Leveraging the 80/20 Rule to Accelerate Law Firm Performance

When it comes to law firm marketing, most things matter very little, and a few things matter greatly. The trick is distinguishing between the two. It’s worth the effort, because identifying your firm’s highest impact, highest leverage marketing activities and investments is the key to accelerating performance. Consider the following examples to put things into perspective.
 

Where We Spend Our Time and Attention

These days, most large law firms solicit feedback from clients about their satisfaction with the firm’s services. Smaller firms may not have a systematic feedback program in place, but seek input from clients in a more informal manner. Either way, the point is to distill the data and make performance and client service improvements.

Let’s assume that you put in place a feedback program that asks clients to rank interactions with your firm on a scale of 1 (very negative) to 7 (very positive). Let’s further assume that the results are mixed—there’s a relatively mixed distribution of responses across the spectrum.

What should you do with this data? Should you invest more resources to improve the experience for clients who rank their interactions with your firm at a 1, 2, or 3, or those who rank them at a 4, 5, or 6? In other words, should you focus on fixing the problems that lead to dissatisfaction, or try to incrementally improve the client experience of those who are already highly satisfied?

Most leaders focus on what seems like the most urgent and important priority, which is addressing problems. This is a finding from Chip and Dan Heath’s new book, The Power of Moments, in which they report that business executives estimated that, on average, their companies spend 80% of their resources trying to improve the experiences of their unhappiest customers.

By doing so, however, they’re missing out on a massive opportunity. The Heaths go on to explain that according to data compiled and distilled by Forrester Research in its annual U.S. Customer Experience Index, “There’s nine times more to gain by elevating positive customers than by eliminating negative ones.” Put another way, an organization’s very best and most satisfied clients or customers spend, on average, nine times more than those who are ambivalent or even generally satisfied. So there’s significantly more to gain (nine times more to be exact) from moving a client from a 6 to a 7 than from a 1 to a 4.
 

Who Drives Our Growth and Who Holds Us Back

A study facilitated by Chicago-based growth consulting firm Strategex took a look at the revenue, cost, and profit breakdown for 1,000 companies. It divided the clients for each company into quartiles, with the 25% of clients who generated the most revenue at the top, and the others organized in descending order based on revenue.

The study found that 89% of total revenue for the 1,000 companies studied came from the top quartile, while the bottom quartile accounted for just 1% of revenue. Other important findings include:

  • Each group of clients required approximately the same amount of effort, both in terms of cost and time, to service.
     
  • The top quartile generated 150% of a company’s profit; the second and third quartile were roughly break-even; and the bottom quartile resulted in a loss of 50%.


The 80/20 Principle at Work

The Forrester Group research, and the Strategex study, are glaring examples of the power of the 80/20 Principle, also called Pareto’s Principle, which suggests that 20% of our efforts lead to 80% of our results; 20% of inputs create 80% of outputs; and 20% of causes lead to 80% of consequences. 80/20 is a rule of thumb with broad application across industries, disciplines and economies. When analyzing its software, Microsoft discovered that by correcting 20% of the most reported bugs, it could eliminate 80% of the related crashes. 20% of U.S. citizens consume 80% of healthcare resources. 20% of U.S. roads see 80% of all traffic.

You can observe the 80/20 Principle at work in many different ways at a law firm, where a majority of revenue is typically generated from a small number of clients. Similarly, a small number of lawyers are typically responsible for bringing in a majority of clients. The numbers may vary a bit from firm to firm, but the principle remains:

All actions, endeavors, and investments do not create equal value; some are disproportionately valuable.

The key to success is to figure out what actions are disproportionately valuable, and do more of them. This is accomplished by incentivizing and coaching people toward more valuable activities, and also reducing friction and removing obstacles that lead to less productive efforts.

The 80/20 Principle implicates every aspect of law firm operations. Take productivity and attorney billable hours, for example. According to a recent Legal Trends Report issued by Clio, the average lawyer only spends 29% of each workday on billable time. That’s only 2.3 hours of billable time for each eight-hour workday. Sure, there are many non-billable activities that lawyers must engage in that are important, but billable hours and realization are the lifeblood of a firm. What would happen to a firm’s bottom-line if, instead of devoting 30%, its lawyers spent 70% or 80% of time on billable work?

This presumes, of course, that a firm has sufficient client workflow to enable lawyers to spend the significant majority of their workdays doing billable work, which leads us to the area where the 80/20 Principle can have the biggest impact: Marketing.

80/20 Marketing

John Wanamaker, a 19th century merchant who is regarded as one of the pioneers of marketing, famously said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” While I’m sure that all of who focus on marketing can empathize with Wanamaker’s sentiment, we have a modern-day advantage that he did not. We have troves of data that allow us to deploy our time and resources toward higher ROI activities. We can figure out the 20% that matter most, and do more of them.

To illustrate the importance of the 80/20 principle, let’s consider one of the most important functions of a law firm’s marketing department, which is building brand awareness. (Note: The following example uses a large law firm to illustrate the point, but the underlying principles apply universally regardless of firm size.)

One of the areas in which most firms struggle is creating a brand identity that is not overly generic. Large firms have thousands of clients, serve hundreds of industries, and often list more than 50 practice areas on their websites. Given these circumstances, it seems almost impossible to craft a brand strategy that is targeted and appealing to a particular target audience, right? After all, when you have 10,000 clients you need a brand that speaks to all of them, don’t you?

