Our review found no consistently applied formal segmentation framework that covers all types of legal services and all types of legal service professionals. Rather, different organisations and commentators take different approaches to segmenting the market normally by using one or two characteristics to make distinctions between different legal services, shown below. This led the LSB to commission the development of a robust framework to segment the legal services market.
By profession: Solicitors – Corporate/City:
- The Magic Circle. is established nomenclature for a group of City law firms perceived as offering the best in legal services: “Allen & Overy, Clifford Chance, Freshfields, Linklaters & Paines and Slaughter & May, widely described as the ‘magic circle’ firms, had established themselves as firms of first resort in heavy commercial matters, enjoying the lion’s share of the most important international and domestic transactions1.” Four of these firms are in the top five firms in the UK in terms of turnover. As a group the magic circle had a combined turnover of £5bn2.
- A KPMG survey3 of 28 large UK public companies that spend an estimated £400m p.a. on legal fees, suggests segmentation of corporate legal services market into:
- A global elite: providing legal services of the highest quality and price in response to the demands of the largest banks and commercial clients.
- Second tier law firms: providing a wide range of general legal services to companies of all sizes, where the expertise or footprint of the global elite offers no real advantage. These may further subdivide between international and national firms.
- Niche practices: combining different legal or professional skills, offering integrated services to both the middle and smaller market clients.
- Corporate Law Firm as one that is one of the largest in terms of staffing and turnover. Corporate firm would have 70% corporate client base4.
By profession: Solicitors – 4 distinctions:
- By Partner Size –Small (sole practice and 2-4 partners), Medium (5-10 and 11-25 partners) , Large (26 partners).5
- ‘high street’/'non-high street’ firms/City/ ‘Large Provincial’/ Niche/ ‘other’6.
- commercial, general, legal aid, private client, litigation (niche), commoditised7.
- big providers with call centres, described by many as “factories” and firms in other parts of the country advertising locally both large and small in size8.
By profession: Barristers:
- Employed barristers offer to their employer (and a limited number of others) the same legal services, including representation in court, as those which self-employed barristers offer to their clients. Both self-employed and employed barristers may be authorised to take pupils. They are all subject to the BSB‘s regulatory regime9.
- In its UK Guide Chambers and Partners classify Barristers into ‘Leading Silks’ and ‘Leading Juniors’. Leading juniors who have since taken silk appear banded under ‘New Silks’. The qualities on which rankings are assessed include technical legal ability, professional conduct, client service, commercial astuteness, diligence, commitment, and other qualities most valued by the client10.
Research into debt advice classified work undertaken into three levels:
- General Help Service: “diagnosing of clients’ problems, giving information and explaining options, identifying further action the client could take, and providing basic assistance such as form filling helping the client to draft letters and contacting third parties on the client’s behalf”.
- Casework Service: “provided at the Legal Services Commission Specialist level and included taking action on the clients’ behalf in order to move their case on, and sometimes negotiation, advocacy or representation”.
- Representation: where an adviser has undertaken representation on behalf of a client at a court or tribunal11
Research into providers of employment advice made a distinction between claimant and respondent: ”Another factor which we anticipated might affect approaches to employment work was client mix. 25 (13%) of firms said they solely did respondent work, and 10 (5%) specialised solely in claimant work. We are able to categorise firms on the basis of the level to which they concentrate on one type of work or the other and do so as follows: Mainly claimant work (70-100% claimant work). Mainly respondent work (70-100% respondent work Mixed practices (the rest).12“
In advocacy a distinction is sometimes made between prosecution and defence.13
By category of law
Individuals regulated by SRA and IPS self select from a range of categories of law as part of the registration process each year.
By organisation ethos
In relation to legal aid work a distinction is made between solicitors and not-for-profit organisations.14
The limitations of the traditional distinctions made when considering the impacts of regulatory changes led the LSB to commission Oxera to develop a robust market segmentation framework. Economic market definition, in contrast to a profession based definition, exposes the fact that different parts of the legal profession can compete with each other within the legal services market, enhancing our collective understanding of the legal services market beyond professional boundaries.
To provide a practical approach to market segmentation, the framework uses easily observable characteristics, in order to capture what might cause the legal service market to function in a different way. These are:
- Type of consumer - consumer-specific characteristics may alter the supplier – consumer relationship, and different consumers may require advice on different issues, even within a particular area of law.
- Type of consumer problem – there is a multitude of problems on which legal advice might be sought. Since consumers cannot alter the nature of these problems, there is limited substitutability between suppliers or services. Without the ability to switch between suppliers or services, differences in market outcomes can persist, since consumers cannot switch to the service with the characteristics they prefer. Thus, providers of different services do not need to compete. For example, advice in relation to a divorce proceeding is not a substitute for property conveyancing services. Therefore, the ideal market segmentation would split between each possible type of consumer problem on which legal advice might be sought.
- Type of legal activity – the type of legal service provided can be seen as an additional relevant distinction since this limits the extent to which suppliers can supply different legal services. For example, the market for basic advice will function differently to the market for advocacy, due to the regulatory barrier controlling who can provide advocacy services at higher courts.
While information on the type of supplier is important – termed supply side segmentation – no single supply side segmentation captures the range of different groups of suppliers competing in each market. The full segmentation framework is shown below. More details can be found here.