Posted by: johnocunningham | September 19, 2017

Competitive Pressures Intensify for Law Firms – What’s the Solution?

According to Altman Weil’s 2017 “Law Firms in Transition” survey, the biggest economic trends that continue to be key factors in law firm planning and strategy at the executive level are:

  • the slow but persistent long-term downturn in demand for law firm services;
  • the growth in the number of lawyers chasing legal work;
  • the rise of contract lawyers and alternative legal service providers; and
  • the growth in competition from in-house legal staffs at the offices of corporate clients.

A sample of some of the interesting survey results includes the following facts:

  • more than 95 percent of law firm leaders see price competition growing over time
  • more than 79 percent see continued encroachment by alternative service providers
  • more than 84 percent see more use of technology over time to replace human resources in law firms

Furthermore, 65 percent say that demand for services performed by their firms has not returned to pre-recession levels of 2007, and 72 percent say that the pace of change affecting the profession will only speed up over time. (For more interesting findings, see the link to the survey in this blog post above).

What does all this mean for law firms?

Once again, they are not immune from market forces and the laws of supply and demand. I know that a significant number of lawyers feel that the profession is becoming too much of a business, but the fact is that clients are customers and they vote with their feet. Thus, they turn to providers who can give them the most economical solutions to their legal problems, whether those providers are technological, human or hybrid . Furthermore, large corporate clients are wealthy enough to develop their own in-house technologies and legal staffs that are trained and developed to meet their own needs, competing with even the largest of law firms by reeling in work that was once farmed out to them.

For law firms that want to survive and thrive, this means they MUST act more like businesses without abandoning their professional standards. Firms have to figure out how to deliver legal products and services at lower prices to beat the competition while maintaining profit margins. That requires sophisticated process analysis and improvement, technological innovation, and packaging of products and services in ways that encourage more buying.

The creative packaging of products and services is something that few firms are doing, but more surely could. For instance, firms that do trust and estate planning might want to consider doing what one firm has done – selling lifetime “care” packages at fixed prices that include necessary re-planning and re-drafting of legal documents over time as marriage, births, divorces, disabilities, deaths, inheritances and other life events change client circumstances. In that way, a firm can get more money up front, and perhaps continue to collect modest annual subscription fees, all while retaining a client who has “bought in” for less than they would normally pay over a lifetime. Similarly, firms could sell services at volume discounts (which some are doing) or they could give “frequent flier” rewards in the form of free legal services as certain revenue roadmarks are passed over years of loyalty.

One thing is for certain – more innovations will be necessary to attract, retain and build upon clients. If these innovations are not forthcoming, the 65 percent of firms that have experienced dropping demand since 2007 will move from the endangered species list to the museum of extinction.

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