogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Package_positon_profit_B.indd 4 30/03/2017 10:22
- 5. v About the author After graduating in marketing and post-graduating in adver- tising, Douglas went into sales thinking that if he could sell he’d never be out of work. Although it was meant to be a tempo- rary step – a purely education-finishing assignment – he has never looked back. His association with the professional services began in 1994 when he joined Intellectual Property Publishing where he soon became sales manager of the IP portfolio, and ultimately sales and marketing manager for the owning group, Armstrong. When Armstrong was sold to Lloyd’s of London Press, Douglas was promoted to commercial director of the Lloyd’s Marine Intelligence Unit with full responsibility for promoting, packaging, and selling Lloyd’s of London’s market-leading ship- ping data output. This role saw him continue to work closely with the professional services, most notably the international Admiralty Law, marine underwriting, and marine finance and actuarial sectors, across the world’s major shipping centres. In 2009, Douglas joined Bernard Savage at Size 10½ Boots, a Business Development Agency that works solely with the professional services, helping professionals to win more new clients and more work from the clients they already have. The tips, tricks, and shortcuts in Package, Position, Profit and Douglas’s first book, The Visible Lawyer (ARK Group, 2016), are the result of a combination of Size 10½ Boots’ partners’ corpo- rate and professional services experience and the no-nonsense, plain speaking, straightforward approach they have developed alongside their constantly growing client list. Because of the nature of self-employment, there is never a lot of spare time, but any time Douglas does have is spent with Package_positon_profit_B.indd 5 30/03/2017 10:22
- 6. vi About the author family, coaching youth football, collecting obscure soul records, and enjoying a second honeymoon with Chelsea Football Club thanks to the arrival of Antonio Conte. Package_positon_profit_B.indd 6 30/03/2017 10:22
- 7. vii The legal market refuses to stand still. While the muttering about AI and virtual practices rumbles on, unsettling many of the more traditional firms’ views of the future, the level of competition within the markets continues to rise rapidly and apparently unabated. Law firms today have to compete with new market entrants (a list that includes many instantly recognisable high street names, all backed by large and generously funded marketing machines), in-house legal teams handling more work for their internal clients and increasingly attracting talent from private practice, and other professionals – most notably accountants – who are starting to encroach on some of the practice areas that were once the preserve of the lawyer. And competition has only been heightened by the unpar- alleled level of consolidation in the market. There have never been so many mergers and acquisitions within the legal world and the new larger, stronger (in theory at least) entities this activity has created add another threat to the remaining firms in their markets. Simultaneously, the level of pressure being exerted by clients on firms is at an all-time high. Technology has inflated expec- tations over response times and accessibility, and recognition of the increased competition between firms for their business has given clients an opportunity to squeeze lawyers on fees and force law firms to offer them more and more in terms of ‘value adds’. But although this may look bleak, is this a bad time to be a law firm? Not at all. As in all walks of life, threats present themselves in step with opportunities. The only thing is, if you Executive summary Package_positon_profit_B.indd 7 30/03/2017 10:22
- 8. viii Executive summary are to pilot your firm, practice, or department through the next phase of the legal industry’s development, you need to ensure you are as attractive as you can be to the clients you want. If you are to achieve that, you need to be cannier in the way you take your firm to market; and to do that, you need to be more sophisticated in the way that you package what you have to offer in terms of your credentials, your services, your service offering and service levels, your personnel, and your specialisms. You need to choose the right market position for your firm. You also need to know that package (or, if relevant, those pack- ages) are priced correctly, in the way that suits your clients best, and in a way that supports the market position you aspire to. Once you have all of those ingredients, you can start to promote your package and your pricing to the market(s) you have chosen to pursue. However, because you have made real decisions as to what those markets are and have agreed the position you would like to attain in those markets, this is no longer a scattergun activity; it will be a focused and carefully planned campaign which, in turn, should reap higher rewards for lower costs. The good news is that if you get the packaging, positioning, and promotion right, you are well on the way to winning the work you want at the fee level you want, and that simply has to be the most direct route to profitable growth. This book has been written to help you do just that: to show you how to package and position your firm in a way that will allow you to profit from your efforts. We’ll cut through some of the marketing-speak that all-too-often either prevents or puts lawyers off getting to the heart of building a viable, relevant marketing strategy. We’ll also look at some practical examples of how best to design the right strategy for your firm and, most importantly of all, how you can implement those ideas easily so that they start delivering commercial success. Chapter 1 provides an introduction to the legal market today, considers the developments that are likely to have an impact on Package_positon_profit_B.indd 8 30/03/2017 10:22
