“Everyone is not your customer,” begins James Markham, quoting Seth Godin during a recent Platforum9 session on legal market segmentation. As a former accountant turned legal consultant who has worked with firms like DLA Piper, Hogan Lovells, and Dentons, Markham brings practical insights to the challenging question of how law firms can better target their ideal clients.

Beyond the “Open Door” Policy

While many law firms still operate with a “we are open” sign mentality, accepting any client who walks through the door, Markham argues this approach no longer serves firms well. The fear of turning away potential business often leads firms to position themselves as full-service providers, capable of everything for everyone. Yet this dilutes their message and can actually reduce their effectiveness in winning the work they truly want.

He points to Wachtell Lipton as an interesting example. “They’re probably the biggest boutique firm in the world with something like three billion dollars in revenue,” Markham notes. While they offer various practice areas typical of a full-service firm, their messaging consistently ties back to their core focus: high-stakes corporate M&A transactions.

The Reality of Implementation

Ron Given, drawing from his extensive experience, raised a practical concern: most firms need to take a gradual approach to segmentation. “If you’re just trying to pay the rent, you’re likely to take stuff in, anything in, but with a realization that over time, when you have the ability to further segment, you’ll do it,” he observed. This pragmatic view acknowledges the reality that building a focused practice often requires financial stability first.

Markham agrees but emphasizes that even smaller firms can benefit from strategic focus. Using his own consulting practice as an example, he explains: “I only work with law firms, and candidly, I really only work with UK law firms… I don’t go to networking events filled with manufacturers in the north of England because they’re irrelevant.”

The Training Challenge

An important consideration raised during the discussion was the impact of specialization on junior lawyer development. Given pointed out that less ideal clients often provide valuable training opportunities for younger lawyers. This creates a tension between strategic focus and professional development needs – a challenge that firms must carefully balance.

Data-Driven Decisions

Ben from Nexl brought an important technological perspective to the discussion, highlighting how modern firms can use data to inform their segmentation strategies. “We have a very defined ideal client profile… we know what we want to pay to acquire them,” he explained, emphasizing the importance of understanding both financial and relationship data in making strategic decisions.

Practical Steps Forward

Markham suggests viewing market segmentation like cutting a cake – firms can slice their market by industry, company size, geography, or business lifecycle stage. The key is making conscious decisions about which segments to pursue rather than defaulting to historical patterns.

For existing clients, this might mean conducting a gap analysis between current relationships and strategic targets. As Markham explains, “You’ve essentially articulated ‘I want to be working with these sorts of clients,’ but what I actually have are those sorts of clients.” This analysis helps firms make informed decisions about where to invest their business development resources.

Managing Conflicts

A practical challenge raised in the discussion was handling conflicts in specialized markets. When focusing on specific industries, firms often find they can only represent one major player due to conflict issues. Markham suggests this should be factored into the segmentation decision – firms need to weigh whether the benefits of serving a dominant player outweigh the restrictions on serving others in the same sector.

The conversation concluded with agreement that effective market segmentation isn’t about reducing opportunities but about making conscious choices that lead to more focused and successful practices. As Markham puts it, “Strategy is really a lot about trade-offs. It’s not about saying what you’re going to do as much as you’re saying what you’re not going to do.”