2003 Legal Services Spending Assessment

Corporate legal departments faced difficult spending decisions in 2003. A stagnant economy put pressure on departments to decrease spending, while the public's sudden interest in corporate governance kept demand for legal services high. In August, The Corporate Counselor and The Center for Marketing Effectiveness (CeME) conducted the 2003 Legal Services Spending Assessment (LSSA). This annual survey of general counsel is conducted in order to determine what influences company spending on outside counsel. This report reviews the results of this exercise and offers insight into how a changing litigation landscape has impacted spending on outside counsel. Based on proprietary LSSA data, the report observes a dramatic shift in the factors that drive general counsel's selection of outside services and a notable lack of effectiveness in law firms' efforts to brand and promote their services.

What Goes Up ' Stays Up

Despite its original application to physics, Isaac Newton's famous law of gravity, 'what goes up, must come down,' is a common adage in business as well. Many markets exhibit analogous behavior: stock markets rise and fall, economies that grow too fast self-correct with periods of contraction and companies with losses in one year will cut expenses to profit in another. But do the same laws apply to the market for the consumption of legal services?

Results from the 2003 LSSA suggest that legal services abide by a set of laws equally volatile. Amid company cost-cutting measures and reduction efforts, legal spending on outside counsel continues to rise. And while general counsel acknowledge internal pressures to curtail their spending on outside legal services, certain types of litigation just won't allow that to be a reality.

General (Counsel) Observations

Over half of the general counsel who participated in the 2003 LSSA observed an increase in their company's spending on outside counsel from 2002 to 2003. Nearly half of those surveyed expect spending to remain flat in 2004, with only one-third of all respondents anticipating spending increases. But the 2004 projections are strikingly different for companies that experienced increases in outside counsel spending in 2003. Nearly half of that group expects spending to continue its upward climb in 2004, while slightly more than one-third expects it will stay the same. For those companies involved in matters outside the U.S., 47% say spending stayed the same and expect that trend to continue in 2004.

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Less is More

Not surprisingly, smaller firms are more susceptible to spending increases than their Fortune 500 counterparts. Of the Fortune 500 companies surveyed, slightly more than 44% increased their spending on outside counsel in 2003, whereas more than half of the remaining firms reported an increase in spending. Similarly, less than one-third of Fortune 500 companies expect their spending to increase in 2004 versus nearly 40% for remaining firms.

There also appears to be correlation between the number of in-house counsel and increases in spending. Only 43% of companies that employ more than 25 attorneys witnessed a spending increase from 2002 to 2003, compared to 54% of companies that employ 25 or fewer attorneys. The results are similar for companies that spend more on outside counsel as a proportion of their legal budget. Forty-two percent of companies that spend more than half of their legal budget on outside counsel increased spending from 2002 to 2003, versus 60% for those who spend less than half of their budget on outside counsel.

Unconventional Wisdom

The above findings are particularly disconcerting when contrasted against the stark performance of the U.S. economy over this same period. At the start of 2003, GDP forecasts for growth were below 3%, and the stock market fell dramatically

in value. As to be expected, budget cuts and cost-cutting measures were readily implemented. Nearly 100% of the 2003 LSSA respondents reported high to moderate pressure to reduce costs and more than half noted even greater pressure this year than last. So why does spending on outside services continue to rise?

A careful review of the findings reveals three inextricably linked reasons for increases in outside counsel spending ' in spite of the pressure to keep costs in check.

1. An increase in workload has forced in-house counsel to look outside the company for additional help.

2. Companies are facing an increased number of legal issues that require specialized expertise.

3. Internal staff cuts have forced companies to recalibrate in-house versus external responsibilities.

Of the three possibilities, the third is perhaps the most unconvincing. Existing research suggests that the gap between in-house counsel costs and the blended average hourly rate of outside counsel has narrowed significantly. (For more on the subject, see PriceWaterhouseCooper's Legal Department Spending Survey and the ACCA's Law Department Compensation.) As the gap decreases, it appears that there is less of an incentive for companies to outsource work in the interest of cutting costs.

