Value-based pricing

Report: Eight of the biggest challenges law firms associate with rates and pricing

Business Development image

After a great holiday enjoying the Northern Hemisphere summer – and thereby avoiding some of the cold winter of Sydney – I returned last week to a read about law firm rates and pricing that really caught my attention, the ‘LawVision & Peer Monitor Pricing Survey: The Growing Prominence of Pricing within Law Firms‘.

Predominately North American based, it’s nonetheless an interesting read – with some contentious stuff (see the ‘LawVision Maturity Curve’ for example) – for anyone even remotely interested in following the current trends and traits affecting law firm pricing issues. But what particularly grabbed my attention in this Report was the ‘8 biggest challenges law firms associate with rates and pricing’ (Figure 3):

pricing.jpg
And what really, really fascinated me about this list is how few of them actually have anything to do with either rates (if that’s the way you want to do things) or pricing.

As you can see from the list, in desending order they are:

  1. Managing cash leaks across the entire rates lifecycle (discounts, write­downs, write­offs, collections)my comment: neither a rates issue  nor a pricing issue, but a behavioural issue
  2. Educating the lawyers in the firm on pricing principlesmy comment: neither a rates issue  nor a pricing issue, but a training issue
  3. Managing rate discounts requested by clientsmy comment: neither a rates issue  nor a pricing issue, but a behavioural issue (and are we seriously still having this conversation!)
  4. Negotiating with clients about the firm’s value and rate/pricing alignment
  5. Putting in place a disciplined pricing processmy comment: neither a rates issue  nor a pricing issue, but a training issue
  6. Managing profitability – my comment: neither a rates issue  nor a pricing issue, but an accounting issue
  7. Developing alternative fees
  8. Pitching for work generally or through the RFP process – my comment: can someone please let me know what this has to do with either rates or pricing!

Which leaves us with:

  • Negotiating with clients about the firm’s value and rate/pricing alignment, and
  • Developing alternative fees

Both of which, depending where in the buying cycle these conversations are taking place with your customer, could actually have something to do with a rates and pricing discussion.

But seriously, Challenges 4 & 7 of 8, and we wonder why law firms struggle with the concept of pricing and the disconnect between firm and customer.

And if we are really being honest and true to our clients, then even inward looking the #1 issue should not be ‘Managing cash leaks across the entire rates lifecycle (discounts, write¬downs, write-offs, collections)‘ but should rather be: ‘How are we rewarding and incentivising in our staff?‘ – because if the answer to that is ‘utilisation‘, then everything above is relatively meaningless.

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

rws_01

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.