- “The advantage that household brands will have over the legal profession is that they are recognised, whereas most lawyers are not”, read more here
- Read our case study on QualitySolicitors who “want to become the legal equivalent of Specsavers”, here
- Check out top brands discussing their legal plans, here
- Legal Industry experts give their viewpoints, here
Imagine if hit TV show This Life had been set in a supermarket, rather than around a swanky law office. That might sound strange, but from the end of this year any company will be able to apply to offer legal services.
Until now, only law firms have been able to invest in or share the profits of certain kinds of ’reserved’ legal work. But the activation of the Legal Services Act, which was passed in 2007 and nicknamed ’Tesco law’, will turn the current regulations on their head and open the door for the likes of banks to supermarkets to enter the £12bn consumer law market in England and Wales for the first time.
Corporate brands, such as the Co-operative Group, will be able to offer legal services as a core part of their business, rather than having to outsource activities that are reserved for law firms or separate them financially as regulations currently dictate. Elliot Moss, business development director at law firm Mishcon de Reya, describes the move as: “The biggest change in the legal industry since its inception. This has never happened before.”
Despite the act being nicknamed ’Tesco law’, the supermarket says it has no plans to offer legal services. However, plenty of other brands are queuing up alongside the Co-operative Group to take advantage of the change in regulations, including the AA, Saga, Which? and Halifax.
Co-operative Legal Services (CLS) has been most vocal of all brands about its intentions to take advantage of the act. To do so, it will need to apply to become an “alternative business structure” (ABS) under the terms of the new law, once a regulator has been appointed to oversee the application process.
CLS already employs 360 legal staff including solicitors and has a turnover of more than £24m a year. The brand confirms that it intends to apply to become an ABS at the earliest opportunity. A spokesman explains: “Assuming we are granted a licence, then we would be able to offer a full suite of solicitor services, should we choose to do so.”
Consumer brands are still very much an unknown for people buying legal services – less than 10% say they would use a supermarket or high street brand for any of these services, according to a YouGov survey from November 2010 (see chart, below).
But many law firms feel it is unfamiliarity rather than genuine resistance that sees consumers expressing little interest in brands offering legal services. Ian Powell, business development and communications director at law firm Irwin Mitchell, claims: “Many will turn to a [consumer] brand they at least recognise.”
The spokesperson for CLS agrees: “Our research suggests that consumers have little knowledge of legal services and would value a trusted and consumer-focused brand to provide such services.”
Meanwhile, Andrew Morton, a partner and head of affinity solutions at law firm Pannone, points out that until recently consumers would probably have been sceptical about the idea of buying insurance or a mobile phone contract from a supermarket. Both are now seen as standard.
He adds: “Legal services seem to be the next step, so there seems to be an opportunity to go to these [brand] organisations and create that demand, saying ’here is a potential stream of revenue for you’. It could add value to the customer’s experience and encourage extra loyalty from those customers.”
Morton is responsible for forming brand partnerships at Pannone, which has a consumer-facing business that focuses particularly on injury, personal finance and family law. Pannone expects to advise brands on how to set up their own legal operations and also to supply ’white label’ services operated by the law firm but sold under brand names.
White label agreements are just one option open to brands wanting to take advantage of the Legal Services Act. Alternatively, they could start their own legal practices recruiting lawyers themselves, as the Co-op seems likely to do, or to buy up existing law firms.
Morton says he understands that a significant number of brands are investigating how to move into this sector and that most will seek to serve the basic legal needs of the mass-market consumer rather than going into high-value corporate law. This would include services such as will-writing and estates, personal injury, property purchases, employment and family law.
Aside from being well-known names to consumers, many brands could also bring their experience to the table in customer care, being able to explain complex issues to clients when offering legal services. Marketing knowledge will also be an advantage: many of the 14,000 legal businesses operating in England and Wales are small solicitors’ practices, with little experience of large advertising budgets.
When consumers are asked which individual brands they would consider as providers of legal services, the Co-op scores 18%, level with the AA and only narrowly behind the best-performing brand, Barclays, at 19% in the YouGov figures.
However, Pannone’s Morton says he thinks there will be a slow transition to consumer brands getting involved, rather than a huge influx of new entrants to the market as soon as they can apply to the regulator.