[IMGCAP(2)]

A Changing Landscape

Clearly a company's caseload and litigation profile impact its spending patterns.

However it is difficult to come by an accurate measure of the extent of that impact. Few companies can isolate the cause and effect of a single case or pending litigation on their spending. Instead, the 2003 LSSA asked general counsel to identify factors in the legal arena that have the greatest impact on their spending decisions. Nearly 90% of general counsel surveyed note that changes in regulation and/or litigation profile had a high to moderate impact on their company's spending on outside counsel in 2003 and anticipate similar consequences in 2004. And over 70% of respondents expect to see substantial increases in spending in the areas of regulation, corporate transactions and securities-related litigation.

The 2003 LSSA's findings are largely in line with industry forecasts. After the Sarbanes-Oxley Act was passed in July 2002, legal analysts warned the Act could dramatically increase the workload and severity of litigation pending against corporations. Their prediction proved correct. Since its enactment, the number of enforcement cases initiated by the SEC has risen by 46%. (SEC Annual Reports, 1999-2002.) A study conducted by Foley & Lardner of Chicago (AmLaw 22 in 2003) reported: 'Sarbanes-Oxley nearly doubled the expense of being a public company, from $1.3 million to almost $2.5 million ' with legal fees increasing by a staggering 90%.' (Houston Business Journal, 'Expenses soar under Sarbanes-Oxley Act,' June 30, 2002, citing Foley & Lardner's Sarbanes-Oxley Anniversary Survey.) Evidently many participants in the 2003 LSSA are experiencing this situation first hand. Coupled with the specialized nature of the litigation, it is not unexpected that more general counsel are turning to outside counsel to shoulder some of the burden.

As American Corporate Counsel Association (ACCA) officers, Fred Krebs and Broc Romanek, stated in a recent interview with the Washington Post, 'The nature and level of liability for different market participants is difficult to predict, but there likely will be additional lawsuits'clearly, the role and relationship between corporate clients and lawyers may be fundamentally altered.' (Washington Post, 'Corporate Governance: How It Affects Your Business,' December 16, 2002.)

[IMGCAP(3)]

Risky Business

These findings imply that in spite of pressures to the contrary, legal spending will increase when driven by issues that have the potential to dramatically impact a company's future. 'Bet-the-company' issues such as securities litigation or mergers and acquisitions and more 'commodity-like' legal services such as labor and employment law or intellectual property appear to impact outside counsel spending decisions differently. (The LSSA classifies labor and employment law, patent law, and intellectual property as more 'commodity-like' legal services and antitrust/competition policy, regulation, mergers and acquisitions, securities litigation, and other corporate transactions as 'bet-the-company' legal services.) Spending on mergers and acquisitions, for instance, is similar to securities litigation in that, regardless of cutbacks, it remains at the very least constant, if not increasing, from year to year. According to the 2003 LSSA, 42% of those surveyed said they do not expect their legal spending on mergers and acquisitions to change, even though deal activity has been in steady decline. (Thomson Financial Securities Data, Securities Industry Association, 2002.) Conversely, spending on more commodity-like services appears more vulnerable to spending cuts. For instance, even though companies have seen an increase in the number of layoffs and employment discrimination lawsuits filed this past year, nearly 60% of those surveyed say they expect their company's spending on employment and labor law to decrease or remain unchanged. Similarly, over 75% of those surveyed said the amount they spend on intellectual property and patent law decreased, contrary to the increase in patent applications as reported by the U.S. Patent Office. (U.S. Patent Office, Patent Statistics, 2000-2003.)

