(NOTE: This is the first of a series of FINN guest blogs. Author Robert Sawhney is a law and professional service marketing expert from Hong Kong. In this blog post, he explains the difference between BD (‘sales’) and marketing, and the importance of the distinction.)
There is little doubt that law firms in Europe are facing an increasingly competitive business environment exacerbated by the decline in economic conditions in the majority of European countries. It is often at these times that law firm partners start thinking about revenue generation and turning on the ‘tap’ of marketing and BD activities. It is exactly this type of thinking that puts most law firms in the same generic, undifferentiated space.
Marketing and BD are quite distinct concepts although they are deeply intertwined. Marketing is not so much a series of initiatives (such as promotion) but rather a business philosophy that puts the client at the center of everything a firm does. It is a business process and culture that recognizes the following above all else:
Marketing is about the creation and delivery of client value!
The problem in law firms is that marketing is so poorly understood that it has become synonymous with BD and promotion and hence most law firm partners believe it is something that can be turned on or off when times change. Additionally, marketing is not considered core to the function of the firm hence it has been marginalized to the point where it is not even part of the strategy process and (assuming a firm has dedicated marketing staff) the marketing people are overwhelmed with day to day tactical initiatives that have little impact on the firm. This creates a vicious cycle whereby firm partners see the marketing activities they use have little impact in firm performance which reinforces the belief that marketing is a back office function of little significance. This reinforced belief is based on the narrow understanding these partners have which is essentially marketing and BD are the same thing, i.e. sales, promotion, and client relations.
What is Marketing?
Many readers may be surprised to learn that marketing has the single largest impact on organization performance. This has been demonstrated in numerous empirical studies in many different sectors (including professional services, cf. infra: “Further Reading”). However, the marketing I am talking about is not the one being used by the vast majority of law firms.
I am talking about a marketing culture (known as a market orientation). This culture is essentially a business philosophy and business process that is about: ‘the organization wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization wide responsiveness to it’
This definition highlights the key point that marketing is firm wide. It is a management responsibility that is far too important to delegate to marketing people (unless you are simply delegating promotional activities which have little to do with a true marketing culture) When one looks at this definition it immediately signals the problem with marketing in a law firm. Law firms sell knowledge yet most law firms are very poor at leveraging their intellectual capital;
- Hourly billing that does not recognize value and creates conflict of interest between client and firm
- Focus on billable time and utilization rates
- Associates trained in technical skills but not in management
- Professionals with high IQ and little EQ
- Firm structure that inhibits cross functional sharing of information
- Professionals with little formal business training
- Senior partners with high resistance to alternative ways of working
- Fixation on practice areas as opposed to client problems
- Focus on cross selling without understanding client needs
- Lack of understanding of marketing techniques such as research, segmentation etc
Every lawyer inherently understands that firm profitability comes from delivering client value but they have forgotten this in the midst of management practices (such as an obsession with leverage and utilization) that are no longer relevant to the changing market. Think about it like this – what do clients really want?
- Responsive firm
- Professionals that speak in simple terms and show empathy
- Firms that understand their business and industry
- Firms that add value to what they do
- Firms that are reliable
- Firms that are flexible
- Firms that offer services which are of real benefit
- Quality work and service
- Firms that show interest in them without always looking for fees
- Regular and unprompted communication
What this points to is a need for culture change within the firm as a prerequisite to achieving a high performance. A market oriented firm is one that understands clients, markets and itself in order to coordinate information sharing across the firm that leads to client value that is very hard for other firms to copy. It is the soft systems of communication and tacit knowledge that will hold the key to success but that key cannot open any doors until firm leaders are ready to adopt change seriously and on a firm wide basis. This approach to strategy (which is market driven and marketing led) is what creates true differentiation, not some superficial attempt to claim superiority in a certain practice through traditional promotional and BD activities!
Figure 1 A model of market orientation and firm performance
Source: Journal of Marketing Theory and Practice (Carr and Lopez, 2007)
Marketing and BD – how are they different?