“At the forefront of this will be banks and insurance companies, where there is an obvious synergy with what they already provide. But there is the opportunity for supermarkets, utilities and any brand that has a strong database of customers,” Morton says.
The act will not simply offer people more places to buy their legal services, says Paul Harding, principal of legal management consultancy ABS Advisory Partners. He suggests the change will reverse the balance of power in the relationship between consumers and lawyers.
“The consumer is now going to call the shots by insisting that conveyancing and wills are just commodities. They can be done with quite a low level of legal expertise and therefore you will find much more going on online,” he predicts.
But just because one area of law will be seen as a commodity does not mean brands should be lax in the quality of legal talent they hire. Mishcon de Reya’s Moss says that service delivery in law has to be as good as for any other branded product.
“They cannot have lawyers who are only OK because the risk for companies is that they fall down in an area they do not know. The risk for a brand owner like the Co-op or Tesco is that they actually diminish the relationship of trust that they have with the consumer,” he says.
Although Moss thinks it unlikely that the best lawyers will be attracted away from large legal practices or the highest-paying “magic circle” corporate law firms, he predicts that some brands will establish their own training schemes to attract law graduates.
With consumer brands offering a genuinely attractive legal proposition on the horizon, another consequence of the act may be that solicitors are forced to embrace marketing.
They will need to promote themselves – sometimes for the first time – to compete with the lower prices that large consumer brands will be able to offer due to their size and scale.
A report by insight firm Pearlfinders in May found that marketing directors of law firms are already aiming to assert their positioning. It concludes: “Differentiation and personalised service is now key in the run-up to a ’battle of the brands’. Law firms are striving to position themselves as the voice of authority and quality – regulated, experienced and professional.”
Solicitors trading on their experience and professionalism is only likely to work if they can convince consumers that the work they do is highly specialised. Since consumer firms are likely to try to capitalise on the commoditisation of legal services, this tactic may not work.
A more convincing strategy may be for law firms to attempt to use their strengths in marketing, such as focusing on recommendations. Word of mouth recommendation is by far the most influential factor when people choose a lawyer, according to the YouGov survey.
Andy Hoe, marketing director of law firm Russell Jones & Walker, which owns the Claims Direct brand, warns that marketing legal services can by its nature require some delicacy. He notes: “We help people deal with their problems. They only ever come to us when they have those problems, so we typically deal with what I consider to be a distress purchase.”
One group of solicitors has been proactive in trying to alter this perception, however, by competing with large consumer brands through consolidation behind a joint marketing message. QualitySolicitors, a franchise brand aiming to have 300 branches across the UK by October, has brought together a network of law firms to offer a standardised service including Saturday opening and fixed fees. It has a nationwide presence in WHSmith and is launching a TV advertising campaign this autumn (see Case Study, below).
The application process for companies seeking to become an ABS under the Legal Services Act was supposed to open in October, but delays in appointing a regulator have now pushed that back to the end of the year. The QualitySolicitors franchise will need its extra lead time because when the Co-op and other brands move into this area, they are likely to bring the full force of their marketing power to grab a significant slice of the legal services market.
And TV shows based around lawyers may soon be just as likely to be based in supermarkets as legal chambers.
The Legal Services Act 2011 explained
Legal firms will be able to take outside investment from non-legal businesses. This means that consumer brands will be able to hold an ownership stake in a company offering legal services and law firms can float on the stock market.
Non-lawyers will be able to become partners of law firms, meaning that specialists in other business disciplines can influence their strategies. Law firms taking advantage of this provision can now become more marketing-focused organisations, run like any other business.
Law firms can go into business areas outside of law, meaning that they can diversify to compete with companies in other sectors and vice-versa.
Andy Hoe, marketing director, Russell Jones & Walker (owner of Claims Direct)
Marketing Week (MW): How does Claims Direct’s brand awareness compare with potential high street competitors?
Andy Hoe (AH): Our unprompted brand awareness is at a level of about 8%, but that level is significantly higher for the Co-op, Virgin or Tesco. Whether or not people would immediately associate those brands with legal services is going to depend on the promotion they do.
Something in the region of £65m to £70m a year is spent on promoting personal injury services across TV, online and directory media. It is already a very busy space, so the question is whether a recognisable brand can cut through that. The challenge within personal injury is because people come to lawyers to solve issues for them, they need the confidence that the person or brand they choose is going to be able to deliver the service that they are looking for.