From these findings, it seems clear that companies facing a disproportionate amount of more commodity-like litigation are more likely to adjust their spending in accordance with the economic downturn. Of the respondents who witnessed increases in commodity-like practice areas from 2002 to 2003, 25% note that budget constraints had a high impact, with only 12.5% reporting a low to negligible impact. Of respondents who witnessed spending increases in bet-the-company type practice areas, only 15% note that budget constraints had a high impact on spending on outside counsel, and nearly a quarter reported budget constraints had low to no impact on their spending decisions.

All Industries are not Created Equal

It stands to reason then that the industries with the highest spending increases on outside counsel will also be those faced with a higher proportion of bet-the-company litigation. Across all industries, 29% of LSSA respondents note their company was involved in some sort of bet-the-company litigation in 2003. For companies in the energy and utilities and health care industries, the number is over 50%. And as predicted, nearly 75% of respondents operating in those industries report they expected spending to increase in 2004 ' much higher than the respondent average of 34%.

At the other end of the spectrum, the industries more involved in more commodity-like litigation in 2003 include automotive and telecommunications ' nearly three times more in some cases. Again, consistent with earlier findings, over 90% in both industries anticipate spending on outside counsel to decrease from 2003 to 2004.

Quality is Job One

Given the scrutiny legal budgets are under, general counsel are very selective when choosing outside counsel. Service and price are only two of the factors that weigh into general counsel's decision-making process. According to the 2003 LSSA, quality of work and results are the leading drivers of outside counsel selection in 2003 ' even more so than value and cost. And the more serious the litigation's repercussions are, the more important track record becomes. Over 95% of respondents facing bet-the-company litigation report quality of work and results have a high impact on their selection of outside counsel.

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There are few industries, short of health care,in which consumers choose quality so dramatically over cost. A law firm's attractiveness, at least according to LSSA respondents, hinges heavily on the reputation and accomplishments of its professionals, independent of cost.

Looking for Lawyers in all the Wrong Places

Firms that emphasize areas of specialization and the track record in those areas over general firm capabilities would therefore appear better positioned to capture the attention of their potential buyer. But with all of the competition for legal services, how do law firms differentiate themselves and their attorneys from their competitors? The answer, for the most part, has been branding ' a marketing activity that law firms have embraced with a vengeance. The last few years have seen a dramatic increase in the amount of attention paid to marketing legal services, as well as the amount spent to keep the marketing fires stoked at these firms. In 2001, the Legal Marketing Association published a report encouraging law firms to get out of the 'dark ages' and move into the era of branding and Web development. (Greg A. Lohr, 'Old-style marketing strategies on trial at law firms;' Washington Business Journal, 2001.) Those words did not go unheeded. A 2003 survey of marketing directors at law firms found that 68% of firms plan to increase their marketing budgets in 2004, with the largest portion of the spending going into branding and image advertising campaigns. ('Two-Thirds of Law Firms to Spend More On Marketing by 2004,' conducted by Glasser LegalWorks , 2003.) It seems as though law firms have thrown all of their marketing efforts into branded Web sites, image advertising and other activities designed to increase name recognition and the overall profile of the firm.

However, the effectiveness of those efforts appears discouraging ' at least for those who are responsible for developing and funding those programs. In the 2003 LSSA, general counsel note that Web sites are one of the last places they consult when looking for outside counsel, opting instead to use less-commercial channels such as referrals or personal contacts. More 'classic' marketing activities such as firm branding and professional affiliations have been equally futile ' only 14% of general counsel put any emphasis on the activities associated with law firm branding.

[IMGCAP(5)]

It appears that just when it may matter most, marketing campaigns have lost their luster in the eyes of their target audience. And while law firms scramble for name recognition in a crowded market, few stop to assess the effectiveness of these efforts. A recent review of legal marketing initiatives in the Dallas Business Journal observes: 'Many of the large, well-established firms still are playing catch-up in the marketing arena because they've been able to rely on long-standing institutional clients for their bread-and-butter. But now, with corporate America undergoing dramatic changes, firms are concerned that many of those client companies simply are disappearing.' (Lisa Tanner, 'Law firms tiptoe into marketing arena,' Dallas Business Journal, 2003.)

