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Client Attrition Analytics

By Kris Satkunas
December 22, 2006

While the managers of professional services firms often view market pressures as the driving force that determines whether clients remain loyal or choose to shop elsewhere for added services, a new study by the Redwood Think Tank indicates that firms have tremendous sway over which clients become long-term business partners.

(The Redwood Think Tank was formed in the spring of 2006 to study significant law firm management issues and formulate solutions that serve as a catalyst for change in the industry, thereby keeping Redwood Analytics attuned to the evolving competitive needs of law firms. The Think Tank's members are a diverse set of senior partners and executives.)

In a study of five large law firms, the Think Tank found that firms are increasingly likely to retain a client when their relationship with the client:

  • Provides the firm a large amount of legal work;
  • Has a mature, established relationship with the firm;
  • Sends the firm work in more than two practice areas; and/or
  • Has more than two firm partners significantly involved in the management of the client's matters.

Most firm managers recognize these four markers as achievements toward broadening and deepening their relationships with clients ' hence the emphasis on cross selling in many firms. However, the results of the Redwood Think Tank's analysis reveal just how dramatically these indicators affect the outcome of client attrition. Indeed, firms that obtain all four of these relationship criteria with a client are highly unlikely to lose that client. This analysis plays out nearly uniformly with every law firm examined.

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