In my latest writing — “Driving Revenue: Value, Value Propositions and Value-Based Pricing” (ALA Legal Management, March 2013) — I offer a basic outline for defining value, communicating value and pricing value. Part One, Defining Value, was posted on March 5. Here is Part Two, Communicating Value:
In his book, Winning the Professional Services Sale, Michael McLaughlin highlighted the importance of communicating value: “a superior understanding and expression of value can edge out a formidable opponent with a long-standing client relationship.”
McKinsey & Co. developed the concept of value expression in the 1980s: the value proposition. A firm’s value propositions help articulate the firm’s benefits, with the goal of all benefits outweighing the cost (remember the formula: V=B-C). Here is a simple definition:
A value proposition is a reason why a client will benefit from engaging the firm.
Value propositions are built on the three ‘benefits’ components:
- Differentiation will offer firms the largest number of options, as well as the most focused; for example: if your firm has represented more big box retailers in land acquisitions than any other competitor, you have a proposition that clearly differentiates your firm.
- Competitive Intelligence will provide the context for knowing which propositions are truly unique, which are shared by only a few competitors, and which are too common to pursue; for example: if research proved your top two competitors represent four of the region’s top 10 employers in labor and employment matters and your firm represent five, you have a truly unique proposition.
- Client expectations—the voice of the client—will tell you which are the most important for client retention; for example: if your firm believes its unique knowledge (e.g., high volume of cases in a certain court) is what clients value, whereas your clients look to you to anticipate problems (e.g., issues that might cause a lawsuit) and to be ready to offer/execute solutions rapidly (e.g., settlement rather than lawsuit), your firm’s value proposition will fall flat and hinder client retention.
With value propositions in hand, you–and your attorneys–are now armed with reasons why your firm is more valuable to a prospect/client. That value can, and should, be captured in higher fees. Part Three will discuss value-based pricing, a strategy to maximize client value and firm profits.