Competition in the legal market is cutthroat, and today clients have more information at their fingertips than ever before — meaning they can easily find a reason (or no reason) to go elsewhere. Securing revenue by retaining clients has become one of the most important tasks in any firm.
In our own internal research among the AmLaw Top 100, most firms experience somewhere between 10% and 30% of existing revenue churns every year. Some of this is inevitable. For example, sometimes a client will have one specific legal need, the firm solves it and the client goes away.
But in other cases, clients might go away because the firm hasn’t been proactive in nurturing that relationship, making it clear that the firm won’t be attentive to their future needs. This is likely because firms often don’t have a clear vision and execution approach to client retention. Here, we’d like to highlight the two most challenging components of a client retention strategy that firms need to define, and some approaches to getting more out of data and analytics.
When developing a client retention strategy, most firms first grapple with the difficult task of identifying which clients to prioritize in their client development efforts. This struggle often arises because partners will make trade-offs between nurturing existing key client accounts and pursuing new client acquisition.
Key client accounts are vital sources of revenue and stability for the firm, necessitating attentive care and tailored services to maintain their loyalty. However, given the focus on billable hours within most firms, partners and attorneys continue to focus on the legal work of today, rather than potentially lucrative opportunities for the future. Most attorneys are working on multiple client cases at a time, especially at the partner level. Compounding the problem, many partner compensation plans still focus on origination of new clients as a major factor (or the only factor) for income distribution, disregarding client retention and expansion as an important metric. In any case, despite knowing retention is important, attorneys will dedicate little time, focus and attention to nurturing those all-important existing client relationships. Determining which clients to focus on is thus crucial to a firm’s success.
More forward-looking client development specialists have started using data to approach this task in a more scalable way. However, the methodology to identify key client accounts is almost always based on the current state, rather than looking ahead to the future. Law firms often look at their top 50 or 100 clients by historical revenue over the past 12, 24 or 36 months. While this information can yield insights, it tells only part of the story. Looking purely at historical revenue won’t tell you which clients are likely to grow in the future, which are likely to be the most profitable, which clients are satisfying and developmentally powerful for attorneys to work with, or which will create mutually beneficial strategic value in the long term by aligning with your firm’s goals.
“Cross-serving requires that someone in the practice has a deep understanding of the firm’s entire range of services and can identify possible synergies between different practices.”
Though they may sound anecdotal, these are real metrics that can be captured using data that already exists in your finance, billing and HR systems. While many firms balk at what they assume will be a complex and time-consuming process, with the right data-driven approach and predictive analytics, many insights can be unlocked in a matter of weeks, not months using a few core data systems.
Once your firm has identified the clients that best suit your practice or industry groups, the team faces a new challenge: How to nurture these client accounts to expand into new service areas.
Given clients’ intense (and justified) focus on legal expertise, law firms have naturally become siloed into specific practice areas. Each practice group often operates independently of all the others, focused exclusively on its specific area of expertise and client base. As a result, there may be limited communication and collaboration among practice groups, hindering the exchange of information about potential opportunities to cross-serve the same clients. Lawyers may prioritize hitting their individual practice's revenue targets, which can discourage them from actively promoting services offered by other practice groups. Cross-serving requires that someone in the practice has a deep understanding of the firm’s entire range of services and can identify possible synergies between different practices. Figuring out how to address a client’s comprehensive needs can be a complex task on top of the many other things partners are asked to do daily.
Data can also play a role in a blueprint for a cross-serving strategy, giving attorneys a way to approach each of their targeted clients and tips on how to get the most value for their clients. It may look like an opportunity heatmap or a service stack strategy that uses predictive methods the system has learned from historical dealings with clients. Each client’s unique needs might suggest a pathway to growth, whether that be through natural extensions of work within existing practices or possible cross-sells to other practices. Effective cross-serving also demands a cohesive internal culture that encourages teamwork and collaboration. Analysis of data can help unlock those internal barriers to suggest which other attorneys or resources within the firm can team up to increase the likelihood of successful client interactions and new revenue streams.
Law firms need to prioritize client retention as a strategic imperative within their firms to unlock continued growth and drive revenue security. Attorneys actively working on matters can’t go this alone without effective support, given their competing priorities. Enabling client development teams with the right data and analytics can help firms identify their most important clients and find new cross-serving opportunities while enabling growth and shoring up lasting relationships.