Law360 - Data-driven insights are key to attracting today's clients
Law firm business development is at an inflection point where data analytics are overtaking cocktails and golf as the go-to strategies for wooing new clients, says Lavinia Calvert, VP, Legal Industry Principal at Intapp.
*This article was first published by Law360
For many law firms, the days of double-digit revenue growth feel like a distant memory. Last year, amid a drought in transactional activity, many elite law firms actually saw their revenue decline.
But some observers have been predicting slower growth as a systemic feature for years now. As competition increased, demand stagnated and clients became less loyal, some analysts even declared growth dead.
Add a cloudy economic outlook, and it becomes clear that law firms can no longer simply rely on their general reputations or the personal relationships that partners forged with legacy clients. Law firm business development is at an inflection point where data analytics are overtaking cocktails and golf as the go-to strategies for wooing new clients.
That’s not to say personal relationships don’t matter. They do, but they’re not enough to keep clients happy and loyal.
Clients today view great legal advice as table stakes — the cost of mere entry to the game. They want counsel that has a holistic understanding of their business: the challenges they face, the macro trends affecting the industry they operate in, the competitive landscape.
In this environment, law firms need to leverage the most precious commodity in today’s information economy: data.
The Advantage of Data-Driven Organizations
While the Big Data revolution swept through many industries years ago, it didn’t hit with the same force at many law firms. That’s perhaps not surprising. Law firms are complex organizations with various business goals and personalities. They also have a long history of financial success, which may have rendered a data strategy less urgent.
But law firms that can effectively leverage data will have a competitive advantage. A McKinsey & Company study found that data-driven organizations are 23 times more likely to acquire customers, six times as likely to retain customers and 19 times as likely to be profitable.
Attracting new clients, retaining them and turning profits is what I call the trifecta for business development. But what does creating a data-driven organization look like?
Identifying Targets With Precision
First, it means putting data to work on a client-acquisition strategy.
Private equity firms provide an illuminating example. When most private equity firms set out to find companies that fit their investment criteria, data is their guide. It’s a way to winnow the field. But with their high fees at stake, it’s also a way for private equity firms to ensure they target the most viable contenders to make a good return for their investors.
Most private equity firms look for companies with good track records of producing cash flows. But that’s just the start. How much revenue do they generate annually? What are their debt levels? What is their market position? What are their levels of profitability?
Law firms can take a similar approach to locate targets.
First, they need to identify the industries they want to target. Then consider the size. Is the firm aiming for the top of the market? The middle?
Establishing a profile for the ideal client can have several benefits. For one, it can help firms create a more targeted pitch, which will ultimately lead to better client service. Focusing on similarly situated targets can also help make the pitch process more efficient.
Gathering Data on Day One
“Show me you know me,” a phrase popularized by Samantha McKenna, founder and CEO of the sales training organization #Samsales Consulting, neatly sums up a command that general counsel have been uttering for years.
It’s good advice. A 2022 survey of in-house counsel from BTI Consulting found that understanding client business is the most powerful trait law firms can use to distinguish themselves from competitors and deepen a client relationship.
That information-gathering process should start at the prospecting stage. But the onboarding process is another opportunity to gather as much data as possible about clients and the industries in which they operate. Gathering this data is crucial for the relationship’s long-term success and for identifying cross-selling opportunities.
Among the areas to probe in this phase are the business’:
- Risk factors;
- Key stakeholders and leaders;
- Competitive threats;
- Regulatory and legal challenges; and
- Financial health and outlook.
There are several ways to gather the data: interviews, surveys, intake forms, external research, analysis of the firm’s historical billings and work product by industry, for example. The key is to systematize the data and share it firmwide so as many people as possible can spot trends and new opportunities.
Empowering business development professionals and others to use the data is also important. Clients themselves can also be a good source of information. For example, Mitch Zuklie, CEO of Orrick Herrington & Sutcliffe LLP, shared during a podcast interview that a new client created a Trivial Pursuit-type exercise with company trivia to help the broader Orrick team understand their business and challenges.
Surfacing Industry Insights
Surfacing data-rich industry insights requires law firms to align themselves more closely with their clients. Traditionally, law firms have organized around legal practice areas. But clients don’t often describe their problems as antitrust, employment or tax problems. They have business problems.
This is why some smart law firms find organizing around industries is more advantageous. It gives law firms more opportunities to collaborate, cross-sell and build a brand identity. A March survey by Heidi Gardner of 25 chief marketing officers at AmLaw 100 firms found that 84% of respondents already have or plan to have sector-based units.
The survey shows that law firms using a sector-based approach reported it helping win new business from existing clients by delivering insights about their sectors. It noted:
The best law firms develop sector-based expertise and use that to help their clients succeed professionally and personally: a General Counsel equipped with knowledge of industry trends and forward-looking predictions will become a more capable business leader and recognized as such by their C-level peers and the board.
That means devoting resources, including technology and staff, to develop data-driven insights useful to clients. In the CMO survey cited above, some respondents at firms with sector-based groups reported that they had not delivered exceptional results because they had not moved beyond implementing these groups as purely marketing initiatives to turning them “into engines for generating new insights for clients based on deeper cross-practice, cross-office collaboration.”
The firms that pay more than lip service to a sector-based approach will find it easier to proactively reach out to clients based on recognized patterns derived from data. Say, for example, a law firm catering to startups collects data to show emerging evidence of down rounds. Giving clients those insights could provide tremendous value and offer law firms a superior way to stay top of mind than simply calling clients for general check-ins.
The Evolving Skill Set of the Business Development Professional
In 2023, an enterprising law firm is just as likely to hire a business development professional with a data analytics background as one with a more traditional sales and marketing skill set. Without access to data and the ability to use it to strategically align business development activities with business strategy, professionals are flying blind.
Make no mistake, the traditional tools of the business development professional are not being rendered obsolete, but rather a new tool must be added to the toolbox. The ability to read market and client data and anticipate opportunities and challenges for clients or prospective clients is becoming indispensable.
And now, with the rush of new AI tools at their disposal, law firm business development departments that lack the ability to capture and assess data will be at a huge strategic disadvantage.
Idiosyncratic, reactive and personal approaches to business development are inadequate in today’s competitive market. More than ever, law firms need to draw out data that can land clients and keep them happy and profitable.
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