Avoiding the Commoditization of Your Law Practice
Debra L. Bruce, JD, PCC.
My article in 2007 about some of the potential ramifications of law firms going public generated quite a number of reader responses. One email asked a question that intrigued me. The reader asked how he could keep his law practice from becoming commoditized. Both small and large law firms should be asking themselves that, because the tide has already turned toward the commoditization of many legal services.
What are commodity legal services? Generally, legal services that involve routine and predictable legal issues that can be systematized into forms and processes. To the consumer of the services the providers are fungible, and the consumer can’t really distinguish one provider from another. The services don’t involve complex legal issues, or the issues have already been addressed with such frequency and regularity that they have become routine. Often each individual claim or matter involves a relatively small amount of money at risk, necessitating an inexpensive process or the economies of large volume. Through the use of questionnaires, checklists, decision trees, step-by-step instructions, standard processes and similar methods, technology enables rapid and cheap production of the relevant legal advice and documentation.
Examples of types of legal work that have already become commoditized in many respects include: mortgage lending, wills and trusts, incorporations, uncontested divorces, debt collection, consumer bankruptcies, loan documentation, equipment leasing, bond offerings, regulatory approvals, worker’s compensation claims, tenant leasing and eviction, foreclosures, immigration, patent prosecution, contract review, product liability litigation, slip and fall personal injury litigation, insurance defense, and certain misdemeanor criminal cases.
Benefits of Commoditization
Commoditization is not all bad. In an era of astronomical legal fees, commoditization keeps some legal representation within the reach of the middle class, if not the lower economic groups, and gives businesses a better chance to react with the lightning speed often required in today’s world. It provides predictability in legal costs, something both individual consumers and Fortune 500 companies strive for.
Many tech savvy small firm lawyers, as well as big firms with IT budgets, have developed profitable high volume practices using the internet, data processors, paralegals, junior lawyers, contract attorneys, or out-sourced offshore attorneys. Low tech lawyers in the fields listed above may want to accelerate their retirement planning, as their profitability and volume will dwindle steadily in the next few years. If you don’t want to compete with the Walmart of legal services one day, you need a plan.
Here are some things you can do to differentiate yourself from the competition and avoid a practice in which the business goes to the lowest bidder.
- Develop the expertise and reputation to attract matters involving big dollars and bet-the-company issues. That requires wisdom, depth of expertise, and good judgment, not just legal skill.
- Develop extensive knowledge and connections in a particular client industry so that your expertise has value beyond mere legal issues. Transform your services from a cost hitting the bottom line to a cost-saver or even a revenue generator due to your innovative advice and valuable introductions to your clients.
- Carve out a niche practice with specialized knowledge of your target client community and the legal and business issues that they face. The niche market might be based on the clients’ gender, age, religion, ethnicity, location, income, industry, language, or lifestyle.
- Move to a smaller town where legal services are not as readily available and relationships are easier to develop. This may only be a temporary solution. As older generations die off, they will be replaced by tech savvy younger generations who are more comfortable purchasing goods and services from strangers online. The lower median income of residents in rural areas may also create downward pressure on legal fees.
- Differentiate your firm by the manner in which services are delivered. Give extraordinary personal service. Focus on the experience you create for your clients. Offer something uncommon like “divorce with a woman’s caring touch” or house calls for will preparation. Follow the examples of Ritz-Carlton Hotels, Nordstrom, Lexus and Whole Foods Market. Each of those companies created success in very competitive markets by targeting the concerns of a wealthy clientele willing to pay more for pampering and superior quality.
- Practice in a field that requires a lot of creativity and innovation or in a highly complex field requiring multi-disciplinary intelligence and years of experience. Fields that come to mind include prosecuting nanotechnology patents, developing international corporate tax strategies or structuring cutting edge financial instruments. Practices that can’t be systematized don’t become commoditized.
- Bundle your legal services with other benefits. By way of example, combine estate planning with facilitating cooperation among family members in the plan design and implementation. Or help parents leave a legacy of their values as well as their property to their children. Guide your clients in the identification of their values and communication of them in a quality video capturing important moments in their life and tales of lessons learned, similar to the Story Corps recordings on public radio. Share office space with therapists to work together to help divorcing clients and their children weather the difficult transition of divorce. Team up with a CPA or MBA to combine legal services for startup businesses with classes on entrepreneurism.
- Become a trusted advisor. Be the lawyer who demonstrates care and concern coupled with objectivity and insight. Understand the personal needs as well as the business needs of your clients. Get involved in their industry. Be a ready resource for advice, information, connections, introductions, sympathy and understanding.
As you look at these ideas for avoiding commoditization, you may notice that many of them focus more on how you view and interact with your clients than on the actual areas of law that you practice. As the number of lawyers increases, and therefore competition increases, the most straight-forward way to avoid the commoditization of your practice requires you to (i) identify a specific target market, (ii) understand the constituents of that market well, and (iii) give them what they most want and need, which may have as much to do with comfort as it does legal advice. If, on the other hand, you prefer to view yourself strictly as a provider of legal services, get ready for the coming days of price competition with the masses.
This article is updated and adapted from the author’s article which originally appeared in The Practice Manager published by the State Bar of Texas on August 13, 2007.