A Haven For Straight Talk: <b>Don't Measure Twice ... Measure Expertly</b>

I have a friend who builds houses for a living. He and his small crew only build about five homes a year, but they do it very well. We were talking about marketing at one point, and I mentioned the old saw (pun intended) about “measure twice, cut once” ' an adage I often use about marketing. He chuckled and said that whoever came up with that quote might have been a seamstress, but never a carpenter.

“Why's that?” I asked.

“Because there's no guarantee your second measurement is any better than your first. You don't need to measure twice; you need to be an expert at measuring.”

“OK,” I said. “Then how do you do that?”

He replied: “You do it a couple hundred times a day. You never do anything without measuring first; no 'eyeballing' it. You understand the reasons behind the measurement, not just the notation on a plan. And if you don't understand, you ask somebody who does.”

I was impressed. Based on that discussion, I've changed my measurement axiom to “Measure expertly.”

But what measurements will be helpful to law firm marketers? That depends on what you're looking to accomplish. As I say over-and-over on my legal marketing blog (shameless plug alert: see, http://legalmarketing.typepad.com for details), marketing without goals is like basketball without baskets.

Marketing is a process; one that hopefully benefits your firm. A beneficial process requires improvement. Improvement requires measurement. It's very simple, and yet many firms carry out no marketing measurement, or only perform measurements that are meaningless from a planning standpoint. For example, measuring profit solely on a per-partner basis, firmwide, once a year. That's like going for a physical to find out if you're dead or alive.

I get the sense, in talking to lawyers, firm administrators and legal marketers, that firms avoid marketing measurement for two main reasons. First, they don't know what they should be measuring. Second, they don't know what they'd do with the measurements if they had them. Again, I'll emphasize that marketing measurements should be based on your firm's specific business goals. But I will suggest some essential marketing measurements and how they relate to strategy and planning in the legal industry.

Market Share

In almost every modern industry, market share is a big deal. Simply put, it's an indication of how much of “the business” your organization is getting. Your piece of the pie. If, for example, there are a total of 10,000 hotel rooms rented in a particular city in one month and your hotel has 500 guests that same month, your market share is 5%. Market share is a good way of measuring how well your firm is doing when compared to the overall market for legal services. Measured over time, it's a way for you to tell if your firm's growth is due to your fabulous marketing activities, or simply to the expansion of your market. Here's a hint: If your market share is the same every year, your marketing ain't doing much beyond treading water.

How can a law firm measure market share? I suggest comparing the number of lawyers at your firm against the number of lawyers in your chosen market. Depending on the city and state, you may be able to get that information for free from your Bar Association or State Supreme Court. If you're one of the top firms in your city, a local business publication may have a “Top 20″ or “Top 25″ list of firms that includes the number of attorneys at each of the listed firms. If you're in the AmLaw 100 or the NLJ 250, you can measure your lawyers against the tally for the whole list, or for firms that you feel are competing for the same business.

Some people will be skeptical of this method. Not all lawyers work the same number of hours and they charge different rates. This is true. But it's also true that rates are generally higher in cities with higher costs-of-living. So this method does take into account cost issues as well as work generated. And while it's not a perfect method, I haven't found a better one. If you have a suggestion, let me know and I'll take full credit for it in a future article.

Room At The Top

And while we're on the subject of market share, let me “share” an interesting tidbit with you. If you add up all the lawyers at the top 100 firms in the NLJ 250 for 2003, you get a total of around 74,000 attorneys. The largest firm on the list, Baker & McKenzie, has 3214 attorneys, for a market share (of those top 100 firms) of around 4.4%. The top 10 firms on the report have a combined market share of less than 23%.

What does this mean? That there's huge room for consolidation in the legal industry. Compare those market share numbers with that of the top restaurant chains in America. According to a report by the food industry consulting firm Technomic, the top chain in the country, McDonald's, had approximately 14% market share (by revenue) of the top 100 restaurants in 2003. The top 10 chains together have around 46%. What's more, McDonald's is 100 times the size of the smallest chain on the Technomic list. Baker & McKenzie is only about eight times the size of the 100th largest firm on the NLJ 250.

Again I hear you cry, “So what?” Well, when the largest player in an industry is only eight times the size of its 100th largest competitor, Mr. Marketing says it's a good time to buy market share. If they combined, firms 92-100 on the NLJ 250 would be bigger than Baker & McKenzie. I'm not saying a merger of that sort would be uncomplicated, but it's certainly more feasible than combining100 firms. And the easier it is to consolidate market share, the easier it is to realize economies of scale in areas like marketing, management, benefits, IT and other infrastructure areas.

More To Come

The whole issue of measurement in legal marketing is ripe for major exploration. The firms that start doing it now, and doing it right, will have huge competitive advantages over time. In my next article, we'll cover some other measurement-related topics, including incremental market share and several ways to look at profitability. Until then, get your rulers out and start practicing.

