July/August 2003  Volume 29, Issue 5
July/August 2003 Issue
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Should You Productize Your Services?
by Sally J. Schmidt
Develop your reputation in a practice area. Build profits through stand-alone services. Gain opportunities to build existing or new client relationships. Give the market what it wants -- package a service that is easy to buy.
Productizing. It's a word that English language purists undoubtedly detest. Yet it's an exciting concept that has revolutionary potential in the realm of law firm marketing. • Consider how most legal services typically require building long-term relationships or waiting for an event to occur before a service is "sold" in response. Not to mention that pricing of traditional legal services is often a point of conflict with clients. In contrast, productizing, quite simply, means making a service more like a product-with a definable scope, understandable period of use and standardized cost basis. The service, consequently, is easier for clients to "buy." • Are you intrigued by the possibilities? Then it's time to study up on the concept of productizing and the issues involved in putting together and marketing a packaged legal service.

The Concept in Action: Blazing New Trails
For years, lawyers have bemoaned the ability of CPAs to sell financial or tax products to clients. That ability gives the accountants a foot in the door and, thus, a stronger potential to sell other services to those clients. Lawyers have similar opportunities to package their services, but there have been myriad obstacles in most law practices-from a lack of creativity, to being wed to the billable hour, to a woefully inadequate ability to determine the cost of services.

Still, the legal profession has its trailblazers. The law firm O'Connor & Hannan, where I served as marketing director more than 15 years ago, grasped the concept wonderfully, producing two innovative productized services. The first, called Closecure, was developed by lawyers in the financial services area. Closecure allowed banks to use the firm for uncomplicated loan closings that normally would be handled by the bank officers. The work was done on a flat-fee basis and was paid for by the borrower.

In addition, the firm's litigators developed a service called Restrictive Covenant Enforcement. It provided a step-by-step process for preventing former employees of client companies from violating their covenants not to compete. Clients were charged an initial fee to participate in the program, along with a flat fee for each violation the lawyers handled. Litigation costs were excluded. The program, however, basically eliminated violations in companies where it was used.

Today there are some visible examples of productizing in action. Bryan Cave, for one, has gained significant attention by developing online training programs under the title The NoZone. Its NoZone for Supervisors program, for example, allows companies to train their supervisors to recognize and respond to discrimination and harassment in the workplace through an interactive online course. A second program, NoZone for Employees, offers a similar training program for all of a company's employees, with the aim of helping client companies prevent discrimination and harassment.

Among other firms with notable productized offerings are Geoffrey & Kahn, with its Emerging 100 program; Miller Canfield, with its Rebate Calculation Service; and Lindquist & Vennum, with its L&V Employment Assessment.

Benefits of Productizing: Serving Clients and Lawyers
There are many reasons for lawyers to examine the concept of productizing certain types of services. The benefits can accrue to the law firm and its clients alike. The client's benefits include:

  • Cost certainty. Clients know what the service will cost and, therefore, they can budget appropriately.
  • Control. The client can "buy" just the one service for a fixed period, testing the firm before embarking on a longer-term relationship.

    The law firm's benefits include:
  • Market leadership. The firm can use the productized service to develop greater name recognition, build its brand in a particular practice area or even own the market.
  • Entrée. The firm garners opportunities to further cultivate the relationship once a company or individual buying the service becomes a client.
  • Profitability. Priced and staffed appropriately, the service can increase the firm's profitability through a combination of leverage and volume.

Productizing in Practice: Planning Your Offering
How, then, can you start down the path of creating or packaging services to achieve the benefits of productizing? Here are issues you will need to address.

Concept: What service will you productize? Quite often, the best and most viable options emerge at the practice level, when lawyers recognize a specific service, or a way to package services, that will meet an existing or emerging client need. Usually, the service adds value for a particular category of clients, such as a given type of company or industry.

Market: Who will buy the service? You should define your targets generally by developing a list of characteristics or qualities -- such as size of company, number of employees, industry and so forth. You also want to develop a list of specific targets, whether they are existing clients, prospective clients or potential referral sources.

Offering: What is the scope of the service? The more specific you can be in describing the program parameters, the more you can clarify the scope of the service for both the firm and prospective clients. What exactly does your offering entail? Which services are included in the package? Which are not? Is there a specific timeline or contract period associated with the service? And what kind of deliverables can the client expect at the end of the engagement?

Competition: Who has similar offerings? Having defined your service, you must analyze the competition. Some lawyers dismiss the importance of this step, perhaps believing that it somehow shows a weakness. However, it can be highly instructive to find out who offers similar services, be it HR consultants, engineers, accountants or trade associations. In particular, the information you gather might help you get a handle on the price people are willing to pay. It might also affect your marketing tactics. It doesn't make sense to promote your productized service through a trade association that offers a similar version of its own to its members.

Staffing: Who will provide the service? At what level will the service be staffed -- partner, associate, paralegal, other professional staff or some combination? That determination can, in turn, raise other questions to address. For example, while it may make sense to limit the number of people providing the service for efficiency and leverage purposes, if the fee is set below normal firm rates, there are compensation and fairness issues to confront.

