This is part one of a three-part series.
Excellent service leads to client satisfaction, which is an essential element in creating client loyalty; but, a client can be satisfied with the results and still feel no personal tie to you or your firm.
The concept of client loyalty includes five things:
- The client’s overall satisfaction when doing business with a law firm.
- The client’s willingness to build a relationship with you and your company.
- The client’s willingness to be a repeat client.
- The client’s willingness to recommend you to others.
- The client’s reluctance to switch to another law firm.
Client turnoffs arise when employees (and I mean both lawyers and non-lawyers) fail to communicate well, both verbally and non-verbally. Some examples of client turnoffs are:
- Failure to greet, or even smile at, a client.
- Failure to see the client on time.
- Inaccurate information given or lack of knowledge conveyed.
- Failure to give full attention to the client, either while on the phone or when meeting them in-person.
- Rude or uncaring attitude.
- Inappropriate, dirty or sloppy appearance in the workplace.
- Any communicative message that causes the client to feel uncomfortable.
Surveys completed by the U.S. Office of Consumer Affairs reveal these interesting facts (within this content, “client” and “customer” are interchangeable):
- One client in four is dissatisfied with some aspect of a typical transaction.
- Only five percent of dissatisfied clients complain to the company. The vast silent majority would rather switch than fight. They simply take their business elsewhere.
- A dissatisfied client will tell 10 to 20 people (12 is the average) about a company that provided poor service. Some people will tell hundreds or even thousands.
How does this affect our business? If 25 percent of our clients are unhappy or unhappy with our service, but only five percent of that 25 percent bother to complain, the impact can be devastating.
Let’s take a typical injury law firm that signs up 1,000 clients per year. If 250 clients are unhappy, but we hear from only five percent of that 250, which is approximately 13, that may sound good to everyone until they realize that the 237 quiet ones are likely to tell 2,844 people (237x12=2,844). Adversely, if a client is completely satisfied, he might tell one to three people.
In 2013, our statistics showed us that there were three major sources of clients in our firm, and it broke down as follows:
421 cases or 41 percent from television
140 cases or 14 percent from our website
340 cases or 33 percent from personal referrals
Now, let me tell you the cost of getting those referrals. In real dollars, TV costs about $900 per client. The website costs approximately $500 per case to get them in the front door. And, last but not least, personal referrals cost absolutely nothing. Which type of referral do you think I want?
What is also important to note is that of the 340 personal referrals that we signed up, we received 823 referrals, which means that we had a 41 percent success rate in signing up personal referrals. In TV advertising, we had 2,333 calls and signed up 421 new cases. This was a conversion rate of 18 percent. Our website yielded 1,268 inquiries and only 140 sign-ups, which is only an 11 percent conversion rate. You can clearly see that the personal referrals are already sold on our services when they seek us out. They’re not just shopping around for attorneys or trying to find out information. They come to us wanting our services. This also costs the firm less time and money in converting these calls to actual cases. Now, I ask you, which do you think is the most cost-effective form of marketing we do in the firm and also yields us the greatest conversion rate? It is clear … the personal referrals from our past clients and people we do business with.
Now, let’s go to the actual dollar cost of an unhappy client. As I stated earlier, out of 1,000 clients, if we go by the national average, we have about 250 unhappy clients. Of those 250 clients, 95 percent never express discontent, but also never come back or refer any clients either. Thus, we have 237 people who could have spoken to at least 474 people and referred us, which on the average would have converted 41 percent or 196 clients. In actual costs, just look at the following:
If we had to replace these clients with TV advertisements, the cost would be $176,400. But, better yet, let’s think of the lost income. If we average $4,000 a fee and we lost 196 potential clients, then we have lost approximately $800,000 in revenue for the year.
BASED ON THE ABOVE, IF WE FOLLOWED THE NATIONAL AVERAGE, LOST REVENUE WOULD BE MORE THAN $1 MILLION.
Potential clients are bombarded with more than 3,000 messages a day meant to influence their spending habits. Whether it’s the billboard they pass every day on the way to work, the label on the bottle of Pepsi they’re drinking or the Cadillac emblem on the car they’re stuck behind in traffic, these visual messages are meant to create top-of-mind awareness and persuade the consumer the next time they’re in the market to buy a certain product or service. With the huge number of messages reaching them every day, it’s no wonder that consumer buying habits can change at the drop of a hat.
That said, client loyalty is of the utmost importance. Simplistic messages that create top-of-mind awareness cannot sway the loyal client. While the competition is spending dollar upon dollar on ways to increase client volume, many of them are forgetting the importance of their existing clients. Forgetting this will almost certainly lead to a number of unsatisfied clients, who will likely never become loyal clients.
In more than 30 years of practice, I have learned many things, and one of the most important is how to develop client loyalty and keep client loyalty. By following some very common-sense rules and setting the stage for all lawyers and employees who work for you, client loyalty is easy to develop. I candidly tell everyone that my practice rises and falls based on client loyalty.
Next week, I’ll share “15 Secrets to Developing Client Loyalty.” See you then!