I have a friend who builds houses for a living. He and his small crew only build about five homes a year, but they do it very well. We were talking about marketing at one point, and I mentioned the old saw (pun intended) about “measure twice, cut once” ' an adage I often use about marketing. He chuckled and said that whoever came up with that quote might have been a seamstress, but never a carpenter.

“Why's that?” I asked.

“Because there's no guarantee your second measurement is any better than your first. You don't need to measure twice; you need to be an expert at measuring.”

“OK,” I said. “Then how do you do that?”

He replied: “You do it a couple hundred times a day. You never do anything without measuring first; no 'eyeballing' it. You understand the reasons behind the measurement, not just the notation on a plan. And if you don't understand, you ask somebody who does.”

I was impressed. Based on that discussion, I've changed my measurement axiom to “Measure expertly.”

But what measurements will be helpful to law firm marketers? That depends on what you're looking to accomplish. As I say over-and-over on my legal marketing blog (shameless plug alert: see, http://legalmarketing.typepad.com for details), marketing without goals is like basketball without baskets.

Marketing is a process; one that hopefully benefits your firm. A beneficial process requires improvement. Improvement requires measurement. It's very simple, and yet many firms carry out no marketing measurement, or only perform measurements that are meaningless from a planning standpoint. For example, measuring profit solely on a per-partner basis, firmwide, once a year. That's like going for a physical to find out if you're dead or alive.

I get the sense, in talking to lawyers, firm administrators and legal marketers, that firms avoid marketing measurement for two main reasons. First, they don't know what they should be measuring. Second, they don't know what they'd do with the measurements if they had them. Again, I'll emphasize that marketing measurements should be based on your firm's specific business goals. But I will suggest some essential marketing measurements and how they relate to strategy and planning in the legal industry.

Market Share

In almost every modern industry, market share is a big deal. Simply put, it's an indication of how much of “the business” your organization is getting. Your piece of the pie. If, for example, there are a total of 10,000 hotel rooms rented in a particular city in one month and your hotel has 500 guests that same month, your market share is 5%. Market share is a good way of measuring how well your firm is doing when compared to the overall market for legal services. Measured over time, it's a way for you to tell if your firm's growth is due to your fabulous marketing activities, or simply to the expansion of your market. Here's a hint: If your market share is the same every year, your marketing ain't doing much beyond treading water.

How can a law firm measure market share? I suggest comparing the number of lawyers at your firm against the number of lawyers in your chosen market. Depending on the city and state, you may be able to get that information for free from your Bar Association or State Supreme Court. If you're one of the top firms in your city, a local business publication may have a “Top 20″ or “Top 25″ list of firms that includes the number of attorneys at each of the listed firms. If you're in the AmLaw 100 or the NLJ 250, you can measure your lawyers against the tally for the whole list, or for firms that you feel are competing for the same business.

Some people will be skeptical of this method. Not all lawyers work the same number of hours and they charge different rates. This is true. But it's also true that rates are generally higher in cities with higher costs-of-living. So this method does take into account cost issues as well as work generated. And while it's not a perfect method, I haven't found a better one. If you have a suggestion, let me know and I'll take full credit for it in a future article.

Room At The Top

And while we're on the subject of market share, let me “share” an interesting tidbit with you. If you add up all the lawyers at the top 100 firms in the NLJ 250 for 2003, you get a total of around 74,000 attorneys. The largest firm on the list, Baker & McKenzie, has 3214 attorneys, for a market share (of those top 100 firms) of around 4.4%. The top 10 firms on the report have a combined market share of less than 23%.

What does this mean? That there's huge room for consolidation in the legal industry. Compare those market share numbers with that of the top restaurant chains in America. According to a report by the food industry consulting firm Technomic, the top chain in the country, McDonald's, had approximately 14% market share (by revenue) of the top 100 restaurants in 2003. The top 10 chains together have around 46%. What's more, McDonald's is 100 times the size of the smallest chain on the Technomic list. Baker & McKenzie is only about eight times the size of the 100th largest firm on the NLJ 250.

Again I hear you cry, “So what?” Well, when the largest player in an industry is only eight times the size of its 100th largest competitor, Mr. Marketing says it's a good time to buy market share. If they combined, firms 92-100 on the NLJ 250 would be bigger than Baker & McKenzie. I'm not saying a merger of that sort would be uncomplicated, but it's certainly more feasible than combining100 firms. And the easier it is to consolidate market share, the easier it is to realize economies of scale in areas like marketing, management, benefits, IT and other infrastructure areas.

More To Come

The whole issue of measurement in legal marketing is ripe for major exploration. The firms that start doing it now, and doing it right, will have huge competitive advantages over time. In my next article, we'll cover some other measurement-related topics, including incremental market share and several ways to look at profitability. Until then, get your rulers out and start practicing.