There are few accepted definitions of BD but it is essentially sales. BD is a much narrower concept than marketing and indeed has a much lower impact on firm performance when looked at in isolation. It is important to note that marketing and BD should be closely integrated because it is marketing which creates the platform for client value and it is the interaction of the professional and client (dialogue) that creates business. However, BD before marketing is like shooting in the dark, you may hit sometimes but nowhere near as much if you could see properly. Marketing allows you to see properly.
Marketing is both a culture and set of behaviours and is the most significant orientation that affects firm performance. For example, we know that clients choose a law firm based on expertise and industry knowledge, and we know that clients leave firms due to poor responsiveness. Both these aspects of client value relate to the ability of the firm to leverage intellectual capital, and since knowledge is the product of a law firm, this process is one that differentiates one firm from another. Marketing gives you the ability to leverage this intellectual capital in your sales conversations with clients because it creates the firm culture whereby knowledge can be shared and utilized (learned).
How can a BD process (or rainmaker) create a meaningful dialogue with a client without having the necessary knowledge in place? They cannot! Additionally, responsiveness is both individual and firm wide. A great rainmaker may be intuitively good at following up client requests and being pro active in mitigating problems but if he/she does not have the information at hand they need to help the client then responsiveness becomes a firm wide issue. What firm culture or structure will ensure that the entire firm understands the need to share information across practices and indeed, treat internal customers the same as external clients? These are the hallmarks of a high performance culture (a marketing culture). BD and rainmaking play their part but marketing ensures a process to enhance and deliver client value is ingrained across the whole firm and everyone understands this.
Law Firm Perception of Marketing and Performance
There is no doubt in my mind that 99.9% of lawyers do not understand marketing properly from the perspective of building a marketing culture as discussed above. These distinctions are very important because perceptions determines peoples reality and hence actions. For example, in a very insightful piece of research by Oyvind Helgeson and colleagues (Marketing Intelligence and Planning, 2009), the authors identified how perceptions of marketing and sales impact business performance. They found that three clusters of firms could be identified: those that focused on marketing alone, sales alone, or both marketing and sales. They found that the firms in cluster 3 (marketing and sales) far outperformed those firms in cluster 1 or 2. In other words, the relative perceptions that firms had of what they considered to be marketing or sales activities had a statistically significant impact on their firm’s business performance. Although the research was not in the professional services sector, it highlights the very real problems in professional service firms (PSFs) when marketing is misunderstood and inappropriately dumped in with all BD activities.
At the end of the day, no firm can survive over the long haul unless they deliver consistently high levels of client value. In the past, law firms have gotten away with less than stellar value delivery due to their monopoly in practicing law and the ever growing demand/need for legal services in a complex business world. This is changing. Clients are becoming more demanding as well as knowledgeable. Additionally, trends in the legal market such as LPO, external investment, globalization, and technology/commoditization means that law firms can no longer take their markets for granted and it will be the firms which can adopt a marketing culture which will stand head and shoulders above the rest.
Robert Sawhney is the managing director of SRC Associates Ltd. A Hong Kong based firm that works throughout Asia with law and other professional service firms on their key strategy, marketing competitiveness and leadership issues.
He is also the author of Marketing Professional Services in Asia (Lexis Nexis, 2009).
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Chang, T.Z., and Chen, S.J. (1998) Market Orientation, Service Quality, and Business Profitability: A conceptual model and empirical evidence. The J of Services Marketing, 12(4), pp.246-264.
Farrell, M.A., and Oczkowski, E (2002) Are Market Orientation and Learning Orientation Necessary for Superior Organizational Performance? Journal of Market Focused Management, 5, pp.197-217.
Guo, C. (2002) Market Orientation and Business Performance: A framework for service organizations. Eur J of Marketing, 36(9/10), pp.1154-1163.
Jaworski, B.J., and Kohli, A.K. (1993) Market Orientation: Antecedents and consequences. J of Marketing, 57, pp.53-70.
Harris, L.C., and Ogbonna, E. (2001b) Leadership Style and Market Orientation: An empirical study. Eur J of Marketing, 35(5/6), pp.744-764.
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