The answer is “yes” if what you’re concerned with is volume rather than profitability. But if profit is what you’re after, then the solution comes into focus. Creating a powerful brand that attracts profitable clients starts with an 80/20 analysis. The objective is to understand, on a deep level, which clients are most valuable to your firm, so you can create a brand strategy to attract more of them.

Let’s say, for the sake of making the math easy, that your firm has provided legal services to 1,000 clients in the past 12 months, and generated $100,000,000 in revenue. The odds are that approximately 200 of those clients accounted for approximately $80,000,000 in revenue.

You could stop there, take a hard look at those 200 clients, and try to find some common characteristics among them to build brand strategy around. But don’t stop. Keep going. Few consider the fact that there is almost always an 80/20 within an 80/20. In other words, 80/20 is exponential. What this means is that among the 200 clients who account for $80,000,000 in revenue, there are likely 40 (20% of 200) who are responsible for $64,000,000 of your firm’s revenue.

Want to create a powerful brand? Communicate a message that intensely appeals to the 40 clients—and others like them—that are disproportionately valuable to your firm. By narrowing your focus to this smaller subset of clients, you’ll have a data set that you can make sense of. You can dig deep on the demographics, and even psychographics (passions, interests, tastes), of your target market, and clearly define your ideal client. Your firm’s messaging, its brand experience, and its entire operations can be built to appeal to your most valuable clients, and by doing so attract more like them. Put another way, your law firm brand can address what matters most to those who matter most to you.

Assume that you want to increase revenue by 20% next year and that your existing base of 1,000 clients will again account for $100,000,000 in revenue. If you approach this objective with the idea that all clients are created equal, and do things the way you’ve always done them, then your firm and its lawyers will have to have to create 200 new client relationships (in this scenario, each client accounts for, on average, $100,000 in revenue). But if you do the work to figure out the 40 clients who are most valuable (each accounts for $1,600,000 in annual revenue), and gear your marketing and business development activity toward attracting more like them, then you only need 13 new clients to hit your revenue goals.

Of course, in the real world, the math isn’t quite so simple and clean. But the principle underlying this math holds true: If your law firm brand is built for broad appeal, then it’s unlikely to intensely appeal to those who can have the biggest impact on your success.

Many firms continue to promote and chase work that is low margin as an insurance policy in order to “keep lawyers’ plates full.” This feels safe, but it’s actually what inhibits growth. It generally takes the same amount of marketing and business development bandwidth to pursue high margin work as it does low margin work. The key to success, therefore, is having the commitment to gain understanding and the courage to change. In other words, success lies in identifying, and then rigorously pursuing, the 20% of activities that really matter.

Brand positioning is not the only marketing-related area where 80/20 analysis is important. Indeed, 80/20 implicates aspect of marketing. Law firm websites are particularly ripe targets for a closer look. Here are a couple of ideas.

  • Website Architecture and Design: Most law firm websites are full of features and pages that don’t matter. It’s likely that 80% of the activity on your site is occurring on 20% of its pages. Eliminate, synthesize, and slim down your site. Focus and eliminate, so you can perfect the rest, and your users will have a better experience. According to a recent survey by LexisNexis, 85% of law firms report that attorney bio pages are the most visited pages on their websites, so invest your time and resources accordingly. By understanding what information users are interested in, you’ll be able to better direct them toward the action you would like them to take because they won’t be as distracted by all of the extraneous information on your site.
     
  • Website Content: The Golden Rule of marketing is that clients and customers care about themselves, first and foremost. They’re not interested in what services you provide or accolades you’ve earned, they care about outcomes. They don’t want a super lawyer, they want a super result. Accordingly, 80% of your site content should directly speak to the needs, desires, interests, and pain points of members of your target market. Speak their language. Demonstrate empathy and understanding of their challenges. Then devote 20% of your content to demonstrating that you have the expertise and authority to help your clients get what they want.
     
  • Content Marketing Initiatives: Dive deeper into your analytics to understand not just where visitors are spending their time on your site, but how they got there in the first place. The odds are that there are a small number of “gateways” that are leading to most of your traffic. These likely include popular articles published on your site that rank highly in search results, as well as articles published on other, high traffic, influential sites that link back to your own. Analyze and understand what makes this gateway content popular, and incorporate the lessons learned into future publishing efforts.

There are no silver bullets when it comes to marketing a law firm—big or small—but there are ways to sharpen your aim and more consistently hit your target. One of the best ways is to leverage the power of the 80/20 Principle. An 80/20 analysis offers the opportunity to identify new markets, cut waste, allocate resources, and focus efforts much more effectively. The smallest insights unearthed during an 80/20 analysis can have a huge impact on the bottom-line.


Could you use a bit of help in defining your target market, and positioning yourself as an expert with clients, potential clients and referral sources within a niche?

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I am currently accepting applications to my Elite Lawyer Coaching program, which involves one-on-one strategic consulting and coaching to help lawyers set and reach their business goals in 2018. If you’re interested in dramatically growing your practice this year, contact me at 313.432.0287 or jay@hcommunications.biz to set up a free consultation to discuss how we can work together to define clear goals, create a specific plan of action, and ensure accountability as you work toward achieving your objectives. Let’s chat soon, as I only have a few slots remaining for new applicants. Also, please check out my new book, The Essential Associate, which is now available for purchase.


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