The market for legal services looks vastly different today than it did 30 years ago.
As one of the oldest professions in society, lawyers protected themselves for centuries through strict self-regulation, and even imposed a ban on advertising.
This high level of protection had the effect of stifling competition and arguably progress, making the market for legal services relatively static and stable compared with others.
That all changed in the 1980s, when the ban on advertising was lifted. For the first time, there was internal competition among law firms. Later, in 2011, the Legal Services Act allowed new entrants into the legal services market, in the form of alternative business structures.
Added to this, advancements in technology – the Internet being the most obvious – have substantially affected the legal services market, changing the way in which law firms promote themselves, win work, communicate with target audiences, and deliver their services.
The combination of internal and external competition and developments in technology has created a highly competitive environment. The only way for legal service providers to compete, survive and thrive is through effective marketing.
No-one knows what the legal services market will look like in 30 years, but it will only be through effective marketing that legal services providers can achieve success.
Background to the current legal services market
Before considering how you should approach marketing within your organisation, it is helpful to understand the factors that have shaped today’s competitive legal market.
Marketing is used by law firms to overcome the challenges and exploit the opportunities that these factors have created.
No more restrictions on promotional activities
Prior to the 1980s, law firms were not allowed to promote either themselves or their services. The Law Society effectively barred its members from any promotional activities.
The bar was lifted in 1984, and since then law firms have had the freedom to promote and advertise their services whenever and wherever they want, provided they don’t make any deceptive or misleading claims.
This development essentially introduced direct competition between law firms into the legal market – something that had not existed before.
New entrants to the legal market
Law firms are not only competing with each other for business. In 2011, the Legal Services Act allowed new types of legal service providers to enter the market, called ‘alternative business structures’ (ABSs).
The Law Society defines an ABS as:
A firm where a non-lawyer:
- is a manager of the firm, or
- has an ownership-type interest in the firm
A firm may also be an ABS where another body:
- is a manager of the firm, or
- has an ownership-type interest in the firm
- and at least 10 per cent of that body is controlled by non-lawyers.
A non-lawyer is a person who is not authorised under the Legal Services Act 2007 to carry out reserved legal activities.
Unlike ‘traditional’ law firms, ABS firms don’t have to be owned or managed by lawyers, but they can still deliver their choice of commercial and/or consumer legal services.
ABS organisations have already entered the legal market in a wave of promotional activity. As it is still relatively early days since the legislation took effect, commentary in the legal press and in legal blogs is mixed as to the impact of these ABS firms on the legal market.
Examples of ABS are The Co-Operative Legal Services and Riverview Law.
- Negative public perception
A study in January 2013 by the Legal Services Consumer Panel called ‘Empowering Consumers’ found the following public perceptions:
- Confidence in the legal market is low
- Low levels of trust in lawyers People lack confidence that their consumer rights will be protected
- Low satisfaction ratings and high complaint volume relating to communications with lawyers during a case
- Many dissatisfied consumers do not complain
Advances in technology have changed the way legal professionals carry out their jobs. The most significant is the internet. But for every new opportunity created by technology, there is also a new risk. For example:
- Law firms have to continually invest in new technologies and new skills to keep up with developments and meet clients’ expectations e.g. providing real-time case management systems. This can be expensive and time consuming.
- The internet has enabled people to take a ‘self help’ approach to finding legal solutions, removing the need to pay a legal professional for the same information or service.
The characteristics of marketing legal services
Marketing legal services is different to marketing physical goods and products. This is due to the distinctive characteristics of legal services, some of which pose challenges that legal service providers need to overcome.
- Legal services as a ‘credence good’
For small businesses and individual consumers, legal services are considered a ‘credence good’:
A credence good is delivered by an expert who also determines the buyer’s needs. This is because buyers are unable to assess how much of the good or service they need; nor can they assess whether or not the service was performed or how well.
Purchasing credence goods puts buyers at risk of opportunistic behaviour: they may be sold too much of a service, or billed for services that were either not performed, or were performed poorly.
The effect this has in the legal services industry is that sometimes prospective clients, due to the uncertainty of buying legal services and the risk of being overbilled, will seek the personal recommendation of friends or family before choosing a legal adviser.
In other situations, the client could be ‘intercepted’ by a third party as part of a wider transaction and ‘forwarded’ on directly to a ‘preferred’ legal services provider. For example, when applying for a mortgage through a bank, the bank will ask the borrower if they already have legal representation in place, and if not, will recommend a provider.
What these two scenarios show is the complexity of the client’s decision making process when selecting a legal adviser, which legal service providers need to be aware of when looking to attract new clients.
- Infrequency or stress purchasing of legal services
For small businesses and individual consumers, purchasing legal services is usually an infrequent event, arising out of a legal necessity or a situation of distress, such as a contractual dispute with a supplier, or the breakdown of a personal relationship.
On an emotional level, this can make the consumer almost begrudging as a client, and creates a reluctance which legal professionals need to be aware of, or overcome if possible.
- The intangibility of legal services
Unlike consumer products – a car, an iPad, a loaf of bread – legal services are ‘intangible’; they can’t be seen, felt or heard before they are bought. Clients attempt to reduce this uncertainty by looking for physical evidence of service quality, eg the quality of the firm’s website, the firm’s office and building, the people involved in the service or the communications from the firm that they have been exposed to.
- The inseparability and variability of legal services
It is impossible to separate the legal service from the people that deliver it. This means the quality of service can vary depending on the people providing it. The effect of this is that often two lawyers in separate departments of the same law firm can offer vastly different ways of providing the same service.
- Limited differentiation between and legal service providers and their services
For consumers, it is difficult to tell the difference between legal service providers and the services they provide. Marketing is the only way to communicate to target audiences differences in offers that would appeal and gain interest.