In the Media - Survival of the Fittest: How Law Firms Are Facing up to an Uncertain Future
It’s at this time of year that we start seeing predicted legal trends for the next 12 months.
Sadly, the outlook for 2023 is not so much of a prediction as a foregone conclusion.
Rising inflation and the impending recession make it likely that the months ahead will be difficult for many, but particularly for law firms in the personal injury (PI) sector, the number of which has dropped significantly in the last 18 months.
For our latest White Paper – ‘Trust me, I’m a lawyer – Marketing legal services in 2023’ – we interviewed 100 firms about the big issues that have affected them over the last year and, with more challenges to come, what they’re doing to prepare themselves.
State of the PI market
It was no surprise to find that the majority of firms operating in PI are still critical of the Official Injury Claim portal, saying it went live before the technology was ready and there are problems even now. Eighteen months in and, far from its intended purpose of enabling people to bring claims without a lawyer, more than 90% of people who use it still find themselves needing to instruct one to help.
One in four of the firms we spoke to that had previously handled lower-value RTA cases had already exited that market, with more set to follow. The tightened margins mean it is no longer financially viable for many, with larger, volume players moving in.
The main reason for the exodus is a dramatic fall in RTA claims volumes – on course to be more than 40% fewer this year compared to before the pandemic. Figures are also down for the rest of the PI market, although we are starting to see some green shoots of recovery.
Many firms are having to find new ways to survive and thrive. The most popular strategy, used by 62% of those we spoke to, was doubling down on sales and marketing. Investing in IT was in second place.
Mergers and acquisitions were also high on the list, with just under a third of firms admitting that they would be considering it over the next 18 months. Half of those were currently in talks about a possible deal or actively seeking one.
A fifth of firms had diversified into other areas of law, particularly private client practices such as conveyancing, family, and wills and probate.
Other strategies included lateral hires and buying in books of work, although with 28% looking to buy and only 10% wanting to sell, this may be difficult to achieve.
Survival instincts
Despite the prevalence of online reviews – think sites like Amazon and Tripadvisor – it’s astonishing that just over a third of firms read or respond to what’s being said about them online.
With a record number of people now shopping around before choosing a lawyer – 43% according to the Legal Services Consumer Panel’s annual tracker survey – it’s imperative to engage.
Fear of negative reviews is understandable, but it’s far outweighed by the benefits of positive ones and if you’re confident in your customer service, you should have nothing to worry about. It can even help your reputation if you respond well to a negative review, positioning you as a modern, consumer-focused organisation.
Be proactive! At First4Lawyers, we ask all of our clients to review us, not once but twice – firstly after 24 hours to gauge the quality of initial interactions and again after three months. Reviews are an opportunity to communicate with clients, to sell yourself and, crucially, to identify any areas where you could improve.
Speed of service and communication is key, regardless of the method of contact. According to Google, people are five times more likely to leave a website if it’s not mobile-friendly, for example. Despite this, more than 60% of the law firms we spoke to didn’t know if theirs was or not.
It’s encouraging to see increased investment in sales and marketing by 60% of firms, although there has been a marked decline in marketing spend over the last two years when looking at the broader market.
The drop in claims volumes also coincides with a fall in above-the-line advertising – mass media activity such as TV which is still the advertising channel that drives the most profit.
It’s here that we can learn lessons from the pandemic and, in particular, Coca-Cola, which slashed its spend and lost market share to arch rival Pepsi as a result. Firms who scaled down or, in some cases, stopped marketing altogether have typically found the drop in brand awareness much more difficult to claw back.
Often perceived as an easy saving to make, cuts to marketing budgets should be considered carefully. When making spending decisions, it’s also helpful to examine any data you have as well as measuring the return on investment of your marketing activity to determine what’s working well and what’s not.
Finally, make sure you have a website that works. When was the last time you reviewed its content or where it ranks for your target keywords? How well does it convert? Your website should be a work in progress – constantly reviewed to make sure you’re meeting Google’s expectations of helpful content and giving consumers the information they want.
Much of the above is not particularly difficult or expensive and simply requires time and effort, but you will reap the rewards.
You can read more in our White Paper here.