Handing Down the Marketing Verdict

The 2003 LSSA confirms conditions that support an attractive environment for the peaceful co-existence of in-house counsel and outside legal services providers: Demand is increasing and the external drivers of demand remain constant in spite of a firm's best efforts to control costs. So, why then, have mega-marketing initiatives been shunned by the very target audience they are designed to attract?

It seems that the marketing pendulum may have swung too far to the left ' at least from the perspective of the intended audience. What matters most, according to survey respondents, is quality of work. In a services environment, quality is a criterion that has to be experienced ' thus the heavy reliance on referrals and personal contacts for information. And, in a services environment, quality results are delivered by skilled and experienced professionals, not 'a firm.'

That's not to say that a firm's identify is unimportant. It is vital to setting expectations about things such as quality and expertise. But a professional services firm's branding and marketing efforts must surely balance its promotion of firm attributes with individual and/or practice area expertise and accomplishments. In a firm of professionals, it is the collective accomplishments of the professionals that not only differentiate a firm, but make or break the brand itself. Branding initiatives focused on enhancing the reputation of its practice areas and experts might provide the incentive for corporate counsel to heed the messages and promotions generated by their perspective service providers.

That process begins with an understanding of the areas in which their clients require assistance ' and a continual cultivation of the insights and experiences deemed important to their clients. Good marketing is a by-product of a good strategy that is executed with precision. Name recognition activities disguised as branding initiatives not only fail to differentiate the services of a firm, they appear to do very little to inform and engage the target audience. If, as Sir Isaac Newton says, 'what goes up must come down,' then the increase in spending on legal services might be short-lived. Only those who carefully manage their position in the market will adapt successfully to the changes when they occur.

[IMGCAP(6)]

To order a copy of this report please visit www.cemeinfo.com or e-mail us at [email protected].

Corporate legal departments faced difficult spending decisions in 2003. A stagnant economy put pressure on departments to decrease spending, while the public's sudden interest in corporate governance kept demand for legal services high. In August, The Corporate Counselor and The Center for Marketing Effectiveness (CeME) conducted the 2003 Legal Services Spending Assessment (LSSA). This annual survey of general counsel is conducted in order to determine what influences company spending on outside counsel. This report reviews the results of this exercise and offers insight into how a changing litigation landscape has impacted spending on outside counsel. Based on proprietary LSSA data, the report observes a dramatic shift in the factors that drive general counsel's selection of outside services and a notable lack of effectiveness in law firms' efforts to brand and promote their services.

What Goes Up ' Stays Up

Despite its original application to physics, Isaac Newton's famous law of gravity, 'what goes up, must come down,' is a common adage in business as well. Many markets exhibit analogous behavior: stock markets rise and fall, economies that grow too fast self-correct with periods of contraction and companies with losses in one year will cut expenses to profit in another. But do the same laws apply to the market for the consumption of legal services?

Results from the 2003 LSSA suggest that legal services abide by a set of laws equally volatile. Amid company cost-cutting measures and reduction efforts, legal spending on outside counsel continues to rise. And while general counsel acknowledge internal pressures to curtail their spending on outside legal services, certain types of litigation just won't allow that to be a reality.

General (Counsel) Observations

Over half of the general counsel who participated in the 2003 LSSA observed an increase in their company's spending on outside counsel from 2002 to 2003. Nearly half of those surveyed expect spending to remain flat in 2004, with only one-third of all respondents anticipating spending increases. But the 2004 projections are strikingly different for companies that experienced increases in outside counsel spending in 2003. Nearly half of that group expects spending to continue its upward climb in 2004, while slightly more than one-third expects it will stay the same. For those companies involved in matters outside the U.S., 47% say spending stayed the same and expect that trend to continue in 2004.

