Are Your Clients Turning into Customers?

02.19.14 | Posted By: Susan Duncan

image001What’s the difference between a client and a customer? Lawyers, like other professional service providers, consider the term client to be more prestigious and most eschew any reference to clients as customers. But it may just be time to reconsider. First, clients are beginning to act more like custmers and second, law firms could benefit greatly by emulating best practices from companies who know how to build the most satisfied and loyal customers.

The word client is derived from the Latin word “clientem” or “cliens” meaning follower or “person seeking the protection or influence of someone powerful.”  It also may be a variation on the word “cluere” which means to listen, follow and obey. Surely no lawyer in 2014 believes their clients will just  follow and obey — and do most clients really need their lawyers to protect them? A few may, but in general that seems patronizing.

Customer, on the other hand, derives from the Latin verb “consuescere” meaning “to accustom,” and to purchase as a habit. Customers more often are associated with those who buy products and consumer services.  Lawyers do not consider what they do to be in any way similar to a commodity or product that could be easily replicated or sold by multiple vendors.  Traditionally, the value of good legal representation could not be measured or quantified.

Distinctions between the traditional lines drawn between Customers and Clients:

Customer Client

 

A person who buys goods or services from another person or company. A person who engages a professional (lawyer, accountant, architect, consultant) for knowledge, advice or representation.
Short-term, transactions-based. An ongoing relationship involving interpersonal interaction and trust.
Tend to comparison shop and base initial decision on value for the price, brand awareness, convenience. Selected on basis of relationship, referral, prior results, and expertise. 

In the “New Normal,” Are Clients Behaving More Like Customers?

As noted in a recent article in The Economist, “Price-discounting tends to be associated more with used-car lots than with posh law firms.”  Even as law firms continue to raise their hourly rates, some as high as $1800 or more per hour, clients push back on certain charges and frequently require substantial discounts.  Most firms raise their rates because they know that their “customers” are going to insist on a steep discount.  It is the reason that the realization rates in law firms dropped from 92% in 2007 to 83.5% in 2013.

Just as law firms have resisted being labeled “businesses” until recently, the line between client and customer continues to blur as law firm clients have started to behave more like customers.  Consider the following client behaviors:

  • They more frequently buy services on a transactional basis, often putting out RFPs for each new matter.
  • Procurement officers in many companies play an important role in screening and selecting law firms.
  • Companies require firms to adhere to strict vendor guidelines both in submitting proposals to do work and after they are selected to do the work.
  • Like their internal peer departments who have approved vendor lists, legal departments frequently have approved panel firms, many of whom were selected based on pricing.
  • They have exerted substantial pressure to reduce rates, provide discounts and provide some advice for free as they increasingly consider many legal services to be of a routine or commodity nature.
  • They increasingly turn to technology-solutions, legal process outsourcers and lower cost providers for lower end, routine work.
  • While long-term or personal relationships and loyalty still play a role in some inside-outside counsel engagements, this advantage has diminished significantly and in some instances has become an impediment.

What Law Firms Can Learn from Among the World’s Best Customer Service Companies

Management guru Peter Drucker’s theorized that “The purpose of business is to create and keep a customer.”  This seems almost too simple but at a time when lawyer supply greatly exceeds demand, finding, landing and retaining good, profitable and loyal clients is very challenging.  Law firms can learn a lot from those companies/brands that have built highly profitable companies on the basis of exceptional customer service and loyalty by putting customers at the center of their mission and culture, companies like Amazon, Apple, Nordstrom, Mercedes, Zappos, Ritz Carlton, LL Bean and many others that routinely are at the top of best customer service surveys.  Most of these did not build their customer loyalty by being the cheapest. Below are some examples of the customer service approaches and philosophies of service leaders.  Should your law firm be establishing similar values, practices and policies as some of the ones below?

The customer is always right. According to a recent Forbes article, “Bezos, perhaps more than anyone, has taken that mantra into the digital era, incrementally cracking one of the business’s great mysteries: figuring what customers want before the cash register rings and then making those insights pay off.” 

Automatic refunds, no questions asked. Amazon CEO, Jeff Bezos, said in a letter to shareholders “We build automated systems that look for occasions when we’ve provided a customer experience that isn’t up to our standards, and those systems then proactively refund customers,” he noted.

Provide a customized beneift/solution that appeals to the customer’s emotions. When Steve Jobs first started the Apple Stores he asked, “How do we enrich people’s lives?” not how do we maximize our profits.

Listen to customers and act on what you hear.  After reviewing multiple surveys and research reports that showed that customers will abandon a purchase if they cannot get free shipping, LL Bean decided to offer year-round, no-strings-attached free shipping.  The company also listens to customers by involving customer-facing, front-line employees including those who handle customer calls and many of whom have long tenure with the company, in marketing and new product roll-outs and decisions.

Empower employees. As reported by Micah Solomon of Forbes, The Ritz-Carlton gives staff $2,000 of discretion per employee per guest to be used to solve any customer complaint in the manner the employee feels is appropriate.  “It works because it changes how employees view customers–and how customers view employees. If an employee starts off defensive, rigid, or withholding, a customer tends to respond by escalating their demands. It’s a classic vicious cycle. But when employees are able to start the interaction from an accepting, flexible, and generous position, customers naturally feel inclined to be reasonable in return. The cycle turns virtuous.”

And finally, Zappo’s 10 Core Values lawyers and law firms should emulate:

1. Deliver Wow! through service.

2. Embrace and drive change.

3. Create fun and a little weirdness.

4. Be adventurous, creative and open-minded.

5. Pursue growth and learning.

6. Build open and honest relationships with communication.

7. Build a positive team and family spirit.

8. Do more with less.

9. Be passionate and determined.

10. Be humble.

At a time when clients have many more choices than they need to find great lawyers who can get the job done, and when they are pushing hard on pricing and value because they believe that many of their legal needs can be well-attended to by many lawyers, firms must really focus on putting the customer front and center in every way they serve them, interact with them and innovate to deliver optimal value and results.