How can such a simple word, price, cause so much confusion? For years, the legal industry has been focused on calculating better price tags and devising creative fee arrangements, all in the name of Pricing. Unfortunately, Pricing is not the same as Price, nor is Price synonymous with Pricing Strategy or Strategic Pricing. It is time to add precision to our Pricing language and activities.
Price: a number; a numeric tool (e.g., hourly rate, fixed fee) used to signal quality and market position of a firm, as well as the amount of resources (i.e., money) that a buyer must sacrifice in order to acquire a firm’s resources (i.e., legal services); it is the only source of revenue within the Marketing Mix (product, place, promotion, price).
Pricing: a process; the art and science of understanding your firm’s value and capturing that value in your firm’s fee arrangements; it includes basic Price calculations; it can include attorneys and/or Business Development staff providing buyer/client motivation; ideally, it is more than the Finance Department calculating a Price.
Strategic Pricing: a collaboration; the art and science of Pricing broadened to include a firm’s functional areas–finance, marketing, business development, attorneys, staffing–to produce optimal Price decisions.
Pricing Strategy: a plan; a comprehensive study of your firm’s internal (your services, your people, your processes) and external (your positioning, your markets, your competitors) attributes in order to define your value and to identify what your buyers’ value; not to be confused with the Pricing Strategies Matrix, which highlights Pricing methods.
So, how well is your firm doing at Pricing, at Strategic Pricing, at defining its Pricing Strategy? It’s time to get started and get better!