The BTI Consulting Group recently completed more than 270 interviews with corporate counsel at large and Fortune 1000 companies. We scrutinized spending trends, legal budgets, risks and goals to decipher exactly where the legal services market is headed in 2009, and concluded that savvy firms will do well by paying attention to these six market trends.

Economic Uncertainty Flattens The Legal Market

2009 will usher in the third straight year of single-digit growth for the legal market. It’s no surprise that corporate counsel are looking to rein in costs, but market growth for outside counsel services in 2009 is projected at just 1.9%.

Capturing a piece of this shrinking pie is essential to law firms facing increased costs and tighter budgets within their own organizations. Savvy law firms align closely with client needs and position themselves as strategic partners to maintain and grow primary relationships in a turbulent market. Take advantage of this robust list of top client needs for 2009 to help jumpstart your marketing and business development strategies:

Add to in-house staff:  Boost realization without layoffs by contracting associates to short-term in-house roles

Get better value from law firms:  Create and adhere to budgets; Provide more business-specific advice; Offer alternative billing arrangements

Manage electronic records:  Provide clients access to e-discovery experts (before they’re needed)

Streamline business processes:  Share best practices in operational management;Offer access to tools and protocols in use at the firm

Make technological improvements:  Host a forum to allow clients to share experiences on in-house technology

Achieve a better regulatory understanding:  Deliver relevant, timely updates on changing regulations; Inform clients how to get involved and proactively impact new regulations

In-sourcing Is The New Outsourcing

Corporate counsel have strategically augmented their internal departments with resources. As part of a growth trend started in 2005, corporate counsel added two new attorneys to staffing rosters in 2008—bring the total average number of attorneys to 33.2. Internal resources help clients boost productivity and get a handle on ever-skyrocketing outside counsel costs.

Don’t expect too many additions in the upcoming year as clients tighten purse strings in response to a potential recession. The most strategic law firms prepare for corporate counsel to demand a boost in productivity and value from their law firms.

Demonstrate your firm’s value-added services

Articulate the value you deliver in client-friendly terms

• Time saved
• Costs avoided

Review draft invoices with clients

• Be sure to share budgets and changes with the client before they see the final bill

Offer savings to clients on routine work

Establish your firm as a trusted advisor for clients

Work together to implement cost-savings strategies and legal management plans

Send proactive updates on market trends affecting their business and industry

Convergence Is A Reality

Shrinking dollars are not the only hurdle to overcome in this downturn. Clients cut law firm rosters to all-new low levels. On average, corporate counsel rely on 42 law firms for their legal needs, cutting the number of firms used by almost 20% in one year. This trend is expected to continue through 2012 as clients anticipate shrinking rosters by another 26%.

Successful law firms hyper-focus on client retention to ensure that their client relationships last long into the future. Some of the most effective client retention strategies include:

Adopt proven key metrics to keep your firm focused

• Number of meetings with client outside of current project

• Client business goals identified

• Work imported from other practice areas

• Post-success briefings

Deploy SWAT teams to attack and build relationships that are deteriorating

Create a Client Advisory Board to build client investment in the firm

• Small group of top marquee clients

• Delineate client service standards

• Adopt client-facing metrics

• Meet annually to assess firm’s performance and discuss new issues

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What Is the Client Allegiance Premium?

The BTI Consulting Group asked more than 650 corporate counsel how a credible law firm could replace one of its existing primary providers. The clients of 87% of law firms provided specific recommendations—the remainder did not. The 13% of law firms who serve this second group of clients have truly won their allegiance.

These law firms, The BTI Client Allegiance Leaders, enjoy the satisfaction of having a strong foothold with their clients. Even better, they capture substantial financial rewards. Specifically, law firms whose clients pledge their allegiance garner:

36.5% higher revenue growth
19.5% premiums on billing rates

This Client Allegiance Premium is the pinnacle of any client relationship. In the past decade, law firms have invested more than $6 billion and untold numbers of hours in attempts to boost client service. Today, 73.8% of AmLaw 200 law firms have established client teams, 69.6% deliver client service training and 56.4% conduct systematic client research in an effort to attain this Holy Grail. So why do so few law firms enjoy the returns?