[IMGCAP(1)]

Less is More

Not surprisingly, smaller firms are more susceptible to spending increases than their Fortune 500 counterparts. Of the Fortune 500 companies surveyed, slightly more than 44% increased their spending on outside counsel in 2003, whereas more than half of the remaining firms reported an increase in spending. Similarly, less than one-third of Fortune 500 companies expect their spending to increase in 2004 versus nearly 40% for remaining firms.

There also appears to be correlation between the number of in-house counsel and increases in spending. Only 43% of companies that employ more than 25 attorneys witnessed a spending increase from 2002 to 2003, compared to 54% of companies that employ 25 or fewer attorneys. The results are similar for companies that spend more on outside counsel as a proportion of their legal budget. Forty-two percent of companies that spend more than half of their legal budget on outside counsel increased spending from 2002 to 2003, versus 60% for those who spend less than half of their budget on outside counsel.

Unconventional Wisdom

The above findings are particularly disconcerting when contrasted against the stark performance of the U.S. economy over this same period. At the start of 2003, GDP forecasts for growth were below 3%, and the stock market fell dramatically

in value. As to be expected, budget cuts and cost-cutting measures were readily implemented. Nearly 100% of the 2003 LSSA respondents reported high to moderate pressure to reduce costs and more than half noted even greater pressure this year than last. So why does spending on outside services continue to rise?

A careful review of the findings reveals three inextricably linked reasons for increases in outside counsel spending ' in spite of the pressure to keep costs in check.

1. An increase in workload has forced in-house counsel to look outside the company for additional help.

2. Companies are facing an increased number of legal issues that require specialized expertise.

3. Internal staff cuts have forced companies to recalibrate in-house versus external responsibilities.

Of the three possibilities, the third is perhaps the most unconvincing. Existing research suggests that the gap between in-house counsel costs and the blended average hourly rate of outside counsel has narrowed significantly. (For more on the subject, see PriceWaterhouseCooper's Legal Department Spending Survey and the ACCA's Law Department Compensation.) As the gap decreases, it appears that there is less of an incentive for companies to outsource work in the interest of cutting costs.

[IMGCAP(2)]

A Changing Landscape

Clearly a company's caseload and litigation profile impact its spending patterns.

However it is difficult to come by an accurate measure of the extent of that impact. Few companies can isolate the cause and effect of a single case or pending litigation on their spending. Instead, the 2003 LSSA asked general counsel to identify factors in the legal arena that have the greatest impact on their spending decisions. Nearly 90% of general counsel surveyed note that changes in regulation and/or litigation profile had a high to moderate impact on their company's spending on outside counsel in 2003 and anticipate similar consequences in 2004. And over 70% of respondents expect to see substantial increases in spending in the areas of regulation, corporate transactions and securities-related litigation.

The 2003 LSSA's findings are largely in line with industry forecasts. After the Sarbanes-Oxley Act was passed in July 2002, legal analysts warned the Act could dramatically increase the workload and severity of litigation pending against corporations. Their prediction proved correct. Since its enactment, the number of enforcement cases initiated by the SEC has risen by 46%. (SEC Annual Reports, 1999-2002.) A study conducted by Foley & Lardner of Chicago (AmLaw 22 in 2003) reported: 'Sarbanes-Oxley nearly doubled the expense of being a public company, from $1.3 million to almost $2.5 million ' with legal fees increasing by a staggering 90%.' (Houston Business Journal, 'Expenses soar under Sarbanes-Oxley Act,' June 30, 2002, citing Foley & Lardner's Sarbanes-Oxley Anniversary Survey.) Evidently many participants in the 2003 LSSA are experiencing this situation first hand. Coupled with the specialized nature of the litigation, it is not unexpected that more general counsel are turning to outside counsel to shoulder some of the burden.

