SME LEGAL SERVICES IN MALAYSIA: EXPLOITING MARKETING
TOOLS WITHIN LIMITATIONS
Apnizan Abdullah, Yusniza Kamarulzaman, Farinda Abdul Ghani
Faculty of Business and Accountancy
University of Malaya
50603 Kuala Lumpur, Malaysia
Abstract
Legal service has emerged as the largest contributor of Small Medium Enterprises (SMEs) in
Malaysia. The operations of legal businesses in this country are governed by several legal
profession acts and rulings. These governing laws and regulations provide certain limitations
pertaining to marketing activities mainly on advertising. Despite of those limitations that they
are legally bound to adhere to; legal services are reported as the largest SMEs in the
professional services in term of number of establishment. Therefore, this study aims to
explore the limitations of marketing activities faced by legal practitioners. Eventually, the
study will recommend certain marketing activities which are useful for the legal practitioners
in planning and exploiting marketing tools and techniques in expanding their business and
services.
Introduction
Small and Medium-sized enterprises (SMEs) have become the backbone of economic growth
of an economy in driving industrial development due to their sheer numbers, size and nature
of operations. As such, their roles in economic expansion and development in Malaysia have
been significantly recognized by the government and the policymakers (Aris, 2007). There
are three well identified sectors namely, manufacturing, agricultural and service sector.
Among these sectors, service sector has formed the largest category of 86.5 percent of total
SMEs in term of the number of business establishment in Malaysia. Most of the SMEs
embarked in retail, restaurant, wholesales, transportation and communication and
professional services (SMIDEC, 2005). Professional services have contributed 2.9 percent of
the total number of service sectors (Saleh and Ndubisi, 2006). According to Malaysian’s
Industrial Master Plan 3 (IMP3)i, there are two types of professional services, namely
accredited professional services such as accounting, auditing, tax consultancy, engineering,
architectural, legal services and other technical services and non-accredited professional
service providers for instance advertising, market research, management consultancy and
others. The accredited professional services have their respective mandatory and governing
body. Meanwhile the non-accredited professional services may have such governing board
although it is not mandatory. Among the professional service firms, legal service has become
the largest contributors in number of establishment which represented 98.3 percent of the
total SMEs in professional services (Saleh and Ndubisi, 2006). Each legal firm must become
a member of Malaysian Bar Council that may pass any rulings to ensure the smooth running
of the legal practice in Malaysia. The Bar Council is empowered to do such rulings by virtue
of Section 42 of Legal Profession act 1976 hereinafter referred as LPA 1976. Other
regulations to be adhered to by all legal firms are Legal Professional (Practice and Etiquette)
Rules 1978, Legal Profession (Publicity) Rules 2001. These laws and regulations dictate the
conduct and manners of the legal practice including the rules regarding practice and ethical
conduct of the legal practitioners and rules on publicity which limit certain marketing
activities. For example, Rule 9 of Publicity Rules 2001 prohibits the legal practitioners from
displaying their nameplate outside their practice premises larger than 92 centimeters by 61
1
centimeters in size. Rule 21 of the similar Rules 2001 further provides that any publicity via
electronic media shall only be carried out in such manner as determined by the Bar Council
and it shall only contain approved information.
Prior research found that marketing is a success factor of SMEs (Indarti and Langenberg,
2004; Bank Negara, 2006). Promotion activities especially advertising has been the area
most emphasized by the legal practitioners’ recent attempt to market. Wang (2003), Indarti
and Langenberg (2004) found that laws and regulations at times became a barrier to the
success of SMEs. With the limitation of promoting of their services, legal practitioners must
be creative in making use of the option available to market their legal services for instance,
providing legal education in legal column in newspaper, conducting research on the clients
need, building up the a client based relationship i.e. relationship with the existing clients,
organizing certain events (Darden et al., 1981). Therefore, this paper aims to understand the
limitation in current legal practice and challenges of marketing practices faced by the legal
service firms. This paper also suggests several recommendations to practitioners in utilizing
appropriate marketing approaches within the constraints.
