Most law firms still price by charging on a strict time spent basis, with invoices detailing work done by each fee earner and the rates applicable, or where the firm believes it appropriate, on a fixed fee basis. But is that what clients want?
What clients really want is:
- Real efforts to reduce production costs. In other words, to move away from a cost-plus mentality;
- Greater cost-consciousness – ‘spending’ our clients’ money with care, as if it were our own;
- More pricing and payment options;
- Greater client involvement in the pricing aspect of the relationship;
- Greater pricing transparency;
- Greater pricing certainty and budgetary predictability – ‘no-surprises’;
- Greater correlation between price on the one hand and the perceived value of the results achieved on the other hand.
By adopting a new approach to pricing which puts the client’s needs and value delivered at the centre of the pricing conversation (a) much tension is removed from the pricing process and (b) the firm will be doing something that few if any of its competitors are doing.
The process begins, counter-intuitively, with the client, not the service to be provided. The lawyer needs a clear understanding of what is important to the client and what they are happy to pay for, what is less important to them and for which they would prefer to pay little if anything, the extent to which they wish to assume price risk or prefer the firm to do so or whether they want to share that price risk. From there, the firm can quickly develop pricing choices for the client to select from.
And that is key here: clients have made it clear time and again that they much prefer to be given choice rather than being presented with a single option. The options might include:
- fixed fees for the entire case and/or stages of the matter;
- abort and success fees;
- bundling/unbundling;
- gold, silver and bronze services,
and so on.
The list of alternative fee arrangements available for an innovative firm to use is surprisingly long! The important thing to bear in mind is that whichever option the client chooses and however the particular matter plays out, the client needs to feel that they have had good value and the firm needs to feel that it has been paid properly.
With the vast majority of law firms struggling to differentiate themselves from their competitors, some go-ahead firms are finding that an innovative approach to pricing really can set them apart.