MW: What are the marketing challenges now for brands solely offering legal services?
AH: About 15.5 million people have used the services of a lawyer in the past seven years, but only 7 million have used the services of a lawyer twice in the past 10 years. We are not required by everybody every day of the week. We do not even have an annual renewal date, as the insurance industry does, which enables us to remind people that we exist.
The advantage that household brands will have over the legal profession is that they are recognised, whereas most lawyers are not. From Russell Jones & Walker’s perspective, that is where Claims Direct comes into play. We make no secret of the fact that we would like to become the biggest consumer law brand in the UK over the next three to five years. Part of that will be as Claims Direct and part of that will be as Russell Jones & Walker.
MW: How do you think consumer brands will seek to operate their legal services offerings, and how will you compete?
AH: The Co-op already has a burgeoning legal practice. There will be others that will consider the practice of white labelling. It is often the simplest, most straightforward way of getting into a new sector without the financial commitment.
The professional services sector is not as sophisticated as the retail sector and the legal profession needs to learn what retailers do best – customer satisfaction and customer service. The legal profession is not particularly good at making itself accessible enough to the general public and that is the aim of the Legal Services Act. That is what law firms like ours have got to get right.
QualitySolicitors is the established legal industry’s response to the competitive threat presented by the changes in the Legal Services Act. Anticipating that consumer brands like the Co-op, the AA and Saga are likely to knock many small practices out of the market with the weight of their marketing budgets, a group of solicitors have decided to collaborate, forming a standardised high street service across the country.
Chief operating officer Saleem Arif explains: “We want to become the legal equivalent of Specsavers, which revolutionised the optical services market by bringing together independent opticians under one brand, standardising the elements of the service and marketing that very hard. QualitySolicitors has gone from zero in May last year to 200 branches. By October, we aim to have 300 branches throughout the UK.”
As well as having its own branded outlets, QualitySolicitors has signed an exclusive, long-term deal with WHSmith to place ’legal access point’ areas and sales staff in its stores. These will allow people to make solicitor appointments, provide conveyancing quotes, sell will-making ’packages’ and sign people up to the ’Legal Privilege’ loyalty scheme.
It aims to have the access points in up to 500 WHSmith branches, with 130 having been installed at the beginning of August.
“It is probably the biggest move anyone has ever made in the legal market,” Arif says.
WHSmith will have the option of investing in QualitySolicitors once a regulator is appointed to oversee implementation of the Legal Services Act at the end of this year.
Although Arif acknowledges that this could be possible “at some point in the future”, he says it is not yet part of the business’s plans.
However, Arif says legal services represent added diversity for the newsagent’s business model. “Despite having reported record results this year and £90m profits, WHSmith is aware that some of its core business, such as books, DVDs and CDs, is on the decline. This is an opportunity to be first to market in a totally new area.”
For the law firms that form the QualitySolicitors group, this is a bid to ensure survival once consumer brands with big marketing budgets enter the legal services market.
The group is making a pre-emptive marketing strike from September with two TV ads, featuring actress and presenter Amanda Holden, informing consumers of its new and expanding presence on the high street and in WHSmith.
Brands and their legal plans
One of the most recognisable brands to signal its intentions in the legal services market is the Co-operative Group. It already has a legal services brand and currently offers will-writing, house buying, personal injury and employment law services, either directly or through a panel of external solicitors.
The changes in the Legal Services Act would allow the Co-op to deliver all of these services directly from a single, in-house law practice. The Co-op has signalled its intention to apply to form this new kind of business structure at the earliest opportunity.
WHSmith (via QualitySolicitors)
As of this month, WHSmith will offer a legal service in 130 of its stores, in the shape of QualitySolicitors concessions. However, WHSmith is not currently allowed to own a stake in the company. Instead, the two have a long-term exclusive contractual arrangement.
Like Specsavers, which began as a collective of independent opticians within Boots stores, QualitySolicitors is an umbrella brand for a group of law firms that have agreed to come together to offer a standardised service. Although WHSmith would be free to buy equity in QualitySolicitors once regulations allow, that is not believed to be part of the newsagent’s current business plan (see Case Study, below).