Research Background and Problem
In the past, professional service firms, including engineers, architects, accountants and
lawyers were reluctant marketers. They succeed in marketing their professional services in a
unique way where they relied on networks of personal relationships and word-of-mouth
which brought them clients to maintain a profitable business. Today, the marketing
challenges they face are different from what they faced before. As mentioned by Goffee and
Scase (1995), the most common problems of these firms, especially the small size firms
(SMEs) are: weak general management; poor financial controls; product competition;
diversification and acquisition; changing market demand; high overhead structure;
manufacturing and operating problems; poor marketing; and price competition. The market
for consumer legal services for instance, is changing in fundamental ways, primarily because
of the dominance of the Internet. In maintaining and expanding their client base, legal firms
therefore, should not ignore marketing tools and strategies to generate high quality leads and
convert these prospects to long term clients.
However, marketing has been misunderstood by many legal firms as merely advertising task.
Advertising in fact, is only a small element of Marketing. Marketing plan of a legal firm is
part of its strategic business plan and is essentially a process whereby the firm's ability to
supply legal services is brought into balance with expected demand for its services from
present and future clients. This approach ensures that the firm could maintain growth and
profitability. The current market competition in legal service demands its practitioners to
have knowledge in marketing.
Legal firms have traditionally been very hesitance to be aggressive about marketing
communication (Winroth, 2000). Bar Associations in many countries including Malaysia
explicitly prohibited certain advertising activities of legal services from its members. For
example, even though the Publicity Rules 2001 allows the legal practitioners to advertise, but
still its contents are restricted to approved information only, such as the legal firm’s name,
contact address, telephone and fax numbers. Other creative methods of marketing such as
billboards, personal selling, radio advertisements and others are strictly prohibited.
Despite the challenges and limitations above, legal firms have been leading other professional
services in the SME service sector and still have to move forward marketing their services
within the acceptable practises in order to survive as well as gaining competitive advantages.
2
As legal services are strictly governed by laws as mentioned earlier, thus legal firms are
restricted from exploiting certain marketing tools for their business purposes.
Thus, the literature review of this paper will focus on the limitation in marketing faced by
legal service and marketing services literatures in search for a deeper understanding of how
marketing strategies still applicable to legal firms to practise within the limitation. Some of
the literatures will make direct sense in this context, while other parts need to be adapted into
the context of acceptable legal practises. This part highlights the diversified theoretical
review, examining a general picture of the above mentioned issues and focusing on SMEs
legal service firms in particular. Much has been written on SMEs topics, especially on
manufacturing sector, entrepreneurial characteristics and business success however, very
limited studies focused on legal services. This paper eventually, contributes to the literature
particularly in the context of the legal sector’s marketing practices in Malaysia.
Literature Review
Legal Service and Advertising
The heart of the concern over legal services’ advertisement lies on the fundamental paradox
of the origin of legal profession itself. Legal service is being portrayed as a noble profession
as it is sustained by its definition as a profession as opposed to a business. Businesses
endeavors are fueled by the quest for financial gain, while the legal profession is supposed to
be fueled by a desire to serve the public. Therefore, a strict distinction must be drawn
between the two by not allowing business oriented practices such as advertising. However,
advertising is still needed to ensure the continued existence of the legal profession
(Christopher, 2004).
In Malaysia, advertising activities among the legal practitioners must be in line with the laws
governing the profession. The law and regulations pertaining to the limitation in advertising
of legal profession are as follows;
1.
Rule 48 of Practice and Etiquette Rules 1978 clearly provides that the legal
practitioners shall not publish his or her own photograph as a member of the Bar
Council in the press or any periodical unless with the approval of Attorney General.
Certain provisions in Publicity Rules 2001 such as;
i.
Rule 4 of Publicity Rules 2001 states that the legal practitioners must only publicize
their practice or the practice’s firms in accordance with rules envisaged in this
Publicity Rules 2001.
ii.
Rule 8 of the Rules 2001 further states that the advertisement of the legal practitioners
or their practice firms via legal or non-legal directories which is approved by the Bar
Council must contained only approved information. Approved information means the
name of the firm, address, telecommunication number, business hours, year of
establishment, merger or association, historical data of the firm, designation of
advocate and solicitor, designation or Commissioner for Oath or Notaries Public or
Agent for Trademark and Patent or consultant, area of practice, language proficiency,
name of the legal practitioners, year of admission, academic and professional
qualification, award, merit or title conferred to the legal practitioners and any other
information which has prior approval from the Bar Council.
