Business schoolMarket research                 Assessing Your                   CompetitiveUnderstanding the market in whi...
Business school                                         Market researchFirm’sPosition        “Firms need to recognise that...
Business schoolMarket research                                                                                          of...
Business school                                                                                       Market research   Wi...
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Assessing Your Firms Competitive Position, Law Business Review, February 2011


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Assessing Your Firms Competitive Position, Law Business Review, February 2011

  1. 1. Business schoolMarket research Assessing Your CompetitiveUnderstanding the market in which you operate isessential to making effective business decisions.Kevin Wheeler examines how assessing themarket can help you to understand clients andareas of potential growthM ost law firms only rely on their internal financial measures to assess their performance, including chargeable hours, hourly rates, utilisation, fees billed, work in progress, recoveries and profits.Coupled with the many sources of comparative financial datafor law firms, including those produced by The Lawyer, LegalWeek and PwC, firms are then able to benchmark their financialperformance against that of their peers. However, this analysis tells firms very little, if anything, aboutthe competitive dynamic of the legal markets in which theyoperate. The legal market is not homogeneous – it is comprisedof many different market segments, often with different firmscompeting in each. For example, the market for the provision oflegal services to Europe’s leading private equity houses is verydifferent to that for the provision of private client legal services inthe North East of England. Clifford Chance is a major player in theformer and Dickinson Dees in the latter. At this level, firms need to have additional market insights if they are to make effective business decisions. For each market segment in which they compete, firms need to know: ● Who are our main competitors? ● What relative market shares do firms have? ● How strong are firms’ relationships with key decision-makers? ● How effective are firms’ marketing and business development programmes? ● Which firms are winning the most new business and why? ● Which firms are perceived to be market leaders? ● How are clients’ needs changing? ● Which firms are developing new products and services in response to these changing needs? ● What pricing strategies are firms operating, and which firms are © Gettyimages perceived to offer the best value for money?8 February 2011
  2. 2. Business school Market researchFirm’sPosition “Firms need to recognise that to produce robust plans they will have to supplement what little market information is available with their own commissioned research” This article sets out how firms can go about commissioning market research to provide answers to these and other questions. Why competitive insight is important In the article “Finding Formulas” (LBR, July 2010), the importance of understanding how a firm is positioned in its key markets was discussed. Without an accurate assessment of the firm’s Kevin Wheeler competitive positioning, business and marketing planning runs the risk of being based on flawed assumptions, which usually leads to poor decision-making. In the legal sector, because there is relatively little publicly available market information, firms often undertake this assessment based on anecdotal market information and partners’ “gut feel”. Partners can often tend to view the world through rose-tinted spectacles and overestimate how strong their market position is, so this analysis is usually wrong. Firms need to recognise that to produce robust plans they will have to supplement what little market information is available with their own commissioned research. Although the immediate reaction might be that this will be expensive, highly focused pieces of research can be cost effective and, ultimately, taking the wrong business decisions because the firm did not have access to reliable market information is going to cost the firm a lot more in the long run. What about the legal directories? The reason why so few law firms commission their own market research is due in part to the existence of legal directories. Partners feel that directories give them all the competitive insight they need, making further research unnecessary. February 2011 9
  3. 3. Business schoolMarket research offering, and help you to ensure marketing “Make sure that you research both and business development strategies are correctly positioned to achieve maximum the users of legal services as well relevance and impact. There are a number of stages involved as those decision-makers who in commissioning a successful market assessment study to gain such insights, which will in turn allow your firm to have influence over which law create a defined market proposition, develop profitable services and improve firms their organisation uses” the bottom line. Define your marketWhile the quality of the research process that underpins Be precise about the “market” you want to assess.these publications has undoubtedly improved over the Consider where the bulk of your firm’s business comesyears, the insights provided are not as detailed as those from at the moment, and/or where you realistically haveobtained through commissioning a piece of research. The opportunities to grow. Focus your research budget heredirectories certainly do not provide answers to the and do not dilute the power of the research by tryinglist of questions posed above. At best, they provide to canvass the whole world. If your firman indication of the main players in a particular operates in a handful of key areas andmarket, ranking firms in bands rather than budget is tight, develop a rolling programmeproviding accurate data on market penetration undertaking one research study a year, so thatand market share. each area is covered every three to four years. The other main source of market insightavailable to law firms comes through the various Who to survey?syndicated market research studies available To provide a reliable overview of your competitivefor purchase in the legal sector. While these can position, the research must be based on agive a firm a good overview of its positioning in the representative sample of the market that you havelegal market with reference to questions about profile, defined. This means going beyond your own clients andusage, reputation, strength of relationships with decision- contacts. It can be tempting to use in-house marketingmakers, impact of marketing, pricing strategies and so on, databases for this type of project, but that will provide atheir weakness is that they often fail to provide insights for the skewed result, unless you know for certain that you holdsmaller