Alternative Fee Arrangements (AFAs)
method of payment not based on hours-times-rates basis; examples include Contingency Fee, Fixed Fee

Benefits
firm attribute from which a client would derive value (see Value Proposition); one of the key elements in the value formula (see Value)

Blended Rate
single rate charged by a firm for all timekeepers, regardless of status; a type of hourly rate; not a true AFA

Bonus
extra payment by a client to a firm at the conclusion of a matter in recognition of the firm’s performance (see also Success Fee)

Branding
strategy that communicates a firm’s unique benefit; often associated with the creation of an image or identity (also known as Brand Positioning)

Bundling
discount strategy that combines multiple attorneys and/or multiple practice groups into a single fee (for example, Blended Rate)

Capped Fee
upper limit of what a firm can charge under an Alternative Fee Arrangement; can be task-based or matter-based (see also Not-to-Exceed)

Client Feedback
method by which a firm understands its performance and what a client values; useful in collecting Competitive Intelligence

Competition
any firm that a (prospective) client considers a suitable alternative; key competitor also known as Next-Best Alternative; can be based on geography, industry, reputation, practice group

Competition-Based Pricing
pricing model rooted in competitive information; key factor in a client’s Willingness-To-Pay

Competitive Advantage
“Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm’s cost of creating it.” (Michael Porter, Competitive Advantage, 1985)

Competitive Intelligence
gathering of information about other firms; necessary to understand fully a client’s expectations regardings costs, benefits, price and value

Contingency Fee
payment made at the end of a matter, based on matter’s outcome; type of Fixed Fee

Cost
the resources needed to acquire a desired benefit; for firms, the sum of total cost (fixed plus variable); for clients, the sum of all invoices (hours plus disbursements) and, ideally, opportunity costs; one of the key elements in the value formula (see Value)

Cost-Plus Pricing
pricing model rooted in a firm’s costs: fees are determined by calculating all fixed, variable, direct and indirect costs, then adding a profit mark-up

Defensive Pricing
reactive strategy to defend market position from a lower-priced competitor

Differentiation
how a firm distinguishes itself from its competition to stand out in the market; articulated through Value Proposition(s); one of two key elements of Competitive Advantage

Discount
any offer by a firm to accept less than full price for full service; most commonly utilized with Hourly Rates (not the same as a write-up or write-down)

Fees Billed
amount charged to a client for professional activity, not including specific charges (e.g., disbursements)

Fees Received
amount paid by a client for a firm’s professional activity; key component in realization

Fence
invisible boundary established to distinguish between Segments; also used to define AFA parameters

Financial Value
cost of the prospect’s Next-Best-Alternative plus the value of whatever differentiates your offer

Five Cs
Create value, Comprehend value, Communicate value, Convince, Capture value; utilized in Value-Based Pricing

Fixed Fee/Flat Fee
single charge for specific engagement, regardless of hours worked

Four Ps (Marketing Mix)
core marketing principle, first introduced in 1960: product, place, price, promotion (price is the only element that produces revenue); in the 1990s, a ‘services’ model introduced client, convenience, cost, communication; in 2013, a B2B framework was proffered: solution, access, value, education (SAVE)

Holdback
portion of a Fixed Fee or budget withheld by a client until an agreed-upon milestone or the matter’s completion; often expressed as a percentage (e.g., 10% holdback)

Hourly Rate
price of one hour of professional activity

Margin
difference between Fees Received and Cost (labor + overhead); a key indicator of profit (aka Contribution Margin)

Next-Best Alternative (NBA)
the firm a (prospective) client perceives to be your competition; critical factor in determining a client’s Willingness-To-Pay

Not-to-Exceed (NTE)
upper limit of what a firm can charge under an Alternative Fee Arrangement; can be task-based or matter-based (see also Capped Fee)

Penetration Pricing
charging a below-market fee in order to gain a prospect’s work; often utilized in AFAs (opposite of Premium Pricing)

Premium Pricing
charging a high price when there is a uniqueness about your service; typically utilized by well-branded firms and boutiques (opposite of Penetration Pricing)

Phase(d) Fee
establishing a timeline and budget based on discrete work; used for “unbundling” services

Pricing
process of determining what a firm will receive in exchange for its services; used to communicate and shift the firm’s competitive position; one of the Four Ps

Pricing Process
three-stage process that helps a business optimize Price: price strategy > price setting > price implementation 

Reference Price
comparative evaluation a (prospective) client makes based on four factors: last paid, pereceived market price, perceived fair price, expected price

Risk Collar
strategy for client and firm to share risk; common example is 10-20%

Segmentation (aka Price Discrimination)
setting different prices for different services; also utilized to capture different types of clients

Scorecard
template-based proposal form submitted by a (prospective) client (most often Excel); helps in-house counsel quickly and accurately compare bids; antithesis of Value-Based Pricing

Shadow Billing
tracking of attorney time for non-hourly matters; helps measure profitability

Strategic Pricing
synthesizing information from accounting and finance, business development and marketing, technology, and sales (i.e., attorneys) to improve a firm’s pricing efforts

Success Fee
extra payment by a client to a firm at the conclusion of a matter in recognition of the firm’s performance (see also Bonus)

Switching Cost
cost incurred when a client decides to change firms; creates inherent advantage for incumbent firms (a type of switching cost is file transfer fees)

Task-Based Billing
a firm charges a certain fee for a discrete service, such as a deposition; type of Fixed Fee

Value
relative concept rooted in the worth of your service to a client; the maximum amount a client is Willing-To-Pay for your service; a key point of Competitive Advantage; can be expressed as a mathematical formula: Value = Benefits – Costs

Value-Based Billing
altering a client’s bill (e.g., a write down or write-off); allowing a client to add/subtract to its final bill; can include a Bonus or Success Fee

Value-Based Pricing
pricing model based on the benefits a firm provides its client

Value Challenge
Association of Corporate Counsel’s 2008 initiative to emphasize value–not costs–in firm/client relationships

Value Proposition
statement summarizing why a prospect will benefit from engaging you/your firm; first developed by McKinsey & Co. in the 1980s

Volume
amount of work a client sends to a firm; critical variable in calculating AFAs

Willingness-To-Pay (WTP)
maximum amount a client will pay for services; rarely captured in final bill; reflection of perceived value, usually based on competitive comparisons