The word publicize is further defined in the same Rule 2 as to make known to the public
through any form of advertisement including the advertisement published in any newspapers,
journal, magazine, book, booklet, directory or other publication, any letter, brochure, bulletin,
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business card, leaflet, nameplate, newsletter, notice, pamphlet or letterhead or stationary or
any advertisement placed via electronic media accessible by the public.
iii.
Rule 9 mentions that the nameplate of placed outside the practice firm must not be
larger than 92 centimetres by 61 centimetres.
iv.
Rule 11 limits the distribution of business card to be done discreetly and only on
occasions at which it is proper for the legal practitioners to establish his professional
identity and the business card also must contain only the approved information as
defined in Rule 2.
v.
Brochure, leaflet or pamphlet mentioning the practice firms and its legal practitioners,
which contain the approved information can only be distributed the firms’ employees,
its clients, any person making unsolicited and bona fide enquires to the firms or any
person with whom the firm had its professional dealing and it can only be distributed
in its premises. This is clearly stated in Rule 12.
vi.
Rule 15 provides the rule regarding interviews with press, radio and television which
prohibits the legal practitioners from making any statement that in view of the Bar
Council as deemed to be an act or attempt to publicize his practice or practice firms.
Only the approved information can be mentioned by the legal practitioner during that
session.
vii.
Rule 17 mentions that the legal practitioner may give greeting card on any occasion to
his client or any person that he has professional dealings, but it must again contain the
approved information only and it cannot be published in any form in any newspaper,
journal or other publication.
viii.
Rule 20 then states that if the legal practitioner has written or contributed in writing,
no information regarding his practice or his practice firm may be stated in any book,
newspaper or journal or other publication save the approved information.
ix.
Rule 21 governs the act of publicity via electronic media which allows the legal
practitioner to put in only the approved information and the manner of the publicity
must be done in such manner as determined by the bar Council.
There are certain examples of certain restriction in publicity in Malaysia being enforced on
the legal practitioners. Even though the limitations seem to restrict certain aspects of
marketing activities in legal service, the establishment of legal SME firms has still
outnumbered other professional services. Legal service has been leading in professional
service sector in Malaysia (Saleh and Ndubisi, 2006). While certain activities in marketing
are disapproved such as personal selling, certain activities in marketing are still allowed. For
example, communication and public relations are areas yet to be utilized by the lawyers
(Darden et al., 1981). Darden et al. (1981) suggested that legal advice column may be a good
device to the legal practitioners in marketing themselves by giving certain educational advise,
for instance what the public can do and what they cannot do (Darden et al., 1981). A study
conducted by Lidsky and Peterson (2007) in Florida suggested that restriction on legal
practitioners in advertising their legal practice and service limit the ability of the market of
legal service to operate effectively hence it is a bad policy and should be repealed.
Legal Service and Client Solicitation
Another ethical concern among legal practitioners is the in-person solicitation of a
prospective client that may lead the lawyer overbearing the prospective client's will. The two
main reasons for this concern are as follows: first, a lawyer is specially trained in the art of
advocacy, while the potential client is almost certainly not; second, the prospective client
may already feel emotional and overburdened by the circumstances that induce possible need
for legal advice (Christopher, 2004). Darden et al. (1981) also agreed that personal selling is
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an ethical question for lawyers. In Malaysia Rule 51 of Practice and Etiquette Rules 1978 and
Section 94 (3) (h) of the LPA 1976 provides that no legal practitioners shall do or cause any
tout. Even though there is a rule prohibiting touting, this act is still prevalent and this Rule 51
is not strictly enforced by the Bar Council (Hashim, 1981).
