Planning a marketing budget is no longer the hit and miss process of old. Sophisticated databases have enabled law firm marketers to get a much greater idea of just where the marketing pounds are being spent. Client relationship management programmes have introduced a stronger element of accountability and have provided a focus for marketing activity. Firms are getting better at spending their marketing money wisely, after some disappointing experiences in the past.
Typically, law firms spend between 2 to 4 per cent of their turnover on marketing – for a global giant such as Clifford Chance, this can mean an annual spend of some £30m. As consolidation leads to more mergers and increasing turnover, marketing budgets are expanding too, putting greater responsibility on the shoulders of marketing managers to extract maximum value. The recent spate of mergers has also meant that firms have had to communicate the logic behind the deals to clients and staff. The need for new branding, publicity and redesigned artwork have all added to the work of marketers.
It is a touchy area for some firms, which decline to make any comment on how their marketing budget breaks down. One marketer says: “It's quite a sensitive subject with the economic slowdown spreading. A lot of partners don't understand why we need a marketing department in the first place.” Clearly, it is up to the marketers to make it crystal clear to the sceptics why marketing is indispensable for the law firm. In many fields, marketing is the first area to get cut in a recession. The larger law firms feel they are fairly recession-proof – merger and acquisition work may tend to dry up, but the insolvency practices will no doubt see an increase in demand. Still, some firms indicate off the record that partners are using the prospect of a downturn to squeeze budgets. Firms are keeping a tight control on budgets and insisting that six or twelve-month marketing plans are worked out in advance and that they are strictly enforced.
“People who question expenditure are right to do so. In the past, money was wasted, it wasn't as well focused as it could have been”
Gillian Khan, Berwin Leighton Paisner
According to Gillian Khan, marketing director at Berwin Leighton Paisner (BLP), during the past five or six years, law firms have got better at working out how much to spend on the different areas of marketing. “People who question the expenditure are right to do so. In the past, money was wasted, it wasn't as well focused as it could have been. But firms that have been doing it for years are doing it better now,” she says.
BLP spends 2.3 per cent of its turnover on marketing, or 2.9 per cent if the costs of paying 23 staff are taken into account. With a combined turnover of £87.4m since the Berwin Leighton and Paisner & Co merger earlier this year, that equates to £2m or £2.5m. The budget is planned with the practice's senior partner and then perused by the marketing department. Of the budget, 52 per cent is split into practice-specific spending, which is planned by business development managers in each area. The remaining 48 per cent goes on firm-wide expenditure. The funds are spread across four departments with a total of 15 practice groups, so the amount received by each one can be quite small.
Khan says that a decade ago, marketing in most law firms meant little more than client entertainment, but this has changed, especially with the growth of client relationship management (CRM). At BLP, this is used for the firm's biggest clients, which are increasingly demanding such an approach. CRM is also being spread to smaller clients. A client team will plan a range of activities with the client to increase feedback through annual reviews, and will look at cross-selling opportunities and team activities. It all costs money, but it is being seen as a basic service for clients and one that helps the law firm know if its hold on a company's business is under threat.
Mary Friel, head of marketing services at Freshfields Bruckhaus Deringer, which has a turnover of some £625m, says that the firm spends around 20 per cent of its marketing budget on business development. Trips to Latin America or the Middle East to visit potential clients are normal.
Another 30 per cent of the budget is spent on client entertainment. “We're great believers in face-to-face client contact, so we spend half of our budget on that,” she says.
A further 10 per cent goes on market research and purchasing databases. These help the firm find out which are the big investment banks in certain fields and assess the firm's own position in the market.
Placing articles in external publications and directories takes up another 10 per cent of the budget. And 15 per cent goes on producing its own internal publications, such as briefings and guides, which are also sent out to clients.
Seminars and conferences account for another 10 per cent. The seminars are mainly in-house and run for clients, and conferences are run throughout Europe.
The final 5 per cent of the budget is spent on consultants. This has included hiring consultants to look at the presentation of the firm in the light of the merger and the use of a public relations consultancy to place articles through contacts with the mainstream business press.
Friel says that less money is being spent on blockbuster entertainments such as big parties. “It is very difficult to have effective communication on that basis,” she says. “We still have them, but we're encouraging lawyers to either entertain clients or visit them in small groups.”
The increasing influence of the marketing department on the way firms relate to clients comes as they tighten their grip on marketing spending. There are less opportunities for practice areas to work out their needs as they go along. It all has to be planned in advance. Business plans are usually three years long and a 12-month marketing plan is seen as being a relatively short period for which to plan ahead.
Matt Baldwin, national communications manager at Hammond Suddards Edge, says that the way his department allocates what it spends is set out with all the various practice areas and sector teams. “We say, this is what you spent last year, what have you got in mind this year for brochures, client entertaining, days at the races and lunches? They can't say, 'We're going to 75 lunches at £100 each,' but they can try and estimate some kind of figure so they know what they've got. If they spend it all after six months, it has gone wrong somewhere.”
He says that a practice area may allocate £75,000 for going to conferences in the first six months and then realise that there are more conferences they should attend. “We can just say that all the conference money has gone. The aim is to stop them overspending on their budgets,” he says.
He believes that having strict targets is a good way to avoid overspending and helps people evaluate all the opportunities and ensure they get the best.
While the majority of leading firms have established marketing departments and are increasingly seeing marketing as a crucial element of their expansion plans, smaller regional firms also need to build their reputations and are using marketing to get their names heard.
Manchester-based Cobbetts spends more than £600,000 per year on marketing, which is 4 per cent of its £16m turnover. The bulk of the marketing spend goes on CRM. Marketing manager Sarah-Jane Howitt says: “As an independent, you have to work a little bit harder to raise the profile and get the name recognition – it costs us a bit.”
As the prospect of economic downturn increases, marketing departments are required to justify every penny they spend to a greater degree. Introducing strict plans and targets is seen as the only way to bring discipline into the area, although it appears somewhat prescriptive and may have the drawback of removing some of the spontaneity of marketing activities. But as long as the firms keep a small percentage back for unforeseen opportunities, and there is a commitment to flexibility, these eventualities can be catered for. More worrying is the pressure to cut marketing budgets in response to a downturn. Some marketing directors say that they are keeping this in mind when planning their budgets, and taking a view on areas where cuts can be made should this become necessary.
But the best way to circumvent scepticism about marketing is to demonstrate its effectiveness. Feedback from conferences and seminars is essential in achieving this. The marketer's task is aided no end by the pressure coming from big clients to have a structured client relationship management plan in place. And as marketing becomes an essential part of the business mix at more law firms, others may be persuaded that it is an important and fruitful area of expenditure.