Business of Law Blog Software solutions for the business of law.
Sizing up the legal market, from a law firm business development perspective.
The graphic nearby puts the legal market into one powerful perspective: customer relationships matter.
Consider the following statistics:
1. Buyer’s market. 33 percent of clients have dropped at least one law firm in the last year, or the average in-house counsel terminates two long-term firms every year.
2. Market share won, is not market share retained. 35 percent of law firms have seen an erosion of market share.
3. New client acquisition costs more. The cost of winning a new client is 10 times greater than the cost of retaining an existing customer.
4. Client retention is more profitable. A 5 percent increase in client retention can increase profits between 25 to 125 percent.
5. Clients buy from firms they already know. The chances of selling to a new customer are between 5 and 20 percent, while the probability of selling to an existing customer is between 60 and 70 percent.
6. Risk of client attrition. When a law firm serves a client in just one area of law the risk of attrition is 35 percent; when a law firm serves a client in 4 or more areas of law, the risk of attrition is less than 5 percent.
7. How to reduce client attrition. When five or more law firm partners are involved with a client, fewer than 10 percent leave the firm.
Given the dynamic change the legal industry is currently undergoing, these business development statistics seem to support the notion that a sound strategy for law firm growth is built on client relationships. This means retaining existing customers and earning a greater share of work from those existing clients.
If you enjoyed this post, you might also like:
Big Law Is Dying? 8 Reactions Worth Reading
