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Bar Association of San Francisco Member Benefits: Publications

Legal Industry is Adjusting to New Reality

 

By Michael Bond, Blattel Communications

 

In early March, the Legal Marketing Association - Bay Area Chapter presented its annual “State of the Industry” program. Marcie Shunk of BTI Consulting was the featured speaker.
So, what is the current state of the legal industry? According to Shunk and BTI’s extensive analytics, the industry is adjusting to a new reality. The Great Recession has led to fundamental shifts in company spending for outside counsel. Through 2008, the amount companies budgeted for law firms grew steadily. In 2009, spending dipped dramatically, and today, it is still well below the pre-recession level. Because the legal spend is static, the major driver of new law firm revenue is poaching business from competitors.

In this compressed marketplace, Shunk noted that, at any given time, there are 15 firms competing with one another for a single piece of business. However, when companies were surveyed regarding choosing legal counsel, fundamental legal skills were not the differentiator – as most felt that all competitors were equally proficient. The critical difference was value. Firms that provided demonstrable value often fostered lasting and growing relationships with clients through the synergy of an emotional connection and a financial commitment – a state BTI calls “clientopia.”

Shunk, in keeping with the emphasis on client value, pointed out that alternative fee arrangements (AFAs) have become increasingly common. Nearly 80 percent of corporate counsels are employing some form of AFA, and more than 90 percent of law firms are offering AFAs. She noted the appeal of these arrangements is “cost predictability,” not necessarily cost reduction.

To stay competitive and grow in a “predator’s market,” Shunk says law firms need to make sure they are maintaining a laser-like focus on their current clients and reviewing how effectively they are meeting their needs. One suggestion offered by Shunk is that firms analyze their matters with clients and conduct mid-matter staffing and budget reviews.

The analytics and insights offered by Shunk indicate an industry that is starting to get back on its feet after a rough stretch. They also illustrate a hyper-competitive marketplace where just being solid on the essentials is not enough. Clients are demanding value, increased interaction and transparency. Firms must always be aware that foxes are lurking outside their henhouses.


 

Michael Bond, an Account Executive at Blattel Communications, is on the LMA-Bay Area Chapter Program Committee and can be reached at michael@blattel.com.

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