Keeping good clients is important for the financial health and viability of every firm. According to a survey performed by BTI Consulting of Boston, law firms that actively track and measure client retention see 12% higher profits per attorney. Client retention rates are key indicators of client satisfaction. And we all know that a happy client doesn't leave their law firm.
However, most law firms are still not monitoring their client retention rate. If you do nothing else in marketing this year, I strongly suggest you start your marketing program here. It should be a real "wake-up" call to your partners when they realize how many clients are walking out the door each year (= $$), and that you have to replace that business just to break even.
Firms that strive to improve their retention rate from year to year are client focused. They pay more attention to client relationships, add value above and beyond the norm for the client, and just seem to try harder. As a result, they will often see opportunities with the client that they may have otherwise missed. Being the most client-focused firm in the market will help a firm improve their client retention and significantly differentiate the firm from its competitors. Client relationships strengthen and happy clients don't leave their law firms (that's worth saying twice).
While most firms fail to track their retention rates, each year more are recognizing the importance of doing so. In the BTI survey, the number of law firms that actively tracked client retention in 2004 rose to 27.3% from just 15.1% a year earlier. Large law firms as a group do a little better job, but not much. A LexisNexis study in 2006 showed that 39% of law firms with 75 or more lawyers tracked their client retention rates.
IF YOU ARE NOT MONITORING YOUR CLIENT RETENTION RATE, THIS IS THE TIME TO START. There is a tremendous opportunity for firms of all sizes to improve their profits by focusing on client retention and satisfaction. You should target those clients with whom you want to build long-lasting relationships and invest a great deal of effort in retaining their business.
If you haven't been monitoring your retention rates, here's an easy way to get started. Identify who your clients were in 2006 and the net revenue generated by each. Which of the 2006 clients were no longer working with the firm in 2007? Why? There will be good reasons for many. But what about those that you can't account for? Did they go elsewhere? Why? It would be to your benefit to find out.
Measuring Satisfaction - Protecting Your Client Base
Retention is directly tied to client satisfaction, so it is important to measure the satisfaction level of your clients on an ongoing basis. Most clients won't just tell you that they are dissatisfied. Rather, they will just stop sending you work and go elsewhere.
Lawyers can and should measure satisfaction throughout an engagement by directly asking the client their opinion of how things are going, and again at the end of the specific transaction/case. One would hope that the lawyers will immediately act to correct any negative feedback.
At the firm level, you should routinely measure the satisfaction levels of all key clients (those that generate a significant amount of revenue or who have the potential for doing so in the future), as well as at least a random sampling of other clients. This helps ensure that the client's experience is in fact being monitored and places the firm in the position to correct any current service problems.
You will be amazed what you will learn when you ask clients how you are doing. There are clients who have been with the same firm for more than 10 years on the verge of moving because they are dissatisfied with aspects of their representation. A satisfaction survey could reveal this dissatisfaction and allow the firm to change course and not only keep the client, but possibly expand the services for that client.
If you encounter resistance from others in your firm to do client surveys or interviews - THAT IS A HUGE RED FLAG. Odds are good that the lawyers who don't want to ask clients about their degree of satisfaction recognize that the outcome would not be positive. If you want to keep good clients and increase the number of referrals, it is critical that you uncover any dissatisfaction and address the problems. If you don't, it's just a matter of time and the client will move on.
Asking clients how you are doing and what you can do better will go a long way to improving your practice - if you LISTEN TO THEM. Contrary to what some lawyers think, the vast majority of clients like the firm to ask how they are doing and will appreciate you're making the effort to do so.
Action to Take
Of those clients who are still working with your firm today, measure their current level of satisfaction through written, on-line or in-person surveys. From the responses, identify at-risk clients and address their concerns.
For your key clients, establish a plan for the coming year of how you will add value to your relationship. Many clients prefer a client relationship manager to serve as their primary contact with the firm. The relationship manager should also determine specific standards that should be met for serving this client, communicate those standards to others working with the client (the "client team") and ensure that they are followed. The client team should make it a priority to get to know the client's business more in-depth and increase their knowledge of the client's industry (all on your dime). Demonstrate your willingness to invest in the relationship and that you value their business. Continue to build personal relationships as well through meals and entertainment opportunities. Help them enhance their reputations by inviting them to co-present at a seminar with you.
For any major contacts (in revenue or potential) who are no longer working with your firm for some unknown reason, consider contacting them to have a conversation about their experience with the firm and why they are no longer using your services. Depending upon the client, the call could be made by the managing partner or another partner of the firm.
Taking exceptional care of your clients will make your firm more profitable, as satisfied clients tend to purchase more services from their law firm over time. The firm's profits go up with the increase in demand for services, while the firm's costs to retain the established client go down relative to the costs involved in securing an entirely new client. If you don't take good care of your client relationships, there is another firm that will.