firms whose market shares are low, meaning that they records of all the relevant industry players. If you only measurefrequently fail to register in studies geared more to the major awareness of your brand among people who already receiveorganisations, for example FTSE 100 companies, and the larger communications from you, you may overestimate your positionfirms that act for them. relative to your competitors. Some sector-based syndicated studies are starting to Use an independent, comprehensive business list to sampleemerge in the legal market and they may be relevant to certain from and you will obtain a far more reliable picture of where youfirms. However, if your firm is interested in understanding the for legal services provided to “niche” segments, such Make sure that you research both the users of legal servicesas a Yorkshire-based manufacturing companies or hi-tech as well as those decision-makers who have influence overorganisations in Southern Germany for example, you will have which law firms their organisation uses. Usually these are theto commission your own research to provide these insights. same, but with the increasing involvement of procurement departments in the selection of external law firms you would notCommissioning a study want to overlook these in any market assessment study. Also,In these challenging economic times, law firms face ever operational staff, such as HR and property directors, often havegreater pressure to retain and grow fees and profits from considerable autonomy from the in-house legal departmentexisting clients, while at the same time attempting to maximise when it comes to appointing legal advisers, so their views will beopportunities from new ones. important. Your firm may have an understanding of its relative marketposition – and fee income and profit per equity partner figures What to ask them?may provide a measure of success – but are there aspects of your Key elements of a market assessment study include:existing clients’ perceptions and behaviour that you need to ● Awareness, usage and perceptions of you and your mainunderstand in more detail? Do you know how potential clients competitors.view your firm’s brand and what could you do to encourage them ● Buyer needs and instruct your firm? ● Satisfaction with current sources of supply, against those Market assessment research can help you to focus on the needs and expectations.competitive strengths and weaknesses of your service within ● Issues/changes that will affect buyers in the future.your target market, identify opportunities to improve your10 February 2011
  4. 4. Business school Market research With this information, you can plotwhere you currently stand (againstthe competition, and against market “The legal sector is slowly waking upexpectations) and prioritise whereaction needs to be taken to ensure to the competitive benefits of havingyou are meeting market needs aseffectively as possible, now and into deep and accurate insights intothe future. Other question areas you can clients’ needs and their perceptions of different law firms. As we comeweave around this core might include– how decision-making structureswork, how often buyers changesuppliers and what “push” and “pull” out of recession, law firms lookingfactors influence this, and whatkinds of marketing and businessdevelopment activity buyers are to grow are advised to invest in thisexposed to and what has most impact. important business activity”How to do it?As noted above, the research must berepresentative in order to provide you with a reliable set business and marketing plans on fact rather than gut feel orof results. This means that any method of data collection anecdote.that would potentially skew the findings should be It is quite possible that while some of the resultsavoided – potential clients who don’t know much about confirm what you already suspected to be the case, othersyou (yet) are as important here as existing contacts, so may run counter to internal beliefs regarding your firm’san online survey that some recipients would have no brand position and/or your clients’ priorities.interest in and see no value in completing will not be If the research has been done properly, then therobust. findings will reflect the reality of what the market is Equally, you will not be able to measure thinking, and should be accepted as such.awareness and perception levels accurately if It can be helpful to get buy-in from keyyour name is connected to the approach up internal stakeholders like the managingfront. partner (who will be responsible for acting An independent telephone survey will on the results afterwards) from the start,often produce the most reliable results, to ensure that they are in a position tointroduced anonymously (your identity take ownership of the the research sponsor can be revealed You should also consider sharing editedtowards the end of the interview, at which highlights of the research with existing andpoint more detailed perceptions of your potential clients, as part of your ongoing marketingstrengths and weaknesses specifically can be explored). activity. The study’s respondents will already have been With firms looking to save money, there has been a tendency promised such a document as an incentive to them takingamong law firms to take market research projects in-house. part in the research.This may work in relation to gathering, say, client satisfaction The fact that you have been prepared to invest in findingfeedback, especially if the interviewer is somebody from the out what the market thinks and needs, and to take businessfirm not involved in the day-to-day provision of services to decisions on the back of this, will carry its own PR value.the client. However, for this sort of market assessment surveywhere you are trying to gather feedback on your competitors, Wake-up calland often from non-clients, an in-house approach will not In all other industries, commissioning market research towork. understand how an organisation is positioned in its key Decision-makers will not be prepared to divulge this markets is recognised by management as essential.sensitive information without having the “buffer” of an The legal sector is slowly waking up to the competitiveindependent market research house involved and their benefits of having deep and accurate insights into clients’anonymity protected. needs and their perceptions of different law firms. As we come out of recession, law firms looking to grow areWhat to do with it? advised to invest in this important business activity.The results from a market assessment study should be used tomap out where you currently are, where you want to be, and Kevin Wheeler has been advising law firms on all aspects of marketingwhat needs to be done to get there. and business development for 16 years both in-house as a marketing Taking a systematic approach like this to understanding director and now as a consultant. He can be contacted at kevin.wheeler@your competitive position will enable you to base your February 2011 11