Law firms need to unleash their marketing & business development teams so they can better seize critical opportunities in the post-pandemic legal environment
For most law firms, 2022 was a rollercoaster year, with the first half seeing firms continue their solid performance that carried them through 2021, a banner year. But by the midpoint of 2022, law firm demand and profit decelerated, and expenses started to climb. By the end of last year, many firms seemed to have successfully adjusted the relationship between headcount, expenses, and revenues, stabilizing growth in profit-per-lawyer. But now, 2023 already is presenting unique challenges for the majority of firms, and their chief marketing officers (CMOs) have an equally unique role in addressing them.
While 2023 seemed to be off to a strong start, the collapse of several regional banks, continuing war in the Ukraine, and the uncertainty wrought by rising interest rates have both clients and law firms a bit uncertain about the direction of economic trends. It’s not clear where overall demand will come in for the first quarter; and while expenses continue to increase, they are offset somewhat by rising rates that firms are able to charge. This heady mix makes continued revenue growth even more important.
On the client side, demand for legal services is projected to remain strong — 41% of clients say they plan to increase legal spending this year, and only 20% expect legal spending to decline. Clients are also looking for legal advice to be delivered in combination with significant industry and sector knowledge, noting that advice presented along with commercial context has more worth than that same advice presented in a vacuum.
Law firms’ marketing & business development teams, of course, play a significant role in turning these projections into actual revenue. But much of marketing & business development was turned upside down by the pandemic. With the temporary loss of in-person marketing channels such as events, many marketing & business development teams were forced to experiment with new types of digital outreach, and they are now in a position to better compare their effectiveness.
On average, law firms are allocating 1% to 2% of revenues to marketing & business development budgets. CMOs are right to wonder if that’s adequate. Along with those budgets come admonitions to get creative and of course, do more with less, even though live events — generally quite expensive — are coming back into the marketing mix.
Balancing the short- and long-term
To meet that mandate, CMOs need to narrow their focus to those initiatives most directly aligned with their firms’ strategic aims. Those aims, of course, need to reflect client priorities: the type of work clients need done, how they want advice delivered, and which geographies are most active, for starters.
The firm’s strategic aims also need to be informed by market insights. A data-driven approach, or even a data-informed one, helps reduce internal debate. Strong, reliable data that comes directly from clients helps teams focus and move ahead. Equally important, it prevents them from using resources on initiatives that may not have much impact.
Responding to clients’ legal needs requires a two-step approach. First are clients’ immediate needs, which our data identifies as most urgent in the regulatory, legal & employment, and litigation practice areas.
While firms are handling urgent client requests, they must also be laying the tracks to support clients’ future needs. That way, when clients are ready to address, for example, data privacy head-on, firms will already have the right legal team with the right relationship at the ready. Right now, clients’ longer-term needs appear to be in areas of regulation, data privacy, cybersecurity risk, and environmental, social, and governance (ESG) issues.
Balancing clients’ short- and long-term priorities requires a balancing act of its own on the part of CMOs, who often are all too aware that they can’t do everything at once. Yet, no matter how urgent or busy short-term needs seem, it’s imperative to carve out the time to look at longer-term client priorities.
The increasing profile of marketing & business development
Other members of firm leadership seem better positioned than ever to help CMOs perform this balancing act. Those in leadership roles in marketing & business development report that the firm leadership is working together better than ever, which makes it easier for leadership to support other functions, including marketing & business development.
In addition, CMOs say that the value of marketing & business development is now better understood by law firm leadership. CMOs are spending less time convincing lawyers of the value of brand strategy, for example, or defining the importance of marketing to law firms.
CMOs are also starting a bit of a reckoning over their data strategy — or lack thereof. They’re understanding the importance of client data, especially client feedback, client insights, and the priorities that are on their clients’ horizons. CMOs also believe there might be valuable insights within their firms’ own datasets; but they also understand that their firms might not have the skills to unlock those insights. Clearly, they see that there is a skills gap when it comes to data analysis. And without the ability to mine the most important insights, they’re concerned about getting bogged down in data without taking effective action — the dreaded analysis paralysis.
CMOs, like their clients, are being asked to do two things at once: grow the current business, and transform their efforts to better capture new business over an indefinite time period. Yet growth and transformation require different skills. Growth often requires intensifying existing efforts for bigger results — and is all about faster, bigger, more. Transformation is a different beast entirely, requiring reflection and iteration.
Law firm CMOs seem well-prepared to do both, and equally importantly, firm leadership seems to understand the urgent need to support them in this critical task.
You can learn how to build a feedback dialogue with your clients that will deliver value and growth, here.