Differentiation as a Strategy: How Law Firms Stand Out

What is a differentiator?

Differentiators help potential clients to distinguish your offer from other suppliers. They are the main reasons that influence a buying decision – or in other words: the strategic competitive advantages of your firm. Why do clients come to your law firm instead of another firm? A coincidence? Hardly.

Differentiation flows from the needs of the target groups. It is the counterpart contained in the offer that satisfies the identified needs. It is the result of the strategic choices a company makes to create added value and thus gain a competitive edge.

The needs in the market are in a constant state of flux. Therefore, strategies based on differentiation must also be constantly reviewed for their relevance. Marketing therefore also means market research as a basis for the definition of differentiation features.

For this reason, companies that continuously research how the needs of their target group develop are usually not only more successful in differentiation but also more profitable!

Step out and look at your own company with an outside perspective? Identify differentiatiors and unlock hidden potential with HeadStarterz: hello@headstarterz.com

The quality of differentiators:

Price as a differentior?

What is certain is that permanently undercutting direct competitors through lower prices does not represent meaningful differentiation. One lives with the constant danger that the competition will undercut one's own prices again. As a result, one not only loses the advantage, but also comes under pressure to lower one's own prices even further. Mostly you end up in a downward spiral. A good example of this are discounters who undercut each other on price. It is therefore important to find a significant and sustainable difference to the competition.

Features of differentiation

For a differentiator to be effective, it must meet four criteria. It must be rare, true, provable and relevant.

1. Rare: The differentiating characteristic should be rare. This follows from the very nature of the matter – in order to differentiate, not everyone may have the same characteristic. One of the most important differentiators in the legal industry is specific expertise (for example, a certain knowledge of the industry). However, expertise does not have to be a differentiating factor in every case. Especially in law firms, experience, expertise and good training are assumed. Clients would not pay hourly fees for incompetent, inexperienced or poorly trained lawyers.
   
   However, if there is expertise in a very specific direction (e.g. a sound knowledge of the sector), which is rather difficult to obtain, this specialisation can effectively be a distinguishing feature.
    
2. True: A differentiator should really be one. This means two things: (1) one must be able to keep the promise associated with the differentiation and (2) the result flowing from the performance actually means an advantage. A negative example: If a company advertises itself as a transparent and honest partner and then, after the initial payment, the client incurs unexpected costs in the enforcement, the truth of the promised service is lacking.
    
3. Provable: The differentiation must be demonstrable in communication. A competitive advantage is of no use if it is not visible to the target groups. For every claim of differentiation, there must be verifiable evidence in a firm's communication. This could, for instance, be certificates, customer feedback or the results of market research. Research might reveal, for example, that almost all clients see the punctuality and quick handling of matters as the main argument for cooperation. This would be solid evidence of the company's claimed high level of service orientation.
    
4. Relevant: Here, a sound understanding of the target group is crucial. Which target group should and does the company want to address? How are they segmented and where is the highest likelihood for a sale? Every company must ask itself these questions and also answer them! For example, specialising in a certain area or a certain service can be more appealing to potential clients. This offers the possibility to dominate the market of a niche audience. There is hardly a differentiator that is relevant in all segments

Effect of differentiating features

Companies that know their differentiation features can pursue much more profitable strategies. The differentiation of the offer does not take place through a price war, but through the added value created with the differentiation for the target group concerned. The target group is willing to pay for this added value. The company does not have to get involved in a price war.

Effective differentiation strengthens branding. Target groups are more likely to remember an offer and the company associated with it. Consequently, it also increases not only the likelihood of a sale but also of future referrals. Especially for law firms, referrals are definitely an essential marketing tool.

Read more about the effect of referrals in law firm marketing here.

Companies with real differentiators remain unique. They cannot be compared directly with the competition. Interested individuals must rely on the qualitative value of differentiation. The combination of greater value and the lack of comparable offerings creates greater loyalty to the firm. If the promises are kept, there is no good reason to switch and no (cheaper) comparable alternative to switch to.

Differentiating features are therefore the basis for being able to charge higher fees without losing clients at the same time. Profitability ("profit per partner") increases.

Where and how to find differentiating features

Differentiating features can be combined and can thus strengthen the competitive advantage.

