Tuesday, August 11, 2009

Use Competition for Legal Services as an Opportunity

One of the biggest frustrations I hear from lawyers on a daily basis is dealing with consumer inquiries that do not turn into paying clients. The top complaints I hear about leads generated from the Internet are:

  1. The consumer is just looking for free advice.
  2. The consumer is price shopping.
  3. I don’t want to compete with other lawyers for a client.
While these observations from attorneys are accurate, Internet usage is growing every year and there should be little doubt that the way consumers evaluate and purchase legal services will increasingly involve the Internet. Further, the quality of the information available online to consumers will continue to improve (if you doubt that statement, think about what has already happened to realtors and car dealerships).

Although I do not practice law, I have worked in the Internet advertising industry for the last 10 years. Even more so than legal services, Internet advertising is intensely competitive and prospective clients are very demanding. However, I’ve learned that the best approach to building a business is not to wish that the market were different, but to figure out how to operate most effectively.

Below is my 3 step prescription for operating in an increasingly online world.

Embrace price shopping and competition
In a free market economy, there is no possible way to avoid competition and price shopping. In fact, market research shows that consumers are more likely to purchase a product and service when they have choice (more specifically, the highest purchase rate occurs when consumers are able to evaluate 3-4 alternatives. (If you think about it, it’s intuitively obvious. . . you are less likely to buy a car or house if you only look at one. And if you evaluate 50, you get information overload and do nothing).

Just because you have competitors that are cheaper doesn’t mean that the cheapest guy will always win. I’ve never operated a business that was the absolute cheapest alternative. However, you do need to make sure that the value that you provide is the highest (for you marketing geeks out there, “value” is defined as the perceived benefit divided by the perceived cost). If the value that you deliver to your clients is low, there is little that any advertising can do to overcome that.

Offer free advice (within reason)
Almost all service businesses offer some free advice, as it’s a great way to differentiate your service from the competition. The key to doing this profitably is knowing how much to provide. As a general rule, the greater the revenue potential, the more free advice you are going to have to give. Investment banks and Madison Avenue advertising agencies will give away months of “free” services for the opportunity to land a multi-million dollar account. Shoe salesman will measure your foot and check the stockroom to see if they have your size (if you go to Nordstrom they might throw you a free compliment or two).

When it comes to legal services, consumers expect some time from you to review their case and for you to explain how you would handle it. Sure, there are a handful of do-it-yourself’ers out there, but many people start off on their own only to realize that they really need a professional (why else would Home Depot make so much money off of professional installations?).

Publish as much information as you can about your practice online
More than anything else, consumers use the Internet to do research. The more you publish about your practice, the more information a consumer can gather about you and your practice. Sure, it takes time to write something intelligent, but the more you publish, the easier it will be to differentiate and build value for your firm AND the less time you will need to spend on giving out the same free advice to each and every consumer that contacts your firm.