The Growth of Legal Service and Limitation
The fact that the laws and regulations have a big impact on the performance of the firms
cannot be denied (Demirbas, 2005). However, previous studies also suggested that law and
regulation at times became a barrier of the successful growth of SMEs (Poisson et al., 2002;
Wang, 2003; Indarti and Langenberg, 2004). Beck et al. (2005) argued that legal constraint
does affect the firms’ growth but the extent of the effects is dependent very much on the
firms size. The smallest firms are most adversely affected by the constraint. Besnik (2007)
stated that the regulation and policies must be addressed differently having regards the size of
the firms i.e. it must be simpler to the smaller firms. In fact, Mead (1991) found that there is
an increase in consumers’ confidence in lawyers with increased lawyers’ advertising.
In Malaysia, the legal constraints in marketing may be pointed out by virtue of certain
provisions. Section 94 (3) (h) of LPA 1976 and Rule 52 of the Practice and Etiquette Rules
1978 prohibit the act of procuring business through a tout, while Rule 48 of the Publicity
Rules 2001 prohibits the lawyers from publishing photograph. Rule 4 of the Publicity Rule
2001 provides vividly that the legal practitioners cannot publicize their practice or practice’s
firms except in accordance with the Publicity Rules 2001. Any act which is not in line with
the rules will be liable to misconduct which warrants disciplinary proceeding as envisaged in
Section 94 of the LPA 1976.
Discussion and Recommendation
Legal service has been identified by IMP3 as a category of SME of professional services in
service sector. According to the Department of Statistic, in 2005 there were 3,293 legal
services establishment reported, which shows a huge increase from 2,595 in 2000 (DOS,
2000). Despite the increase in the number of establishment, Wang (2003) and Indarti and
Langenberg (2004) found that existing laws and regulations become obstacles to the SMEs to
grow successfully. However, the effects of legal constraint are very much dependent on the
firms size (Beck et al.,2005). The government has very strong influence on the commercial
operation and regulation. This influence may be carried out through delegation of power to
certain bodies. The European Commission, for example, plays important role in controlling
service businesses to determine that the rules are followed by the businesses (Kasper et al.,
2006). In Malaysia the governing body for legal service is the Bar Council as envisaged in
the LPA 1976.
The legal practitioners are bound to adhere strictly to its governing laws and regulation
namely, the LPA 176, Practice and Etiquette Rules 1978 and Publicity Rules 2001. These
laws have restricted certain marketing activities in legal service (e.g. Rule 4, Rule 8, Rule 9,
Rule 20, and Rule 21 of the Publicity Rules 2001). In this increasingly urbanized environment
where the world has no barrier, with shifting patterns of using information technology and
fierce competition require firms to try and find new avenues of advertising and marketing.
Most of them are attempting to market their legal services in a new, different and creative
way. It is suggested that legal practitioners should not be hamstrung in their attempts by
misguided regulation (Lidsky and Peterson, 2007).
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Therefore, it is suggested that the laws and regulations governing the legal service in
Malaysia be reviewed and revised to keep abreast with the current need of the legal
practitioners as well as the public. In Malaysia, Hashim (1981) suggested that the LPA 1976
and the related rules to be always updated and modified to improve its efficiency and
enforcement while in Florida, U.S.A., Lidsky and Peterson (2007) recommended the
abolishment of the law restricting the advertising activities via radio and television as well as
the Internet. Hashim (1981) argued that the existing rules are generally good but they need
amplification to improve its enforcement.
As the laws and regulations have effects on the growth of the firms and the effects of legal
constraint are dependent on the size of the firm, the policies addressing the development of
small firms must be differentiated and made much simpler for small firms in order to create a
level of playing (Besnik, 2007). Saleh and Ndubisi (2006) recommended that the government
plays vital role in educating the SME players. The number of centers for training, consultancy
and expert services must be increased pertaining to important areas such as information
technology, financial and marketing planning, among others.
SMEs in Malaysia including legal firms should not totally rely on government agencies or
incentives. They should develop their path of movement by relying on certain strategies in
getting proper access of new market, increasing their revenue and expanding their client base
or market (Saleh and Ndubisi, 2006). Among strategies available are as follows; having
marketing planning (Saleh and Ndubisi, 2006), developing networking and strategic alliances
(Saleh and Ndubisi, 2006), understanding their markets and competition, gaining
technological know-how (Darden et al., 1981). In term of marketing strategies, there are
certain marketing tools that can be exploited by the legal firms but they must be carried out
within the limited legitimate spheres, for example;
Branding Strategy
Brand refers as, a name, term, design, symbol, or any other feature that identifies one seller's
good or service as distinct from those of other sellers. The legal term for brand is trademark.
