Why keeping existing clients is better than finding new ones
Clients. Businesses spend millions each year on marketing and sales in the hope of luring elusive new clients on board. Lawyers are no different, with Forbes estimating US firms’ annual marketing spending now tops $890 million. But is this focus on new clients making a difference at the top of the performance tables?
“The best performing law firms keep 92% of their clients on a year-over-year basis. The average retention rate for all law firms with 100 attorneys or more is 85.2%. And almost 20% of law firms report losing 4 of their top 10 clients every year.” BTI Consulting
Arguably, the most significant indicator of the success of a firm is not how many new clients it brings on board, but how many it keeps on board.
Client retention and success
Before we get into a correlation vs causation debate, research by Fred Reichheld of Bain & Co spells out in black and white the value of client retention. According to Reichheld:
“a 5% increase in customer retention produces more that a 25% increase in profit” Bain & Co
Client retention then, is vastly more lucrative in terms of profit for the company relative to its proportion. And it goes further than that. The cost of acquiring a new client is eight to twelve times higher than acquiring business from an existing client (BTI Consulting) and this only increases with competition. If you are a larger firm then, client retention should sit on equal footing (at the very least) with bringing on board new clients to ensure you stay at the top of the leader tables. And this begs the big question – what is it that instils client loyalty?
Client loyalty – some misconceptions
First, let us start with a painful misconception. A study of more than 75,000 clients in 2010 by CEB Inc
“found a very weak correlation between customer satisfaction and long-term loyalty” ABA Journal
Put simply, it seems that the delivery of excellent work is not sufficient to keep your clients on board. Furthermore, findings show that there are rapidly diminishing returns in long term loyalty once a threshold of exceeding expectations has been met. So what did CEB determine was the key to client retention? Effortless experiences. This means streamlined interactions, on easy to use (or access) platforms. Offering an online tool like Docusign instead of printing out, signing and re-scanning documents. Panelists at a ‘Marketing Partner Forum’ hosted by Thomson Reuters and including Vice Presidents from Google to U.S. Bank cited:
“billing timeliness …is an area where there needs to be across-the-board improvement” Thomson Reuters
In a world where clients can measure the ease and tailored nature of a firm’s services against the competition, but also against every other experience they have had as a client, the easiest innovations will be the small ones. Clocktimizer offers the opportunity to create a more tailored fee arrangement to suit your client, and produces timely itemised bills to ensure they feel fully informed of the hard work done by their lawyers. But a firm can also look to something as simple as an in-house online meeting tool, so clients don’t have to come to your offices. It can be the ability to book a meeting with a lawyer online, or make your lawyers skills searchable, but referenced by the cases they have worked on using these specialisations.
Let us compare legal services to the accommodation industry for a moment. My (or indeed any client’s) golden standard of ‘ease of service’ has been set by companies like Booking.com or Airbnb. It is the process of constant innovation; of testing new ideas, features and services; which should act as a guide for law firms looking to raise their own customer retention rates as high as these internet giants and in doing so their own firm’s bottom lines.