Instead of shrinking the marketing budget, an economic downturn could very well be the time to increase spending and ensure your firm stands out from the crowd, writes Megan Channer
Things are looking gloomy for the legal services sector – or so my clients and colleagues inform me. Even if your law firm hasn’t experienced a decline in business, you have undoubtedly heard of others battening down the hatches.
In a bid to prepare for the downturn, many firms are re-examining their budgets to see where they can trim expenses if or when their own business takes a hit. Some top-tier firms are offering redundancies to staff while partners are re-evaluating their profit forecasts.
The prospect of a depressed economy isn’t just affecting large law firms; some small practices I work with are factoring in declining revenue as a result of the weakening economy, either choosing not to engage new staff in the short term or letting others go.
During hard times, most businesses cut back on spending. And the marketing budget is one expense many law firms will consider reducing or eliminating entirely. Yet studies have shown this is the wrong move.
An economic decline actually offers new opportunities and advantages for firms that embrace smart marketing. There are myriad reasons to continue – or step up – your firm’s marketing activities during a downturn. Here’s my top three:
1. You can hear the sound of a pin drop
Marketing your services will give your firm an advantage over those that scale back or discontinue their marketing efforts. There is strong evidence that those who don’t cut and run generate a more positive impact from their marketing activities because their relative spending increases dramatically.
This general principle of “relativity” in marketing is simple. When you attempt to make your voice heard in a large crowd, you have to keep shouting louder to be audible (and pay a bundle to do so). But when the crowd dissipates, you can hear the sound of a pin drop. Clever firms continue to market in a downturn.
As a result, when prospective clients need a lawyer, they’re more likely to think of you than the one who hasn’t been marketing. This gives your firm the opportunity to increase its brand recognition and market share.
2. Through adversity comes opportunity
In a downturn, not everything is down. Slower economies are good for some types of business. Certain practice areas are recession-proof or likely to experience an increase in business in a soft economy.
During a downturn, lawyers can still expect to see significant work in insolvency, litigation, bankruptcy, restructuring, intellectual property, trusts, personal injury and products liability. Agile firms will recognise the opportunity this presents. Your firm should adjust its marketing to emphasise practice areas that remain profitable.
If you primarily work in a practice area that thrives during boom economies, consider cross-training and expanding your practice to areas that do well during bust economies.
If you can’t easily diversify your practice, at least be on the lookout for opportunities. If your competitors eliminate practice areas or go out of business entirely, you may be able to pick up the work they previously handled.
Downturns are also a great time to recruit new talent. With pay packets being scaled down and redundancies on offer, you may secure lawyers who have chosen to depart their firm because of an attractive redundancy package and/or the timing was right to seek out more attractive career prospects.
If you are able to offer career advancement and/or higher remuneration, it’s even possible to snare a star performer from a floundering rival. It’s always the right time to hire good people if they will improve your firm’s client services and profitability in the medium-to-long term. Then get out there and market to your clients (and your competitors’ clients) about your new key appointments and practice groups!
3. From little things, big things grow
During hard times, there is particular pressure to justify every dollar spent. What we saw during the last recession was that marketing budgets were cut not because marketing wasn’t a good investment, but because managers were not able to demonstrate it was.
When your firm looks at where to cut expenditure and assesses the marketing budget, it will be looking at how much is being spent on marketing overhead versus marketing activities. If cuts are absolutely necessary, smart businesses trim overhead spending that isn’t producing any direct, measurable results.
Marketing metrics are particularly important in making the case for spending, and allow you to demonstrate the effectiveness of marketing. If a managing partner has to choose between investing in a project with a good return, one with poor return, and one unknown, the one with the good return is going to be preserved.
If you can prove return on investment – that is, marketing activities are bringing in new business and increased fees worth more than expenditure – you may be able to make a case for growing your marketing budget. After all, if it’s working – why not do more of it?
If you don’t have marketing metrics in place, start by examining performance drivers and creating a hypothesis about the important metrics that can be tested. You then can refine those assumptions based on results.
Marketing smarter
You should rightfully be concerned about how a potential recession will affect your firm or practice, and the legal needs of your clients. Analyse your marketing efforts. Where is your law firm spending its money, what tangible results are you seeing from those investments, how well are you reaching prospective clients and how can you attract more business from new and existing clients?
Proactive law firms will carefully consider their marketing activities, pursue a mix of solutions, track the results and redirect resources toward the marketing efforts that yield the best returns.
When the economy is tight, it’s important to look at each marketing activity in terms of value and return on investment. Focus the majority of your firm’s marketing budget on investments that have low risk and proven high reward. If, after making those purchases, you have money left, you can use it to test other marketing activities.
Make thoughtful decisions about how and where you spend your money. This is the time to make strategic investments in marketing your law firm, with the understanding that these investments will help generate revenue in the short-term and build your law firm’s market share into the future.
With careful thought and strategic investment in marketing and business development, smart law firms will see a payoff from their investment, both during the slow times and after the economy picks up steam.
Megan Channer is a Principal and Marketing & Communications Director of Market Fresh, email megan@marketfreshideas.com.au or visit www.marketfresh.com.au