A brand may identify one item, a family of items, or all items of that seller. If used for the
firm as a whole, the preferred term is trade name. According to Dibb (1997) a brand is more
than just a combination of a name, a design, a symbol or other features that differentiate a
good or a service from others. It is a unique set of tangible and intangible added values that
are perceived and valued by the customer. In addition a brand is said to have personality, an
emotional bond to the customer that grows out of the perceived characteristics (Court 1997
and de Chernatony 1996).
"Brand awareness" is a prized possession, frequently achieved only after expensive
advertising campaigns. The physical expression of a brand is in the combined impact of a
firm’s logo, tagline, web site, brochures and other promotional pieces. Brand building
campaigns can be designed through large scale advertising and marketing budgets. They can
also be incrementally achieved over the longer term through the delivery of high quality
services by a professional legal team that operates in a customer-oriented environment. Some
ways that could be implemented by legal firms in branding strategies include; legal services
(practice) focus in specialized areas for clear recognition, create a distinctive theme,
characterized by a logo and accompanying tagline, maintain high visibility in marketplace
through advertising, sponsorships and all promotional materials.
Cross-Selling
"Cross-sell" is a direct marketing concept that means selling more services to an existing
client. Legal firms should utilise different cross-sell opportunities and spend some time to
think of complementary services that will enable them to offer greater legal benefit to their
6
clients. Special campaigns could be created, such direct mail or a series of seminars, to
educate existing clients on the benefits of related legal services. Intellectual property could
provide unique cross-sell opportunities, for instance, developing HR policies that protect the
‘trade secrets’ for new corporate clients who recently filed a patent or trademark application.
Niche Marketing
Powerful law practices are built on the concept of specialization. Legal firms need to find a
way to make their practice stand out from the competition in a recognizable way that can be
communicated to the current and prospective clients. No law firm is totally a one-stop shop.
Due to the complexities associated with most legal firms today, a law firm especially the
SMEs it is better off limiting themselves to niche market. Not only will lawyers become more
proficient in these areas of the law, but it’s easier and more efficient to focus the firm’s
business development efforts on fewer practice areas.
Online Marketing
Internet marketing can seem particularly complicated to those who are not familiar with
technical aspects of it from setting up Internet accounts to selecting powerful and often used
search engines. Many legal firms see Internet marketing as a daunting task which requires a
lot of effort and time. When it comes to marketing on the Internet, most legal firms do not
understand exactly what they need to have for a successful Internet marketing campaign.
Most legal firms fail to incorporate the vital elements that are crucial to successfully
marketing their firm on the Internet. These elements are such as web popularity, website
design, website content, conversion strength and web analytics or also known as 7Cs (i.e.
Context, Content, Community, Communication, Connection, Commerce and Customization)
suggested by Kotler & Keller (2007).
Marketing services is accepted as more difficult than marketing products. Services have
several qualitative differences and are:1. Heterogeneous - in other words services cannot be standardised.
2. Inseparable - Unlike producing for instance dairy products, the production, marketing and
delivery of services is very often the same process.
3. Perishable and cannot be stored - This means that supply and demand must be matched or
production will be lost.
4. Intangible - they cannot be seen and very seldom can they be objectively measured.
Some legal firms fail to recognise that only the experienced clients will be able to value the
functional quality of the legal service. Clients do value the quality of lawyer-client
relationship and are be judged based factors such as :- Who is interested in them; Who best
understands their concerns; Who listens most effectively; Who has the best insight into their
situation; Who is most likely to work effectively with them.
Therefore, today many marketing policies must be based on the client-centred approach
which can be described in the 4R Approaches that includes research, recognition, reputation
and relationship as shown in Figure 1. In the figure the circle with clockwise moving arrows
implies a few things. First of all, no component is either more or less important than another.
