Law firm pricing was one of the key takeaways from the Legal Marketing Association’s 2013 Annual Conference, according to the May/June 2013 issue of Strategies: The Journal of Legal Marketing. The conference was held on April 8-10 in Las Vegas.
Strategies offers this summary (which I presume was influenced by the conference’s only pricing session: “Pricing, Profitability and the Role of Marketing” presented by Toby Brown of Akin Gump and Colleen Nihill of Dechert):
Legal pricing is a critical emerging function within law firms. Due to rate and fee pressures in the market, firms need to be able to maintain their competitive position and profitability. The pricing role is challenging as it requires a unique blend of skills, such as business development, financial analytics, project management, and communication and presentation skills, along with an entrepreneurial spirit. Pricing presents a powerful business development opportunity. Most firms are using pricing in a defensive mode right now, doing whatever they can to hold on to work and stay profitable. Successful firms will make pricing a more proactive, offensive role, using it as a tool to grow the business and enhance profitability. In addition,general counsel is looking for open communication about pricing from law firms upfront and it expects the firm to be in control of these expenses.
Another key takeaway was providing value, a key component of effective, strategic pricing. Strategies offers this summary:
Clients and general counsel want law firms to show how they provide value, and marketers can help their firms develop these value propositions. Law firms need to have a comprehensive understanding of the client’s needs, and one way to get to this is by asking the client what they expect upfront. They don’t want to know about the lawyer’s resume or biography–they want to know how their firm differentiates itself and how it provides adequate problem solving.
If clients know why they should hire your firm (benefits), they can decide if your price (cost) creates a valuable purchase: Value = Benefits – Cost. Therefore, all firms need to be proactive in understanding their value, communicating their value (via value propositions), and charging for their value (via strategic pricing).
For more on this subject, see my three-part series on value: POST.