AA and Saga
Both the AA and Saga, owned by the same group of private equity companies, launched online legal service offerings in November 2010. These provide consumers with templated legal documents, such as a holding letter to a money lender or a pack of divorce documents, that can be drafted online for a fixed fee. Legal services through both brands are provided by Cogent Law.
Cogent’s parent firm Parabis has said that it is investigating taking private equity investment and the Legal Services Act would make it possible for the AA’s and Saga’s owners to buy a stake and share profits, or for either brand to take the legal services they currently provide in-house.
A spokesman for the AA told Marketing Week that no firm plans have been made to change the current arrangement, saying that “in the future we are keeping our options open”. However, he adds that “an internal legal operation might follow”.
Tesco and Virgin Money
Though the Legal Services Act has been dubbed ’Tesco law’, the supermarket has never stated any intention to move into the legal sector.
As with Tesco, Virgin Money has been repeatedly named in speculative reports, but the company says there are no immediate plans to move into the market.
Business development and communications director Irwin Mitchell (law firm)
There is a need to make legal services more accessible to those who need advice or want to purchase a legal product. The Legal Services Act will create an environment through which new entrants can come into a market that was traditionally the reserve of law firms and offer clients a way to access the services they need.
The common belief is that those consumer services that can be commoditised will be most affected. Some consumer brands will be able to embrace the concept and offer a professional service that will rival many solicitors – others will fail.
We have sought to build awareness of our law firm’s brand within the geographical regions that we service and online, which is increasingly important.
We have also developed white label products and services, supported by insurance and a 24/7 legal helpline, which enables the firm to partner with commercial organisations that are looking to offer their customers legal services. The Telegraph newspaper is an example of this, with its development of Telegraph Legal Services.
Chief operating officer, QualitySolicitors (legal franchise brand)
The problem historically has been that if you wanted a really good quality of service, it has been impossible to know who is good and who is not. It has only been possible to compare law firms on price.
The old view that members of the public should be grateful for lawyers’ services has changed. The balance of power has gone the other way and lawyers now have to provide a good level of service and look after their clients properly. Most law firms are not very good at marketing – they are not very good at reaching out to their past clients or attracting new ones.
Business development director, Mishcon de Reya (law firm)
The Legal Services Act will allow brands like the Co-op to go into a business area that they were previously prohibited from entering.
This will, therefore, mean that a lot of consumers at the lower end of the market will be able to buy legal services from a brand on the high street that they can trust, rather than a one-man-band solicitor. These companies will be offering all the things that a one-man-band practice just cannot do.
For a great swathe of day-to-day legal stuff for private individuals, this makes a major difference. But high street-branded legal services are for a certain type of person. If you always shop at Waitrose and Marks & Spencer, you are not going to suddenly shop at Lidl. If you come to Mishcon de Reya because you want to pay £500 an hour for a lawyer that is going to offer you specific personal advice, you are not going to go to your local high street brand just because they are called the Co-op or Tesco.
Partner and head of affinity solutions, Pannone (law firm)
The most interesting opportunity is for any type of organisation that has a large and loyal customer database, including utilities or supermarket chains. Ten years ago, we would never have expected to be sold insurance by supermarkets, but that is exactly what they are trying to do when you are waiting in the checkout queue.
They are going to want to ’pile them high and sell them cheap’. They are going to want to do commoditised legal services, in so far as you can with legal services. There is not going to be any big explosion of these people working their way into the market during 2012, but the opportunity will gradually become apparent to them. It has rather stayed under the radar so far.
For law firms like ours, it is an opportunity to create the demand by going to brands and showing them where this opportunity lies.
Principal, ABS Advisory Partners (legal management consultancy)
Solicitors have been in their ivory towers for many years, suggesting that things like house sales and purchases are highly professional processes, whereas consumers have been asking: is it really necessary to do seven years’ training to buy and sell houses? We think it can be done much more cheaply, in a much more friendly fashion.
I am going through this experience with my 80-year-old mother at the moment. It is actually quite a terrifying experience having five solicitors sending you letters that you do not understand. I think accessibility is very important. The Legal Services Act is either going to force prices down or it is going to force standards up, perhaps both. There is no doubt that the accessibility and the friendly nature of the service provision is going to improve what marketers call ’the consumer experience’. That change is what this legislation is all about.