pricing options

What is the biggest pricing problem law firms are facing today?

This week’s episode of the Impact Pricing podcast (episode 20 – ‘Mastering SaaS Pricing: How to Price and Package Your Service’) sees host Mark Stiving talking with Kyle Poyar, Vice President for Market Strategy at OpenView. By their own admission, Mark and Kyle geek-out over SaaS pricing theory and its KPIs, so this podcast is not for everyone.

What is interesting, however, is the response Kylie gives to a question Mark asks at the 23 minute 37 second mark.

Mark’s question:

What do you see as the biggest pricing problem that subscription companies are having today?

Kylie’s response:

…structurally speaking, companies are not spending enough time on pricing, they don’t take a scientific or rigorous enough approach to optimising their pricing and testing it and collecting data on it. And we have gotten smart about just about everything in technology and if you look at the level of sophistication of the operations of a technology company it’s like just so different from where we were a few years ago. But pricing hasn’t really changed and I’ve just started to hear of companies that are trying to bring on pricing talent and make their first dedicated pricing hire and have that happen earlier in their lifecycle; but then those companies are having trouble figuring out what’s the right profile to hire for, who is going to do a good job in this role, and then finding that talent and so I think like, structurally, their biggest challenge is just lack of great pricing skills…

In my opinion, that sums up pretty well the pricing problem that we have in law firms:- we’re in such a rush to show everyone how serious we are about the pricing issue/problem facing the industry (as in, alternatives to the billable hour, project management, process improvement etc), that we have hired Heads of Pricing by the boat loads, but a niggling issue remains – industry report after industry report that has sought feedback from clients indicates (some might even say, shows) that we haven’t gotten all that much more sophisticated or even better about how we price. If that’s the case, we have to ask: is there just a lack of great pricing skills in the industry?

As always, interested in your thoughts/views/feedback.

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NB: please ignore all comments Kylie makes about volume discounts prior to his comments above, as regular readers will know I don’t hold with those views!

An OmniFocus subscription – a great example of ‘charm pricing’?

Not familiar with the term ‘charm pricing’? – neither was I until I started taking the issue of pricing seriously, but at it’s core is something we (tender and pitch professionals) see daily,  the psychological effect of reducing the the left digit(s) by one so that “0” and “00” becomes “9” and “99” – i.e. $150.00 becomes either $149 or $149.99.

Why is it important?

Check out these two subscription options…

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…and let me know which you would have gone with.

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The Client Cost Conundrum: Legal Service Pricing in a Post-Recession Market – A White Paper by the ALA

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A post yesterday by Patrick Johansen, CLM, CPP, National Practice Manager at Seyfarth Shaw (on his ‘Patrick on Pricing‘ blog) alerted me to a newly published White Paper by the Association of Legal Administrators (ALA) titled “The Client Cost Conundrum: Legal Service Pricing in a Post-Recession Market“.

To start with, if you are going to publish a White Paper titled “The Client Cost Conundrum: Legal Service Pricing in a Post-Recession Market“, then, in my book, you have licence to write an absolute cracker.

Add to that your intent that:

“This white paper will identify economic factors that influenced relationship changes between clients and law firms after the Great Recession; pinpoint current legal service pricing best practices; highlight pricing strategies that can attract and retain clients; and help law firms learn to address efficiency and other factors that may affect many pricing scenarios.”

and throw in quotes from some of the industry’s leading pricing consultants – including Patrick himself, Colin Jasper of Jasper Consulting, Toby Brown of Akin Gump and Timothy Corcoran of Corcoran Consulting Group, and you’ve grabbed my attention.

So what did I find?

A very disappointing read, that had me both wondering what decade I had woken up in and really questioning whether the industry could survive for much longer.

What do I mean by this?

Well, judge for yourself: here are just some of the quotes from this paper:-

  • “Sixty-eight percent of law departments say they received discounts from firms in 2015. The number of law departments that received a discount of more than 10 percent has increased 4 percent in the past two years; the amount of firms receiving a 6 to 10 percent discount grew by nearly 9 percent”

–  Discounts are not a pricing strategy, period.

  • “In an effort to strengthen client relationships, some law firms are working to better understand their clients’ needs. Approximately 29 percent of firms say they’re working to identify each client’s unique pricing preferences to support the firm’s overall pricing strategy.”

–  29% of firms are working to identify each client’s unique pricing preference. Seriously, what are the other 71% doing: throwing darts in a dart board and hoping for the best?

  • “To better comprehend what clients want, 85 percent are initiating direct conversations about pricing and budgets.”

–  “initiating direct conversation”: as opposed to what exactly, being told?

  • “Twenty-two percent of firm leaders say they thoroughly understand their top 20 clients’ business models, earnings and growth strategy”

–  I have no idea what the other 78% are thinking of, but I’m suddenly very glad I cannot invest [financially] in a law firm.

  • “29 percent of firms say their knowledge of their clients’ business and client relationships give them a key competitive advantage”

–  what is the key competitive advantage for the other 71% I wonder?

  • “Sixty-one percent of firms say overcapacity is diluting their firm’s profitability.”

–  that’s too laughable to even be laughable. I mean seriously, are the other 39% saying it’s the Friday Night Drinks that’s the issue…?

And on that note, I shall end this post with this: read the White Paper, it is really well researched and a look at the Index itself is worth the download; just don’t expect to be blown away with how progressive the industry has become towards pricing.

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What are my pricing options?

what are my pricing options

You hear a lot these days about ‘pricing‘. This might be as it relates to Alternative Fee Arrangements (AFAs) or Value-based pricing (VBP).

Indeed, all the noise around this issue can get daunting at times.

So for today’s post I thought I would share a graphic that I have created from the many RFTs (tenders), RFQs (quotes), RFPs (proposals) that I have been involved in over the years and which I have named: “What are my pricing options?“.

Also, I’ll let you in on a little secret:- there’s isn’t such as thing as an “Alternative Fee Arrangement” – only pricing options or fee arrangement. Likewise, if properly explained and clearly transparent, all pricing options are value-based.

There’s one caveat I have though: any pricing option that includes a ‘discount’ or ‘volume discount’ component isn’t a pricing option – as you’re not getting your asking price!

I hope your find the graphic useful and if this is a subject you are interested in learning more about I would suggest you start with the Association of Corporate Counsel’s (ACC) Value-based fee primer.