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Data Mining: Using  Technology to Increases Revenues
by Barbara Lewis MBA and Dan Otto MBA

Your software and database programs capture critical information that can help you develop a plan for future business development that will increase your revenues and your profits. Yet, few law firms take advantage of their existing data by using it strategically.

Data, such as the client referral source, the client industry and client matter, linked to the clients with the largest revenues can be a blueprint for future marketing efforts. For example, a list by attorney of top revenue generating clients in descending order for 2000 sorted by referral source industry and the client industry, points to where the marketing should be targeted.

An attorney determines that half of his or her revenue is generated from referrals of CPAs. This attorney should be marketing to CPAs. Through data mining, the attorney analyzes the clients’ industries and sees that 25 percent of the revenue is generated by video game companies. The attorney who is familiar with the nuances of this industry should find it easier to attract clients in that industry as opposed to one in which s/he knows nothing. And it’s more efficient to market by industry segment than it is to conduct general marketing to all industries.

Not only should annual data be analyzed, but data should be compared from year to year to determine trends. A growth in a particular industry could signal opportunities for an attorney. For example, one year of revenues generated in a particular industry yielded a 25 percent growth from the previous year. The next year the growth was 50 percent and the following year it was even more. The firm saw an opportunity that they wouldn’t have recognized if they weren’t mining data. They decided to focus on that work and today enjoy a thriving and profitable practice in that industry.

Most law firms have a substantial amount of data that can provide attorneys with historical information, which is crucial in making decisions about the future. The data can help in developing strategic plans, business plans, projections and budgets. However, one of the best ways to use the data is in marketing plans. Furthermore, last year’s results can be compared to previous years to determine trends.

Data can be sorted in the following ways:

Clients in descending order of revenue

Calculate the percentage revenue for each client and make sure that no one client generates more than 10 percent of revenues. One client that generates more than 10 percent can be dangerous if the client decides to bring the work in-house or leaves the attorney for some other reason.

Referral sources in descending order of revenue

Identify the referral sources that refer the largest percentage of revenue, so they can be cultivated further. One attorney was shocked when she found that over one third of her revenues were generated through one referral source. She decided to spend more time with this referral source to ensure that she was receiving as many referrals as possible.

Client industry in descending order of revenue

Clients segmented by industry can indicate areas of focus, around which the attorney can build an industry practice.

Referral source industry in descending order of revenue

This data highlights the industry where top referral sources are located. If past clients are generated from other attorney referrals, for example, then target attorneys for future marketing.

Type of work (matter) in descending order of revenue

This data indicates what type of work was performed. Attorneys can develop an expertise in a specific area of work based on their past experience. For example, one attorney discovered that the majority of his work was shifting to a new area. He realized that there were more cases in that area and decided to aggressively market the area through articles and speeches.

The data can be analyzed by using revenue figures or the number of clients. In most cases, the results are very similar. There are some instances where one client may generate the largest revenue; however, attorneys shouldn’t develop a strategy based on only one client. In this case, the number of clients should be used for the analysis.

Sometimes marketing events generate clients instead of referral sources. For example, attorneys may get clients from articles or speeches. These events should be tracked as well, so that the attorney can determine if they are worth duplicating. One attorney gets clients from a bar association speech and so she continues to give the speech each year.

Once the data for 2000 is sorted, it is compared to data from 1999, 1998 and previous years to identify trends. While historical data doesn’t always indicate future paths, it’s one of the best ways to determine what’s worked and what’s not working. With good databases, this information can be analyzed quarterly as well as semiannually.

Decisions about future marketing can’t solely be made as a result of internal data analysis, but are tempered by external forces as well. For example, attorneys with estate planning practices that may decline with elimination of the estate tax, need to examine other complementary areas upon which they can focus. They may be able to find an area that has an upward trend in their practices during the past few years.

Some attorneys build a new database for the analysis each year. However, by customizing software and linking databases and software together, attorneys can develop reports that can be easily generated for analysis.

Attorneys only have a discrete amount of time to market, so allocating resources appropriately is important. Tracking and analyzing data can provide easy answers to the interrogatories: who, what, where and how to market in the future, which can increase revenues. And since the marketing efforts are focused, based on data analysis, profits should increase as well. Technology can be a great asset in marketing when data is captured and analyzed.

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