The legal industry’s largest firms continue to invest in Pricing as the majority of the legal industry reverses its investments, according to the latest Altman Weil survey.
In the 11th annual Law Firms in Transition survey, released last month, firm leaders showed diverging interest in Pricing-related efforts. When asked, Is your firm doing any of the following to support its pricing strategy, leaders’ responses very clearly reflected firm size:
- Among the largest firms (250+ lawyer): a majority were investing in four of the seven categories (4 of 7); at least one-third were investing in all seven categories (7 of 7); and, overall, four of the seven categories showed an increased investment from 2018 (4 of 7).
- Among the smaller firms (<250 lawyers): a majority were investing in only one of the seven categories (1 of 7); at least one-third were investing in only three of the seven categories (3 of 7); and, overall, only one of the seven categories showed an increased investment from 2018 (1 of 7).
Among all firms, three categories dropped by ten percent, each signaling poor thinking.
- Developing Data: among the largest firms, a likely answer to the drop is that firms have completed developing data on Costs; among the rest of the industry, a likely answer is that firms already had a grasp of their Costs. A better question for a Pricing survey is how many are capturing data on the Prices of their services (which impacts the next point).
- Clients’ Unique Pricing Preferences: client retention is not a large enough factor to account for the low–and diminishing–commitment firms recorded here. Not only does this reflect an industry still focused on itself, we must ask what all those Pricing professionals are doing, if not catering to buyers’/clients’ preferences? My guess: they are focused on the numbers: a myopic, unstrategic view of Pricing. Firms need a course correction.
- Poor Pricing Strategy: all firms need to take steps to articulate their Pricing Strategy and then execute. The paltry response shows an ignorance for the power of Pricing. Firms need a course correction.
For smaller firms, the growing disparity between larger law firms (250+ lawyers) and the rest of the legal industry (<250 lawyers) should cause concern. To the extent there is competition between these segments, larger firms are adding to their competitive advantage by investing in Pricing professionals and Pricing Functions (not to mention LPM resources). If smaller firms are unable to add resources, they need to increase their “efforts supporting Firm Pricing Strategy.”
|Efforts Supporting Firm Pricing Strategy (250+ Lawyers, 92 firms)||2019||2018||2017||2016||2015|
|Collaborating with clients on creative fee options||85.6||76.6||NA||NA||NA|
|Developing data on cost of services sold||76.7||86.2||87.5||90.6||85.5|
|Training lawyers to talk with clients about Pricing||58.9||57.4||58.0||70.6||75.0|
|Adding Pricing Director/Staff member||75.6||73.4||62.5||63.5||59.5|
|Setting margin goals in firm and practice group plans||48.9||40.4||44.3||47.1||48.7|
|Identifying each client’s unique Pricing preferences||36.7||41.5||29.5||42.4||42.1|
|Incorporating Pricing in all planning efforts||32.2||40.4||43.2||49.4||36.8|
|Efforts Supporting Firm Pricing Strategy (<250 Lawyers, 270 firms)||2019||2018||2017||2016||2015|
|Collaborating with clients on creative fee options||56.8||64.4||NA||NA||NA|
|Developing data on cost of services sold||44.0||49.8||49.1||59.0||56.9|
|Training lawyers to talk with clients about Pricing||35.4||33.0||40.1||35.2||35.4|
|Adding Pricing Director/Staff member||14.0||15.7||13.9||12.3||13.9|
|Setting margin goals in firm and practice group plans||16.7||22.2||26.2||27.9||25.8|
|Identifying each client’s unique Pricing preferences||19.0||26.8||29.6||27.5||24.9|
|Incorporating Pricing in all planning efforts||15.2||18.0||20.6||24.2||24.4|
The survey was conducted in March/April 2019. Law firm leaders (i.e., managing partners and chairs) from 362 firms (with more than 50 attorneys) participated in the study. Overall, 92 firms with 250+ attorneys and 270 firms with under 250 attorneys participated, including 49% of the 500 largest US law firms. The full report is available by following this link: 2019 LAW FIRMS IN TRANSITION.