Legal Technology Journal

CRM technology has taken a battering. But is software really the problem or have people been missing the point entirely?

In a survey I conducted in conjunction with Legal Business magazine a few years ago, client relationship management (CRM) and marketing systems were cited as ‘over-hyped technologies that had not lived up to expectations’. Harsh words indeed. Even today, CRM has the dubious distinction of not only being one of the hottest concepts in law firm practice management, but also one of the least understood and most ineffectually implemented. So what is the problem – are we looking at a fundamentally flawed concept or is the whole subject being approached from the wrong perspective?

In the world of legal technology, there have been two significant developments in the sub-category of CRM software in recent months. The first has been the release of version 5.5 of InterAction, the market leading CRM application from LexisNexis Interface Software, and the second has been the start of an upswell of enthusiasm for the Dynamics CRM system from Microsoft, which could be, arguably, the only serious challenger to InterAction. And that typifies just about everything that is wrong: all the emphasis is upon the technology itself with seemingly little or no consideration given to what the firm is actually going to do with it. As one despairing marketing consultant once put it to me: ‘Law firms claim they have CRM strategies but they don’t – they just have CRM software.’

It is probably fair to assume one of the reasons why so many law firms have a jaundiced view of CRM is that they were never certain from the outset what it was or why they were investing in it, so let’s go back to some business basics. In the typical law firm (in fact, in most client service-oriented businesses) a huge amount of energy is devoted to winning new business, yet firms still find their practice development ambitions thwarted by a ‘churn rate’ among clients. Thus, with all the new business they win, firms are not adding to growth but merely replacing the fees lost from existing clients whose custom they have failed to retain once the initial honeymoon period is over. In other words, firms are devoting their marketing resources to an exercise that amounts to little more than running just to keep from falling behind.

Five ways to keep your client

It is this scenario that the concept of client relationship – and note that the key word here is ‘relationship’ – attempts to overcome by creating a win-win situation for everyone concerned. Ideally, CRM should address the following five issues.

1. Closer relationship with the client

Do you really know what your clients think about your firm’s services? You may think you are meeting their needs, but is this actually the case? Could you do more for them and/or are there ways in which you could deliver your services in a more effective fashion? For example, some research suggests that as many as 96% of clients will not volunteer information that suggests they are unhappy with a firm’s services. Instead, they will simply reduce the volume of work they send you or else stop instructing you altogether – and even then you may be unaware of the root cause of the problem if they hide behind excuses such as blaming head office or the economy, rather than telling you the unpalatable truth.

The key here is to get closer to your clients – to find out what really makes them tick – and to maintain that relationship. This, indeed, is why some firms are now appointing ‘client partners’ (what would be called key account managers is other areas of business) to provide an ongoing link rather than relying on feedback from fee-earners. It should, however, be stressed here that firms will have to address the billable hours targets issue if their client partners are to be effective. Having client partners who always have one eye on the clock – and, yes, there really are firms that take their clients out for a Christmas lunch and then bill them for the privilege – is more than likely to be counterproductive.

2. Greater client satisfaction and ‘super-pleasing’

Of course, every lawyer intends to provide a service that ‘keeps the customer satisfied’, but in most firms these good intentions seldom progress much beyond trying to do the job right the first time, every time. And, as with the previous point, once again there is a risk of firms deluding themselves over the issue of what they believe the client thinks about the firm’s services and the client’s actual opinion. A classic problem here is the self-serving client satisfaction survey and the fact that if you ask clients whether they are happy with the services you provide, the vast majority will say ‘yes’ regardless of their true feelings.

One objective of CRM, therefore, is to increase a client’s genuine level of satisfaction with your services. Ideally, what you should be striving to achieve is what is sometimes known as ‘super-pleasing’, whereby you actually exceed the client’s expectations. It is also worth noting that trying to super-please clients involves more than a mutual massaging of egos, as not only are super-pleased clients more likely to instruct you on further projects in the future, but they will also be more inclined to recommend your firm’s services to their friends, colleagues and business associates.

3. Improved client retention

The sum total of a closer relationship and greater satisfaction should in turn add up to higher client retention ratios – after all, if you are doing such a great job for them, why would they want to go elsewhere? Indeed, if you establish a good relationship, then if problems ever do arise the client is more likely to be willing to discuss them with you rather than simply switching to another firm.

As mentioned at the outset, one of the biggest stumbling blocks to growth is the churn rate, with firms constantly having to seek now business to replacing existing clients that have been lost. If you can retain your clients then a firm’s practice development plans and whole financial outlook will be based on far more substantial foundations. Furthermore, the longer you retain a client, the more profitable they become as you build up more information about them, develop a greater understanding of their business and its needs, and start to exploit cross-selling opportunities (see below) within the firm. As a rule of thumb, professional service clients become most profitable from year three of the relationship.

4. Improved cross-selling

Almost all firms have an opening to cross-sell legal services to their clients, but few exploit this opportunity to the full. The fact is, every client has a number of different potential professional relationships with your firm. To give a simple example: the client that uses your firm to secure a lease on a new office will inevitably have other corporate legal needs, including employment work, IP issues, planning, company/commercial and litigation. If you have already impressed a client with the way you have handled one matter for it, it is going to be more receptive when you approach it about other projects. Indeed, even if they are only a private client and currently have their commercial work handled by another firm, they may still be open to an approach on the strength of the work you have already undertaken for them. Anecdotal evidence, from firms that have concentrated on cross-selling over a prolonged period of time, suggests that as much as 40% of all new business is derived from existing clients.

5. Increased fee-earner productivity

With any new client, there is an element of a learning curve as fee-earners grapple with understanding their business and researching its particular needs. However, once you have amassed this information and built up an element of client-specific know-how, including document precedents and a familiarity with any relevant legislation, the curve flattens out and it should become possible to handle each fresh set of instructions in a more productive and cost-effective fashion. Once again, the longer you retain the client, the more you can exploit this know-how to your commercial advantage. Compare this with the churn scenario, where almost every client is a new client and so you are forever reinventing the wheel and never able to fully take advantage of accumulated know-how.

A means, not an end

So far so good but if CRM has the potential to deliver so many benefits, how come the legal world’s experiences with it leave many firms with the feeling that it is an over-hyped concept that frequently fails to live up to expectations? If this describes your experiences, you are not alone; IT analyst Gartner has estimated that, within the wider area of business generally, 55% of all CRM projects fail to meet their goals. Let’s go back to those five points again – what is one thing they all have in common? The answer is they have nothing whatsoever to do with technology or CRM software. Instead, they involve people issues, cultural issues and a firm’s business processes.

True enough, CRM applications can help, but they are only tools to help deliver broader CRM strategies. By itself, CRM technology is not a panacea for damaged client relationships, and it certainly won’t win new business. As it says on the tin, CRM is about managing relationships and that means listening to what the clients say and want and, wherever possible, meeting those needs. The corollary is that no matter how much money is spent on CRM software, if a firm does not have a genuinely client-focused culture, the IT is never going to make any difference.