Ever since the Great Recession, clients have started to exercise their power on the legal market by pushing for improved efficiency, predictability, and cost-effectiveness in the delivery of legal services. The last decade has thus given rise to a more aware type of legal consumer. According to a recently published report by Thompson Reuters, evidence of this trend includes more vigorous budgeting and billing processes, and increased reliance on in-house lawyers to provide many of the services previously obtained from outside law firms.
Besides this post-crisis focus on cost-effectiveness among the legal clients, new legal tech solutions and alternative legal service providers put pressure on the traditional law firms by offering cheaper and more digital accessible legal services. To summarise the current situation: The past years have seen a significant change in the legal demand and a bunch of new players on the market whose main focus is to meet this exact demand.
However, these fundamental changes at work on the legal market are not just giving birth to “alternative” legal services. They are becoming the norm. Also among the more traditional legal service providers has there been an increased focus on client-centricity as opposed to the more lawyer-centric past.
As covered in earlier articles on Legal Tech Weekly, we are experiencing some seismic shifts in the legal industry with traditional law firms that open captive ALSP’s, develop modern innovation cultures. and introduce new pricing models. As noted in the before-mentioned Thompson Reuters report, there is a move away from the law firm-centric model where “legal expertise was seen as the primary service clients purchased on a fee-for-services basis, and toward an “integrated solutions” model characterized by value-based pricing.“
When innovation becomes the norm, law firms will need other differentiators. And in a world where the client is king, focusing on customer care, better service and improved client experience is one of the obvious places to start. Law firms will not need to start from scratch and reinvent themselves completely.
They could, for example, look to how modern software companies have refined the idea of customer success, focused on outcome-value and measured their accomplishments in client retention rather than just customer acquisition.
But what would it mean if law firms were run a bit more like modern SaaS companies?
The rise of SaaS
In the past decade, SaaS (software as a service) companies have become an influential part of the global economy. It turned out, that nobody wanted to maintain a local server in the basement and that expensive software licenses stored on CD-ROM were not suited for an economy that values scalability and flexibility. Consequently, the most popular delivery model for software is SaaS where the tools are stored in the cloud and paid for via subscriptions.
The benefits are multiple. The customers receive their software at a predictable cost that includes delivery, hosting, support etc., so they do not have to install programs, maintain the software, browse for new updates or hire internal tech-support. All they need is access to the internet, which enables flexible, remote and gig-based working. The entry-level is low as there is no need for million-dollar investments in hardware and the use is easy to scale for growing businesses because you can in- and decrease the number of subscriptions on a month-to-month basis.
Furthermore, most SaaS companies hold a high-security standard that would be very expensive yo achieve independently for a locally installed application.
The SaaS delivery model is also in tune with the outcome-thinking that is predominant among 21st-century consumers. As Richard Susskind states in his latest book: People do not want neurosurgeons, they want health. The product or the specific mode of delivery does not have intrinsically value. What matters is the outcome they produce. That makes ownership redundant as people just want access to the outcome, they simply want their products “-as-a-service” which the SaaS-industry has contributed heavily to.
Combined, all these factors make it very easy for users of SaaS products to experiment with different solutions without risk. They do not have to invest large sums in software and can easily on- and offboard themselves.
Retention driving a customer-centric culture
Because of the flexible and interchangeable nature of their service, client retention is almost equally important to client acquisition for modern SaaS companies.
Most SaaS companies base their business model on unit economics which involves focusing on the users’ Customer Lifetime Value (the revenue generated for the entire length of time they subscribe to the service) and their Cost per Acquisition (how much is spent to acquire a new user). In a global economy with fierce competition and high advertisement-prices, increasing the lifetime value of a customer by retaining them on the platform is key to success.
Since the SaaS business model requires customer satisfaction for profits, the leading SaaS companies invest heavily in user support and customer success managers that can help customers achieve their desired outcome through their interactions with the service, as well as proactively orchestrate a customer's journey toward that outcome.
Instead of squeezing every last penny out of the user, the focus of customer success is to build long-lasting relationships and collect the feedback that is necessary to improve and develop their service to make it a market-leading position.
Customer Success in law
As more and more legal service providers implement subscription-based business models, client-retention will also become important to secure survival in a competitive legal market.
Already now, research by Deloitte found that customer-centric companies are 60 % more profitable compared to companies that were not focused on the customer. According to Salesforce: “A significant majority (84%) of customers say that being treated like a person, rather than a number, is very important to winning their business.” The same study also found that “74% of business-to-business customers and 63% of consumers will pay more for a great experience.” These numbers indicate that there are strong economic incentives for law firms and most other businesses to adopt client-centric strategies.
According to Clio research, American lawyers spend only 2.4 hours per day on billable work while up to 40 % of their day goes to acquiring new clients. If they would spend more time on client-centric legal work, they could increase the satisfaction with their work, and thereby improve the client-loyalty and -retention. Again, that would render the need to spent so much time on the acquisition.
So what could law firms do to become more client-centric and apply customer success strategies in the work with their clients?
NPS as a metric
A great place for law firms to begin would be to monitor and measure their performance in terms of client satisfaction. To do that, Saas companies usually swear to the NPS (Net Promoter Score) as a key metric when they evaluate their performance. The NPS is a questionnaire that indicates a customer’s propensity to recommend the product to others. It ranges from 1-10. A score of 1-6 shows the detractors, while 7-8 shows passive customers and 9-10 indicates that the users are active promoters. It has become a benchmark standard in the digital age to measure customer satisfaction, loyalty and brand perception.
Instead of looking at profitability, hour-rates or productivity as the most important metrics of success, law firms that measure their success by NPS would naturally become more client-centric. Especially if they also reward lawyers with good scores instead of those with the highest turn-over. Such a bonus system would definitely create more incentives to be client-centric.
Conduct surveys and gather feedback
Recent research shows that the legal industry as a whole performs terribly on customer satisfaction. Some surveys even show that lawyers are doing worse than airlines and car rentals on NPS (!), while the SaaS companies on the contrary top the charts. That is alarming. Especially since 62 % of legal consumers say that they ask for recommendations when they are looking to hire a lawyer.
In general, the best way to improve service is to ask those who used it what they think about it. By gathering surveys and gather feedback in a structured and consistent way like most SaaS-platforms and customer success teams do, law firms will be able to find room for improvements in the customer experience they deliver. Should pricing be more predictable? Should the lawyers be more accessible? The better and more comprehensively you gather feedback, the more precise the answers you will get.
What separates customer success from normal customer-support teams is that they work proactively to help users achieve their desired outcome. In order to give proactive feedback, law firms will need extensive data on their clients as well as more complete insights into their legal affairs.
The best way to get that is by using client portals, CRM-systems and other client-facing digital tools such as contract management platforms, where law firms can monitor and manage their clients’ legal documents. In fact, the best way to adopt the customer-centric strategies of SaaS-platforms is by offering legal services as-a-service on digital SaaS platforms. These could either be off-the-shelf products or platforms developed by the law firms themselves.
In this way, law firms could deliver real outcome value to their clients, and the client-centric approach would simultaneously lead to more legal work and a higher client-loyalty which means increased profits.