Budgeting season is in the air. Law firm marketing leaders are working hard to turn their marketing dreams into budget realities. CMOs are pulling together their best arguments to get what they want, and in some cases, have been fighting for years to get. Here is some ammunition to help.
The Largest Law Firms Add
The largest 30 law firms are adding to their marketing and business development budgets in 2016.* The biggest firms are spending 2.2% in 2016, up from 1.9% in 2015. To take a broader view, the largest 100 law firms are adding to their marketing budgets. Law firms in the Am Law 31 to 100 increased MBD budgets to 2.43% of fee revenue this year from 2.3% in 2015. Bigger law is making bigger budgets—however minimal the additions.
Midsize Firms Take Away
It’s a different story when we get to the second 100 largest law firms. The marketing and business development budgets at these midsize firms dropped as a percent of total fee revenue. The decrease is small—but a decrease of any size in a brutal market is like tying one hand behind your back and stepping in the ring. The shrinking MBD budgets at law firms outside the Am Law 100 make the increases at the largest 30 firms seem enormous.
Law firms 101 to 200 in size cut their budgets to 2.54% of revenue now from 2.8% in 2015. Law firms outside the largest 200 law firms dropped to 2.71% from 3.1%.
Small Changes in Budget Mean Immense Changes in Strategic Intent
The largest law firms are becoming more aggressive in pursuing clients. At the same time they have made their MBD budgets bigger. Midsize firms may be spending their money shrewdly, but the evidence suggests large law is focusing more energy on core business development than the mid-sized firms. And the large firms are winning more work.
The shift in strategy and spending compels every law firm to at least match if not exceed their competitors. Cutting back in the face of competitors who are increasing their funding and winning more work is rarely a winning approach. The pressure is on for any firm outside the largest 30—and especially outside the top 100—to increase funding and focus on those activities which protect and grow clients first, and attract strategically targeted clients second. The reach for new, unknown clients is third.
Law firms still have time to adjust their marketing and business development budgets for 2017. So many law firms know they are operating in a predator’s paradise—the law firms who take business from others will win. The 2016 budgets suggest the MBD budgets are detached from the idea of taking business. No firm has ever gained share without investing in (meaning adding to) their MBD budget. The biggest law firms have figured this out and gain advantage the longer other law firms wait.
The time and place is here. The market is ripe with opportunity below the surface (which you can see more of in our upcoming BTI Practice Outlook 2017 being released on October 18, 2016). As of now, law firms have 2 choices—increase funding or reallocate the budget to focus on clients and targeted clients. Those who don’t act risk their market share and their options. It is well known recovering a lost client costs 2 to 8 times the cost of keeping a client. Seems like a better way to save money.
MBR
*Based on in-depth interviews BTI conducted with more than 150 law firm marketing leaders between June 2016 and September 2016.