As American Corporate Counsel Association (ACCA) officers, Fred Krebs and Broc Romanek, stated in a recent interview with the Washington Post, 'The nature and level of liability for different market participants is difficult to predict, but there likely will be additional lawsuits'clearly, the role and relationship between corporate clients and lawyers may be fundamentally altered.' (Washington Post, 'Corporate Governance: How It Affects Your Business,' December 16, 2002.)

[IMGCAP(3)]

Risky Business

These findings imply that in spite of pressures to the contrary, legal spending will increase when driven by issues that have the potential to dramatically impact a company's future. 'Bet-the-company' issues such as securities litigation or mergers and acquisitions and more 'commodity-like' legal services such as labor and employment law or intellectual property appear to impact outside counsel spending decisions differently. (The LSSA classifies labor and employment law, patent law, and intellectual property as more 'commodity-like' legal services and antitrust/competition policy, regulation, mergers and acquisitions, securities litigation, and other corporate transactions as 'bet-the-company' legal services.) Spending on mergers and acquisitions, for instance, is similar to securities litigation in that, regardless of cutbacks, it remains at the very least constant, if not increasing, from year to year. According to the 2003 LSSA, 42% of those surveyed said they do not expect their legal spending on mergers and acquisitions to change, even though deal activity has been in steady decline. (Thomson Financial Securities Data, Securities Industry Association, 2002.) Conversely, spending on more commodity-like services appears more vulnerable to spending cuts. For instance, even though companies have seen an increase in the number of layoffs and employment discrimination lawsuits filed this past year, nearly 60% of those surveyed say they expect their company's spending on employment and labor law to decrease or remain unchanged. Similarly, over 75% of those surveyed said the amount they spend on intellectual property and patent law decreased, contrary to the increase in patent applications as reported by the U.S. Patent Office. (U.S. Patent Office, Patent Statistics, 2000-2003.)

From these findings, it seems clear that companies facing a disproportionate amount of more commodity-like litigation are more likely to adjust their spending in accordance with the economic downturn. Of the respondents who witnessed increases in commodity-like practice areas from 2002 to 2003, 25% note that budget constraints had a high impact, with only 12.5% reporting a low to negligible impact. Of respondents who witnessed spending increases in bet-the-company type practice areas, only 15% note that budget constraints had a high impact on spending on outside counsel, and nearly a quarter reported budget constraints had low to no impact on their spending decisions.

All Industries are not Created Equal

It stands to reason then that the industries with the highest spending increases on outside counsel will also be those faced with a higher proportion of bet-the-company litigation. Across all industries, 29% of LSSA respondents note their company was involved in some sort of bet-the-company litigation in 2003. For companies in the energy and utilities and health care industries, the number is over 50%. And as predicted, nearly 75% of respondents operating in those industries report they expected spending to increase in 2004 ' much higher than the respondent average of 34%.

At the other end of the spectrum, the industries more involved in more commodity-like litigation in 2003 include automotive and telecommunications ' nearly three times more in some cases. Again, consistent with earlier findings, over 90% in both industries anticipate spending on outside counsel to decrease from 2003 to 2004.

Quality is Job One

Given the scrutiny legal budgets are under, general counsel are very selective when choosing outside counsel. Service and price are only two of the factors that weigh into general counsel's decision-making process. According to the 2003 LSSA, quality of work and results are the leading drivers of outside counsel selection in 2003 ' even more so than value and cost. And the more serious the litigation's repercussions are, the more important track record becomes. Over 95% of respondents facing bet-the-company litigation report quality of work and results have a high impact on their selection of outside counsel.

[IMGCAP(4)]

There are few industries, short of health care,in which consumers choose quality so dramatically over cost. A law firm's attractiveness, at least according to LSSA respondents, hinges heavily on the reputation and accomplishments of its professionals, independent of cost.