Benefits: Why will people want to buy it? Before you can price and market your offering, you need to take a hard look at what value it will hold for clients. Will it save people money? Save them time? Keep them out of trouble? In some cases, the competitive analysis will help the firm better articulate the benefits of its service.

Pricing: What will it cost the buyer? There are many different ways a firm might price a productized service, from a flat fee, to a contingent fee, to taking warrants in a company. The price may be based on a company characteristic, such as a percentage of revenue or a flat fee per employee. To price the service effectively, you must carefully analyze all elements that compose the service, or each phase of the service. Your pricing structure should also factor in the benefits to clients.

Marketing: What is the best way to attract buyers? There are many approaches, including targeted promotional or substantive mailings, trade show activity, advertising, publicity, events, seminars and articles in relevant business or industry periodicals. Still, most legal services -- even those that are productized -- need to be sold through relationships. And the more expensive the service, the more necessary personal selling will be, and the longer the buyer's decision timetable becomes. The question is, who will do the selling? Depending on the nature of the offering, it may be the lawyers in the related practice, other lawyers in the firm or even third parties, such as trust officers or financial planners.

Also, remember that the name you select for the new service will affect the ultimate success of your marketing plan. Many firms saddle their offerings with names that are too generic. This mistake can make it difficult to trademark your service's name -- and it certainly makes it harder for the offering to stand out from the competition.

Ethics: What rules apply to delivery and marketing? Depending on the jurisdiction in which your firm practices, you may be prohibited from certain pricing options or restricted in your marketing methods. Be thorough in investigating all the ethics rules and procedures that may apply.

Internal Issues: How do you prepare the firm? You need to get your firm ready to launch the service. There are any number of issues to be addressed, depending on the culture, systems and skeptics in a given firm.

For example, who will receive credit for clients developed through the program? How will the time and billing system track work related to the new offering? Will you need to assign new tasks to information technology and other support staff? Are there training issues involved for lawyers and staff, and what is the learning curve? And there are still larger issues to address, such as concerns about whether this packaged service will somehow diminish the value of existing services.

Costs: What's the price tag for developing, launching and sustaining the service? Given all the factors involved in the preceding issues, you have a variety of numbers to crunch. Depending on the type of offering, and your rollout plans for it, out-of-pocket costs may include training, marketing and business development, IT and systems programming expenses. There will also be substantial development costs in terms of lawyer time. Practitioners' involvement will be essential at every step, from creating the program and systems to promoting the service.

Results: How will you measure success? The measurement of success should relate back to the overall objectives of the offering. If the primary objective is to garner additional business from existing clients, you will need to track the number of clients adopting the service. If the objective is to develop new clients, you will need to measure new business in the door.

For all new services, keep in mind that your timetable for success (however it is measured) needs to be realistic. Developing a completely new service often takes three years or more. At the same time, you should establish a "fish or cut bait" date for determining the offering's success, to ensure that resources are not devoted longer than necessary to an unsuccessful cause.

Six Rules for a Successful Service Launch -- and Beyond
Regardless of what service you choose to productize, there are rules you need to heed as you develop and implement the new program. Here are a few final notes to help your offering succeed.

Rule #1: Market research is invaluable. Before investing your resources, bounce your idea around with some valued advisors. Ask a few existing clients to participate in a focus group to discuss the elements of the program, the market need for this service, the competition, the pricing options and ideas for marketing.

Rule #2: A marketing mix is mandatory. Successful service development requires more than just a brochure. Getting clients to buy productized services calls for a mix of marketing activities complemented by efforts to discuss the offering directly with prospects and potential referral sources. Mass marketing efforts alone will not ensure a sufficient volume of takers.

Rule #3: A proper "fit" is critical. Like ancillary businesses, productized services should work hand in hand with the firm's existing services and clientele. An NCAA compliance audit might be a great service in theory-but without a toehold in the sports law market, the offering is likely to fail.

Rule #4: Cross-selling is the easiest way to sell. Sometimes it's best to have lawyers in the relevant practice area introduce the offering to their existing clients and, thereby, augment their relationships. Some offerings, however, need to be sold by other firm lawyers in positions to recognize good opportunities in the wider marketplace. Either way, much of your marketing effort needs to be focused internally, on educating other firm lawyers about how they can cross-sell this service.

Rule #5: You win some, you lose some -- but you need to make money. Some firms intentionally develop their offerings as loss leaders, with the goal of obtaining spin-off work. Some firms expect to win substantially on a few clients, thus offsetting losses incurred with others. And some price their offerings to be profitable as stand-alone services. The bottom line, however, is still the bottom line. You need to measure whether the productized service is, in fact, contributing to profitability as expected. Otherwise, you run a risk of becoming like the old yarn: "The service may lose money, but we make up for it in volume."

Rule #6: Reinforcement produces results. Launching a new service may be exciting. But successful promotion requires more than just a one-time, flash-in-the-pan communication strategy. The hardest part of any marketing effort is sustaining it. To see results, you need to make an ongoing investment of time, money and energy and market the service continually.

Sally J. Schmidt ( sallyschmidt@schmidt-marketing.com) is President of Schmidt Marketing, Inc., in Burnsville, MN. She was the first president of the Legal Marketing Association and is the author of Marketing the Law Firm: Business Development Techniques (Law Journal Press, updated semiannually).