While the legal industry is often perceived as a slow adopter of new technology, the latest research from LexisNexis finds that law firms' CRM initiatives are mature, with almost half (48 percent) of firms having systems that are more than five years old. An additional 23 percent put the age of their systems at between three and five years.
A full 63 percent of firms plan additional CRM investments in 2014, and more than half (54 percent) are looking to make system upgrades in the next three years, according to the LexisNexis report "Insight into the State of Law Firm CRM," released in early December.
For most firms, this will mean upgrades to existing systems rather than new rollouts, the research found.
The report also noted that the current economic climate is a big reason for the importance firms are placing on their CRM system investments. "Our analysis of the data and macro trends in the industry suggest the catalyst is tightening competition driven by more sophisticated buyers demanding greater value from their legal services," says Ted Seward, senior marketing manager with the InterAction business at LexisNexis. "The legal industry, especially big law, has seen firms chasing less work over the last five or so years. The conventional wisdom was that this would turn around with the economy, but it has not."
Nonetheless, the investments in the technology are paying off, according to the research. Fifty percent of respondents strongly agreed or agreed that their practices were seeing measurable returns from their CRM initiatives. More than half of the firms cited "better client relationships" as the primary benefit of their CRM projects. Another 48 percent cited an "improved ability to cross-sell." Other benefits cited were increased team collaboration, improved efficiency in serving clients, greater staff satisfaction, increased revenue and profitability, and cost savings.
According to Seward, better client relationships are usually a precursor to improved financial outcomes for the firm, typically through improved selling of its services to more divisions of a client account, lower levels of attrition away from the firm, or a combination of the two.
"For a law firm, it's also important to ensure that more than one partner has a relationship with a client, since there is evidence to suggest it reduces the chances of client attrition," Seward says. "In fact, we see data that suggests when just one partner is engaged with a client, the risk of attrition approaches forty percent, but when five or more partners are involved in a client relationship, that risk of attrition falls to less than five percent."
An earlier survey by LexisNexis found that many firms are using social media to strengthen relationships as well. Social CRM, the firm concluded, can help attorneys uncover data about the needs, concerns, pain points, and interests of clients and potential clients, thereby enabling them to forge deeper relationships. It can also help attorneys spot issues and concerns that are important to clients, helping them to identify additional services that they can offer to those clients.
Firms are also using social media to position themselves as subject matter experts in certain areas. Attorneys can use social media to communicate their knowledge of cases, issues, legal trends, or other matters, which in turn can help with branding efforts and landing new clients.
In total, 42 percent labeled their CRM projects as successes. Twenty-three percent said it was too early to tell, but they were expecting to find successes too.
For those projects that were not considered successful, a lack of employee buy-in was cited as the main reason by 33 percent of firms. Poor data quality, integration challenges, a lack of leadership, and the absence of a long-term strategy were also factors.
"It is imperative to make the process of entering and maintaining data very easy for attorneys. A second area of high importance is ensuring that client data held within the system is up-to-date and of uniformly high quality," Seward adds.
Also important is leadership emphasis and the continued development of a culture of customer relationship building that is underpinned with knowledge management, Seward says.
He also points out that law firms need to continue to seek new ways to keep the interest level in the CRM system high. "Attorneys are highly competitive, and gamification is an emerging trend in law firm CRM."