Looking for Lawyers in all the Wrong Places

Firms that emphasize areas of specialization and the track record in those areas over general firm capabilities would therefore appear better positioned to capture the attention of their potential buyer. But with all of the competition for legal services, how do law firms differentiate themselves and their attorneys from their competitors? The answer, for the most part, has been branding ' a marketing activity that law firms have embraced with a vengeance. The last few years have seen a dramatic increase in the amount of attention paid to marketing legal services, as well as the amount spent to keep the marketing fires stoked at these firms. In 2001, the Legal Marketing Association published a report encouraging law firms to get out of the 'dark ages' and move into the era of branding and Web development. (Greg A. Lohr, 'Old-style marketing strategies on trial at law firms;' Washington Business Journal, 2001.) Those words did not go unheeded. A 2003 survey of marketing directors at law firms found that 68% of firms plan to increase their marketing budgets in 2004, with the largest portion of the spending going into branding and image advertising campaigns. ('Two-Thirds of Law Firms to Spend More On Marketing by 2004,' conducted by Glasser LegalWorks , 2003.) It seems as though law firms have thrown all of their marketing efforts into branded Web sites, image advertising and other activities designed to increase name recognition and the overall profile of the firm.

However, the effectiveness of those efforts appears discouraging ' at least for those who are responsible for developing and funding those programs. In the 2003 LSSA, general counsel note that Web sites are one of the last places they consult when looking for outside counsel, opting instead to use less-commercial channels such as referrals or personal contacts. More 'classic' marketing activities such as firm branding and professional affiliations have been equally futile ' only 14% of general counsel put any emphasis on the activities associated with law firm branding.

[IMGCAP(5)]

It appears that just when it may matter most, marketing campaigns have lost their luster in the eyes of their target audience. And while law firms scramble for name recognition in a crowded market, few stop to assess the effectiveness of these efforts. A recent review of legal marketing initiatives in the Dallas Business Journal observes: 'Many of the large, well-established firms still are playing catch-up in the marketing arena because they've been able to rely on long-standing institutional clients for their bread-and-butter. But now, with corporate America undergoing dramatic changes, firms are concerned that many of those client companies simply are disappearing.' (Lisa Tanner, 'Law firms tiptoe into marketing arena,' Dallas Business Journal, 2003.)

Handing Down the Marketing Verdict

The 2003 LSSA confirms conditions that support an attractive environment for the peaceful co-existence of in-house counsel and outside legal services providers: Demand is increasing and the external drivers of demand remain constant in spite of a firm's best efforts to control costs. So, why then, have mega-marketing initiatives been shunned by the very target audience they are designed to attract?

It seems that the marketing pendulum may have swung too far to the left ' at least from the perspective of the intended audience. What matters most, according to survey respondents, is quality of work. In a services environment, quality is a criterion that has to be experienced ' thus the heavy reliance on referrals and personal contacts for information. And, in a services environment, quality results are delivered by skilled and experienced professionals, not 'a firm.'

That's not to say that a firm's identify is unimportant. It is vital to setting expectations about things such as quality and expertise. But a professional services firm's branding and marketing efforts must surely balance its promotion of firm attributes with individual and/or practice area expertise and accomplishments. In a firm of professionals, it is the collective accomplishments of the professionals that not only differentiate a firm, but make or break the brand itself. Branding initiatives focused on enhancing the reputation of its practice areas and experts might provide the incentive for corporate counsel to heed the messages and promotions generated by their perspective service providers.

That process begins with an understanding of the areas in which their clients require assistance ' and a continual cultivation of the insights and experiences deemed important to their clients. Good marketing is a by-product of a good strategy that is executed with precision. Name recognition activities disguised as branding initiatives not only fail to differentiate the services of a firm, they appear to do very little to inform and engage the target audience. If, as Sir Isaac Newton says, 'what goes up must come down,' then the increase in spending on legal services might be short-lived. Only those who carefully manage their position in the market will adapt successfully to the changes when they occur.

[IMGCAP(6)]

To order a copy of this report please visit www.cemeinfo.com or e-mail us at [email protected].