EXCLUSIVE: Can client relationship management really drive major profit increases for law firms?

In an exclusive feature for the Law Management section, Robin Dicks, founding director of the Thriving Company, examines how law firms can increase profits with the right client relationship management strategies

It is almost impossible to find a law firm website that does not promote the firm as totally client-focused, and providing client service that is second to none.

Of course, the theory is that client relationship management (CRM) and excellent client service don’t just benefit the client, but the law firm too. In theory, they should create more sustainable relationships and improved margins, not least because of reduced cost and effort in extending a firm’s services to satisfied clients.

The reality is that the level of benefits achieved differs markedly between law firms, as revealed by a benchmark study, undertaken recently by The Thriving Company in conjunction with Professional Marketing Forum.

151 of the 273 participants were from law firms. The vast majority of law firms reported that they had achieved at least some benefits from their approach to CRM, across one or more of 10 objectives. These included, for example, better relationships with key clients, and increased return from marketing investments.  However, critically, only one in ten law firms reported that they had achieved major benefits in increased profitability as a result of their CRM activities.
Analysing the level of benefits achieved and the activities undertaken by a firm shows that the wide disparity the results reveal is not incidental. Few firms undertake many of the key activities which were most closely correlated with growing revenue or profit, and most successfully extending client relationships.

There is a lot of wasted effort out there.  We know that many law firms have struggled to systematically manage client relationships, and, of course, culture plays a part in this. But what are the implications for those firms that really do want to achieve a major return for their CRM efforts? 

Clearly, it is possible. Amongst other things, those firms who report major benefits:

• Create a clear direction, strategy and objectives for their efforts
• Define measures of success through their accounts
• Specifically identify what clients expect and use this to track their performance.
• Set clear expectations of staff
• Define the management information that partners, practice managers, and service line heads use to track the impact of CRM on their objectives

CRM software is often viewed as either the saviour or the graveyard of CRM efforts, but the ability to set and manage the direction of a CRM programme, and to focus efforts on what clients really do value is much more important. Many law firms can really enhance their results through clearly thinking through how they resolve this. It is actually pretty achievable to significantly boost profitability.

More than ever, law firm clients are taking advantage of supply and demand. Being able to sustain relationships and reduce the volatility of billings and profitability are of huge benefit to firms. However, in response to the recession, law firms have focused their efforts on tactical marketing activities such as ‘pushing’ their message out consistently, and rebuilding their websites. On their own, these efforts have generated little benefit for clients or firms.
Law firms that are trying to understand what clients really value openly and objectively, and can follow this up with managing CRM activities effectively, will gain competitive and financial advantage.    

Robin Dicks is the founding director of The Thriving Company Limited, which specialises in helping professional service firms improve their marketing, business development, and overall business performance.