- 9. ix Package, Position, Profit firms of all sizes in the not-too-distant future, and spells out why it will only become more important to package, position, and promote your law firm more commercially, more creatively, and more effectively. Chapter 2 then explores the first steps towards building a law firm 21st -century clients want to buy. We look at Kotler’s four Ps (product, position, price, and promotion), which provide a structure for a successful marketing strategy, and how to apply these to a law firm today, including the kinds of questions you need to be thinking about (and able to answer) as a firm in each of the four key areas. Chapter 3 challenges you to think about your strengths, weaknesses, and what your clients value most about your firm. This chapter takes you through the process for designing and building a client value proposition (CVP) that really sets out what clients gain from working with your firm, and how to manage that process internally. Chapter 4 explains how you actually use your client value proposition so that it’s embedded in everything you do and is tangible in every ‘touchpoint’ a client, contact, or target has with your firm. I include examples of how CVPs can be, and have been, used successfully, for example in pitch situations, through website design, or in the language and mediums you use when communicating with clients. Chapter 5 focuses on positioning your firm. We consider key questions such as what positioning really means in a legal market context, how to choose how and where to position your firm, and what part brand plays within the positioning process. Chapter 6 shares six stories from legal services providers in the US and UK that have done an exemplary job of packaging and positioning their firms in today’s competitive legal market. In each case, I spoke to those closest to the projects these firms had implemented for a full and frank appraisal of exactly what they did and what they have achieved. Having gone through the process of designing a CVP and packaging your firm in the way that best fits the market position Package_positon_profit_B.indd 9 30/03/2017 10:22
- 10. you want, all of that work will be wasted if you come up with a pricing structure that contradicts your message. Chapter 7 tackles how to come up with a strategy that aligns with your offering and the market position you occupy or aspire to. Finally, in the Epilogue, I ask you to consider the final, essen- tial ingredient by which all of your strategies and processes will stand or fall: your people. Package_positon_profit_B.indd 10 30/03/2017 10:22
- 11. xi As well as the NG2 branch of the Clan McPherson, this book is for Bernard Savage, the other half of Size 10½ Boots to thank him for his friendship, partnership, and support over the last however many years… and in the vain hope he reads it and finally finds out what a client value proposition really is! Dedication Package_positon_profit_B.indd 11 30/03/2017 10:22
- 13. 1 Chapter 1: An introduction to today Where is the legal market today? Well that really is the $64-million question, isn’t it? Depending on who you talk to, and on which day, the legal industry is either at death’s door or about to embark on the trip of a life- time. To compound matters further, both views are supported by highly charged and highly credible arguments, put forward by equally highly charged and credible legal figures. As we are faced with quite a spectrum, let’s start with what we know. The legal market is certainly more complex than ever before and the reasons for that include the following: 1. Increased competition This has to be the starting point because the fact that the legal market has never been this competitive is: ●● Something we all need to wholeheartedly agree on before we go any further; and ●● The number one threat to every law firm today (whatever your size, wherever you’re based, whatever specialism(s) you offer). I’m no economist but I do recognise that the more competi- tive a market is, the more options exist for consumers; and the more options that exist, the harder it is for those individual options to stand out. If legal service providers can’t stand out from the crowd, retaining clients while still attracting a new clientele to insulate their future is always going to be an uphill struggle. Package_positon_profit_B.indd 1 30/03/2017 10:22