Strategies for law firms and other professional services:

Possible strategies for finding differentiators for professional services, especially for law firms and other consultancies in the legal industry, are explained in more detail below:

1. Specialisation: This is perhaps the most commonly used differentiator. Clients value law firms/boutiques that specialise in the sector they are interested in – they assume that specialists can solve their problems more effectively and quickly.
2. Specialisation in a particular service: This strategy is particularly effective if the service is rare. An innovative format for offering mediation services could be an example.
3. Offering a unique technology or process: TThis means only a process that addresses the problem in a completely new way and thus offers a new and real benefit to the client. Legal tech applications have already given certain law firms advantages in this regard. However, these are not always sustainable because other firms can upgrade. They are also not accessible to all law firms, as not all have a meaningful volume. Technology often favours constellations with large data sets.
4. Specialisation in serving clients of a certain size: Large companies have different needs than SMEs or private individuals. Service providers with experience a specific client group can offer a great service.
5. All employees share a certain characteristic/qualification: For example only employees with a degree from a top university are selected; or a firm only hires staff with a doctorate or professorship because their typical engagement involves work that benefits highly trained academic minds (e.g. writing expert opinions).
6. Specialise in clients who share a specific characteristic: For example, law firms that specialise in victim representation or representing insured persons against insurance companies.
7. Have one or more people who have a high profile as experts or icons in their field: A star in the team. People with well-known publications, important positions, high media presence or otherwise high profile can certainly offer added value for a certain clientele.
8. Offering a unique business model: Innovation is needed here. The most common example: While competitors charge by the hour, fixed prices could be a valuable alternative which are appreciated by certain (not all!) clients.
9. Offer a unique set of contacts or relationships: How and with whom is a firm networked? An exciting network of helpful experts in other fields may well be of interest to the client and may tip the balance in favour of a purchase decision.
10. Business with a truly distinctive level of service: CClients expect good service as a matter of principle. Therefore, an exceptional service experience is needed to differentiate. But it is also a fact that the promised service is not delivered. Those who can prove a high level of service have an advantage!
11. Differentiatethrough clients you already have: Differentiation through a broad, existing base of clients with a high reputation from a certain target group. This inspires confidence in many people.
12. Look/act different from the competition: A corporate behaviour that is different can be a powerful differentiator. The important thing is simple: just being different is not enough. It must be associated with an advantage for the target groups.

How to choose correctly?

Consciously or unconsciously, we often assume that our competition knows something that we don't know. We align ourselves accordingly and choose inappropriate differentiators.

There are two basic approaches for making the right choice.

Proactive approach

You decide for yourself and without being influenced by what you already have. It takes courage to make and implement such a decision. This approach makes sense especially if your company does not yet have any inherent differentiating features or if you recognise a market opportunity that the company could fulfil after the change.

Passive approach

Here, differentiation is discovered instead of newly created. This approach is especially recommended for companies that don't want a dramatic change in strategy. Often, established consulting firms lack the distance to their own strengths. One loses the overview. Often all it takes is a sharpening of awareness – some space to step out for a moment and refocus. Convincing stories need good and clear differentiators.

Maintaining competitive advantages

The key to sustainable success is a process of permanent awareness of what is happening in the legal market.

Understanding legal marketing as a comprehensive process: Where everything comes together and what legal marketing as a discipline entails.

First, market analysis is essential to objectively assess opportunities for differentiation. Proper differentiation requires that you understand at all times what the target group / potential clients need and how they make purchasing decisions. We need information and data to answer these questions. What else can you do to make better strategic decisions?

The second question you should ask your company is: Do other companies have the same differentiators? Are the differentiators strong enough to drive referrals and customer loyalty? How might the needs of the target group change in the next few years? How can you meet them? Are our differentiators qualitatively sufficient (rare, true, provable and relevant)?

The third prerequisite for maintaining competitive advantage: Culture. The differentiation / strategy must be effectively lived by the employees. They need clear communication and, if necessary, an adjustment of certain processes. Therefore, from time to time, question your marketing materials and key messages contained in the communication: Are they still relevant and do they prove your claimed differentiation?

Analyse your own differentiation strategy with HeadStarterz and unlock hidden potential: hello@headstarterz.com

Conclusion

Differentiators distinguish the company. A strong differentiator gives your company a competitive advantage.

In order to be successful in competition, professional service companies must first determine or recognise their competitive advantage. It is also possible to combine several features. For this strategy to be effective, the differentiators should be rare, true, provable and relevant. It is important to conduct ongoing market research in order to notice changes in the legal industry and to identify necessary adjustments in the strategy.