Three Styles Of Feedback Drive Financial Rewards

One of the keys to realizing the potential of client service—and securing the rewards of the Client Allegiance Premium—is a world-class client feedback program. A high-caliber program combines three main styles of client feedback into a systematic, formal approach to gathering and responding to client insights:

Routine client interaction
Individual client assessment
Firm-wide performance analysis and action

1. Routine Client Interaction (informal, client-specific)
Virtually every law firm engages in regular client interactions. Telephone conversations, email exchanges and relaxed lunch meetings all provide informal opportunities to gain insights into client satisfaction, goals and priorities. This is, by far, the most prevalent style of client feedback—and the one with which attorneys are most comfortable.

Unfortunately, routine client interactions may also be one of the least reliable indicators of client service and satisfaction. Routine communications alone rarely provide ample information to direct strategic investment, uncover opportunities or even retain clients. Clients seldom feel comfortable during the course of daily conversation with their attorneys to raise pressing issues, voice underlying concerns or express dissatisfaction (especially if this dissatisfaction is with the attorney himself).

Making the most of your regular encounters requires a systematic, disciplined approach. Follow these four steps to empower your daily interactions with clients:

Identify any potential business opportunities
Record client preferences (communication style, billing, etc.)
Ask open-ended questions about the client’s business goals and objectives
Encourage management or marketing to visit your clients for feedback

Though these recommendations can help you make the most of your regular communications with clients, they are not intended to replace the two other styles of client feedback. Routine communications by themselves seldom impact firm-wide performance. In fact, without the third style of feedback, firm-wide performance analysis and action, we find the impact on financial results to be inconsistent and variable.

2. Individual Client Assessment (formal, client-specific)
Individual, client-specific analysis of satisfaction is typically how law firms ready to institute a more formal client feedback program graduate to the next level. Of the 56.4% of AmLaw 200 law firms currently conducting systematic client research, the majority rely primarily, if not solely, on individual client assessment. (Only a handful of world-class programs incorporate the final frontier, firm-wide performance analysis and action. This third style of feedback is essential to capturing the real financial benefits. We discuss this in more detail below.)

Approaches to conducting individual client assessments vary widely. Most common among law firms are:

Third-party surveys by mail or online
Managing Partner visits to clients
CMO interviews
End-of-matter surveys

Individual client assessments generally include summaries of individual client feedback and recommended client-specific follow-up items. Just over half of law firms call on third-party service providers to assist in one or more aspects of individual client outreach and analysis.

Four key factors characterize best-in-class levels of individual client assessment:

Client-specific evaluation of satisfaction, opportunities and relationship status
Client-focused design
Qualitative, experiential insights
Action plans to follow up on client opportunities and risks

Individual client assessments can deliver powerful, high-impact client feedback which enables firms to drive targeted changes and growth on a client-by-client basis. The strength of this style of feedback is in its granularity: it is specific, tangible and frequently actionable.

The downside is follow-up activities are often limited to those individual client relationships which get active, focused attention. This is the primary reason why individual client assessments alone do not yield the firm-wide financial benefits of a comprehensive program, which incorporates all three styles of client feedback.

3. Firm-wide Performance Analysis and Action (formal, institutional)
Fewer than 10% of law firms today embrace firm-wide performance analysis and action as a critical component of their client feedback programs. Yet it is this single approach that truly separates the mice from the men.

Firm-wide performance analysis and action compiles systematic insights from a select group of clients to generate an institutional assessment of performance and related strategic recommendations. This analysis is typically both quantitative and qualitative and includes competitive benchmarking. Law firms that perform firm-wide analyses consider them an extension of their strategic plan and regularly rely on this institutional insight to drive market direction and firm investments.

The size of the client group included in the analysis depends largely on the composition of a firm’s client base, as well as the specific goals and objectives of the outreach. For example, it may range from just 36 key clients who account for more than 70% of a firm’s revenue to over 150 clients representative of a firm’s entire client base. Few firms engage in this complex level of analysis without the assistance of a well-trained expert in research and analytical methods.

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