- 14. 2 Chapter 1: An introduction to today Just to compound the issue, the more competition there is, the more pressure is placed on both the tangibles (pricing, client care, service offering, recognised niche specialisms) and the intangibles (how valued and how wedded to a particular firm a client feels, how much added value they feel they receive). This pressure will eventually lead to doubt, which in turn could very well lead clients to explore new options if they start to believe those new options are better, cheaper, or more effective. 2. Increased consolidation More firms than ever are now looking to merge or acquire, and rarely a day goes by without reading reports of a rumoured or completed merger. The stronger players see M&A as a quick fix, a short cut to growth and to inflating their value and increasing their market position. Meanwhile, weaker firms seem to see it as an escape from their current woes, all too often missing the likely downsides – most particularly the loss of independence – that tend to arise once their share of the acquisition fee has been banked. At the same time, there are of course benefits for both sides. Economies of scale, increased cross-selling oppor- tunities, and a larger purse from which to fund the next phase of growth being the obvious ones. Meanwhile, for those facing the spectre of a newly merged firm in their immediate marketplace, there is quite rightly a reason to worry. The new, larger entity could well be attractive to some of your clients and their ability to shed some internal support costs could allow them to shave their fee levels, which might make them even more attractive. Moreover, never forget that consolidation is a two-way street. If your practice is commercially focused, there is a higher likelihood than ever before that your clients will merge or be acquired and that brings with it its own threats; your client’s new colleagues could well stick with their chosen or incumbent legal advisers and force the issue that they – and not you – should be retained by NewCo. Package_positon_profit_B.indd 2 30/03/2017 10:22
- 15. 3 Package, Position, Profit 3. Cannier clients I think it’s fair to say that in all walks of life we expect more these days. Whenever we make a purchase, go out for some- thing to eat, or stay in a hotel we want to be courted, rewarded, and generally afforded the level of care and attention tradition- ally reserved for a new born baby. Those buying professional services are no different to those buying from the retail or hospitality sectors. Your clients know they can go elsewhere (and would be welcomed warmly for making the move). They also know that you are the ones under pressure to provide all of the value-add extras required to support every pound/dollar/euro your clients spend on your advice. This is a real threat for those firms who either don’t recog- nise that added value and service are now the key drivers in a purchasing decision. It is even more of a threat for those who pay little more than lip service to this side of their offering, steadfastly refusing to award it the respect it demands. Every client will eventually see through the insincerity and superfici- ality of lip service. And for those still harbouring a belief that ‘doing a good job is marketing enough’, this could well drive the last nail into their commercial coffin. 4. Heightened price sensitivity Alongside a greater demand for added extras, clients also know that in many cases they can also use the increased levels of competition in the market (and many firms’ increasingly public willingness to compete solely on price) to squeeze fee levels. Contrary to popular opinion, this is not just a problem faced by smaller firms. I have seen first-hand while working with clients on tenders, pitches, and beauty parades larger firms being told that they need to drop fee levels in order to compete. While many can accommodate a slight reduction by moving work around the various levels of fee earners they have at their disposal, this pressure is still eroding revenue and profitability so it has to be considered a threat. Package_positon_profit_B.indd 3 30/03/2017 10:22
- 16. 4 Chapter 1: An introduction to today Waters are muddied further by those firms willing to ‘buy in’ work in the first instance, thinking (in my opinion, mistakenly) that they’ll be able to uplift those fee levels once they prove their worth and the relationship is up and running. I learned very early in my career that the old adage ‘you can’t negotiate up’ is one of the truest ever spoken. Those clients who push hard to drive down prices in the first instance are not only highly unlikely to be loyal, but are also the most likely to go back to the market for a deal should you have the temerity to attempt to put your prices up. 5. Changing consumer behaviours and preferences Traditionally when you needed legal advice (and depending on whether that advice was for you or your business), you’d either go to the office of your local lawyers or to the office of a lawyer who’d been recommended to you by someone you trusted. However, that was back in the days when you weren’t two clicks on your smart phone from anything you wanted to buy – those dank, dark days when you thought buying something actually required knowing, seeing, or talking to someone. Admittedly, online channels (and even online referrals underpinned by third party feedback) are unlikely to be a huge threat to large, commercially focused firms; they should still be able to thrive on client referrals and reputation. It will, however, be an increasing threat to smaller regional or private-client-fo- cused practices whose clients will go to Google first, and will be willing to trust what they find there. If they do like what they find, their decision is more likely to be driven by price and availability rather than location. Moreover, the potent cocktail of the right price and instant availability plus positive client feedback is likely to be enough to turn interest into a purchase. Location is an interesting point in itself. Skype and email have rendered location an irrelevance to clients in a number of practice areas. Both allow lawyers to arrange conferences around even the tightest of schedules and the instant delivery offered Package_positon_profit_B.indd 4 30/03/2017 10:22