Second, though reason indicates that the place to start would be “Research,” use of the model
can start in any of the quadrants with the logical next step being in a clockwise direction so
that Research contributes to Recognition which contributes to Reputation which contributes
to Relationship which contributes to Research and so on. In practice, the model does not
follow such a tidy stepwise progression activities for all 4 R’s will most likely be pursued
simultaneously. During the planning process, though, thinking in steps from one R to the
other is easier to manage than jumping all around.
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Source: www.4rmarketing.com/4RModel.htm
Figure 1: 4R Approaches in Marketing
Research
Research in this context doesn’t mean it has to be a market research firm to conduct deep and
mathematically valid (and expensive) studies of markets, customers, and competitors. There
are other ways to conduct research that, while they won’t pass muster with market research
gurus, will give businesses useful information to apply to relevant marketing activities.
Examples of cost- and time-effective research strategies include:
Customer surveys (online, telephone, paper)
Interviews (customers, vendors, partners)
Secondary research (web research, library search)
Recognition
As discussed earlier in Marketing, branding is very important to be distinctive from
competitors. It deals with a large part of the recognition component. However, like market
research, SMEs can’t usually afford the services of a dedicated branding consultant, and
instead try to create recognition through several different methods, including: Company name
and logo, Brochure, Web site, Advertising, Trade show exhibits and Branded merchandise.
Other elements of recognition can include a clear mission message that is understood by
employees, customers, and vendors, sponsorships of various kinds, and mentions in local and
trade media.
Reputation
A good reputation is important to any business, especially service firms it is lifeblood. As
service firms do not dealing with tangible products, the firm’s reputation is a key indicator of
the quality and trustworthiness of its service providers in the market’s perception. Word of
mouth, customer stories, testimonials, workshops, training courses and management seminars
help in spreading the word while gaining reputation from the market. The methods used to
gain recognition also serve to establish and maintain a good reputation. Trade show
participation can move into showcasing the firm’s talent once recognition is established.
Event sponsorships can also be chosen to spotlight the firm’s preeminence in its field.
Relationship
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Another common-sense component of any marketing effort, the firm’s relationships with its
customers, suppliers, employees, and the community at large are very important to its ability
to succeed. People buy from people they have good relationships with, regardless of anything
e.g. attractive website, nice brochures, or expressive public speaking, if SMEs don’t have
excellent relationships with their customers, employees, partners, and suppliers, SMEs might
as well just pack it in. Some other ways to enhance relationship are: Employee newsletter;
Sales training tools and materials for channel partners; Social events for customers (holiday
party, hospitality suite at a trade show/conference); Company-supported participation by firm
employees in professional organizations; Online portals that share documents and other
artifacts with constituents; Co-authorship of papers and presentations with customers and/or
partners.
In conclusion, even though the laws have placed certain limitations in marketing legal service
in Malaysia, the legal practitioners also must be creative in utilizing other marketing tools
(Darden et al., 1981) which are still permissible in the eyes of law as what have been
suggested above.
Conclusion
Market orientation will make a greater contribution to competitive position when services
become obsolete quickly, are highly inseparable, people have a greater role in service
delivery and service personnel need to be highly skilled. Brand management will make a
greater contribution to competitive position when services are more intangible, become
obsolete quickly, are people intensive, standardized and where customer learning is required.
New service development will make a greater contribution to competitive position when
services become obsolete quickly, are delivered by technology, are widely available and are
more customized. Web practices will make a greater contribution to competitive position
when services are delivered by technology and when services are widely temporally and
spatially available. Therefore, they are rooms for improvement of the existing laws and
regulation governing the legal service in order to strengthen the growth of legal service sector
in Malaysia. The government also should intervene by providing sufficient support,
conducive legal environment and policies which need to be addressed differently having
regards the size and the target group of SMEs as well as other incentives to this sector.
However, the legal practitioners on the other hands must be very creative and innovative in
fully exploiting other marketing devices or approaches which are still acceptable by the law
and the public.
___________________________________________________________________________
_
1
Malaysia's Third Industrial Master Plan (IMP3) sets out the policies for the manufacturing
and services sector, and coupled with the national agricultural policy, it will be the
foundation for achieving a developed nation status by 2020.
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List of Statutes
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Legal Profession (Practice & Etiquette) Rules 1978
Legal Profession (Publicity) Rules 2001
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