Once the long-standing rule of thumb in the legal industry, the Rule of Three — which refers to mapping out a strategy to engage clients in at least three practice areas — is based on the idea that with each practice and service area added, you increase the likelihood that your firm will retain and grow the relationship with a client. However, in a sophisticated and competitive legal marketing and business development landscape — coupled with the legal industry experiencing a consolidation of general counsel with outside firms generally — three practice and service areas are no longer enough. Your firm should be targeting five.
When your firm successfully executes a land-and-expand strategy aimed at cross-selling legal services into new practice and service areas, several factors combine to drive revenue and profitability. First, client loyalty creates both annuity revenue and a steady referral stream. Second, it’s easier and more profitable to cross-sell existing clients than sign new ones. Third, cross-selling provides the opportunity to sell in high-margin specialized service areas. Fourth, offering tailored products and services that address niche client needs creates a better client service experience.
However, despite the fact it’s faster and less expensive to win new business from internal referrals than from unsigned prospects, many law firms don’t have robust cross-selling practices in place. Often, this is because a firm’s referring lawyer isn’t incentivized to make the introduction: Lawyers tend to hold their clients close to the vest and may be unwilling to risk complicating a client relationship to help a colleague sell a service from which they will not directly benefit.
However, with their ability to track trends in legal marketing and business development becoming more sophisticated over time, firms know that expanding a client relationship into new practice and service areas not only drives revenue and profitability, but also builds client loyalty — which translates into better retention rates and lower cost of acquisition.
Enhancing whitespace analysis to cross-sell practice and service areas
To surface untapped opportunities to cross-sell existing clients, many firms perform whitespace analysis, which refers to identifying the practice and service areas that have not yet been sold to a given client. So, if your firm has 15 practice and service areas and a client has been sold 3, your whitespace analysis would show 12 opportunities to grow the client relationship.
However, the reality is that some opportunities won’t make it through conflicts clearance — so forward-thinking firms often refine their whitespace analysis to include an additional greenspace analysis, which is defined as identifying the practice and service areas where your firm has the talent, expertise, and skill sets to provide excellent client service, but the client is either unaware that you provide these offerings or doesn’t have your firm top of mind for that type of work.
When you treat whitespace analysis as a heat map that guides you to the greenest opportunities, you should be looking at not only where you have the strongest relationships, the deepest experience, and the right people to do the work, but also which clients have expressed a need. Adding these additional nuances to your whitespace analysis can help you focus your business development efforts on the opportunities your firm is most likely to win.
Elevating the role of marketing and business development teams
Legal marketing and business development teams play an integral role in driving success with the Rule of 5 strategy. Firms that have invested in technologies that support robust data analysis are surfacing timely insights in context, which builds the business agility required to create a diversified client base and a strong annuity business.
Whereas law firm CRMs were once used mainly to store marketing and business development data, contacts, lists, and event information, today, marketing and business development teams are looking to expand the use cases to support evolving needs such as tracking diversity, financial commitments, outside counsel guidelines, and terms. These capabilities are more than nice-to-haves; they’re becoming an integral part of pitching, winning, and retaining business.
As firms make their way through these changes, they’re also fielding requests for proposals (RFPs) that increasingly include new requirements, such as current diversity, equity, and inclusion (DEI) statistics for the firm overall, and the assembly of unique, diverse account teams. As marketing and business development teams broaden their role into this new area and others, they need to implement a cross-functional approach to bridging the gaps.
Realizing the advantages of the land-and-expand strategy
By actively cross-selling legal services, your firm can positively impact critical key performance indicators (KPIs) including realization rates, cost of acquisition, and client retention. Your firm can also position itself to build a roster of reliable annuity clients to solidify your annualized book of business.
Additionally, even if your firm loses a portion of a client’s business, the relationship remains, and so does some of the work, keeping your client in the fold and positioning you to maintain existing and new lines of business development communication and relationship-building. The deeper your relationship with cross-sold clients, the better you can study them holistically, which means you can surface dormant opportunities and provide better client service.
When you focus on landing and expanding client relationships, you set your firm up to reap the rewards of steady revenue and lower costs of acquisition. By systemizing your marketing and business development planning and improving your risk profile, you put your firm in a solid position for sustainable growth and profitability.
To learn more about OnePlace Marketing & Business Development, schedule a demo.