value

‘Bears and Alligators’

Business Development image

Happy New Year to all.

I trust everyone had a relaxing and enjoyable holiday period. I certainly did, and took the opportunity to catch-up on some podcasts I had missed towards to the end of 2019. One of those was Episode 47 of Mark Stiving’s weekly Impact Pricing.

In this episode Mark has a free-ranging talk with Kevin Christian on all things pricing related under the appropriately named ‘Two Pricing Experts Talk Pricing(published 9 December 2019) and, while the whole podcast is great, things get particularly interesting  around the 19 minute mark when Kevin asks Mark:

“If a bear gets in a fight with an alligator, who wins?”

Now I can hear you saying: “What has this got to do with law firm business development and pricing issues?”, but – pun intended – ‘bear’ with me.

Because, as is music to the ears of every lawyer, Kevin explains,

‘it depends’ –

on where the fight is taking place.

If the fight is taking place on land then the bear is more likely to win; but if the fight is taking place in water then the alligator is more likely to win.

Que?

Here goes – bears and alligators are analogies to the ‘value’ discussion such that, as Kevin states, if you are:

  • Talking about the ‘Value of your Solution’: then you are in the seller/vendor territory and the seller/vendor is going to be leading and benefiting from the conversation;

whereas:

  • If you are only talking about the ‘Price of your Solution‘, without talking about the value, then you are in the buyer’s territory.

Takeout – what does this mean?

In a world when we deal with procurement and other agents who are not looking at the value of the service we provide, but are constantly looking at the cost of that service; then, as law firms, it becomes imperative that we explain the value being provided and have ourselves a land battle with the alligators.

rws_01

Does your law firm use personas in its tender response preparation?

Business Development image

 

I first came across the use of “personas”, in the buying-cycle, in ‘This is Service Design Doing’ by Marc Stinkdorn, Edgar Hormess, Markus, Adam Lawrence, and Jakob Schneider. This is one of those books that have a pivotal impact on your thinking and go directly into your Top 20 reading recommendations.

But it has been a while since I last picked the book up. And so when I was reading ‘Personas – A Simple Introduction’ by Rikke Dam and Two Siang  this week (as material for this week‘s newsletter)  it brought me immediately back to Service Design Doing; especially, or probably more particularly, who Dam and Siang define “persona” as being:

Personas are fictional characters, which you create based upon your research in order to represent the different user types that might use your service, product, site, or brand in a similar way. Creating personas will help you to understand your users’ needs, experiences, behaviours and goals. Creating personas can help you step out of yourself. It can help you to recognise that different people have different needs and expectations, and it can also help you to identify with the user you’re designing for.

How many law firm business development / tender / pitch / pursuit / etc professionals use this concept  in their bid/no bid process? Not many would be my guess.

But think of the benefits of your law firm role playing (or at least giving a chair to) the following personas in any tender “bid/no bid” discussion:

  • the Procurement person’s persona
  • the Legal operations person’s persona (increasingly) – CLOC / ACC and the growth of legal operations
  • the Client/user persona
  • the Client/payer persona
  • the GC persona
  • the CFO persona
  • the CEO persona
  • the In-house lawyers persona
  • the Business Managers persona

And the list can go on and on.

If your firm played this game, do you think you might start to get a little better at wining tenders?

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

rws_01

It doesn’t pay to be a loyal customer

Business Development image

The Chanticleer column in this weekend’s Australian Financial Review is titled ‘It doesn’t pay to be a loyal customer’. The article is a post-Hayne, post several reductions in interest rates, look at bank mortgage rates and analysis undertaken by Matthew Wilson at Evans & Partners that suggests:

“In Australia, the banks enjoy a profit benefit of about $3 billion a year from exploiting the difference in mortgage rates between existing and new customers”.

I’m not going to comment on whether or not that statement is correct/true (although a hunch would suggest it is), but it did make me think that in the professional services (read ‘legal’) sector it absolutely holds true that it doesn’t pay to be a loyal customer/client.

What do I mean by this?

Well when pricing services to new customers/clients – especially in tender situations, law firms are far more willing to:

  • Buy the work to cement the relationship
  • Offer volume discounts
  • Deeply discount on rack-rates
  • Agree to discounted fixed fee arrangements
  • Agree to risk-sharing arrangements

Indeed, more often than not the average billing rate (ABR) and the average realisation rate of a long-term customer/client will be higher than a new client, while lock-up days will be lower.

As Chanticleer says, it really doesn’t pay to be a loyal customer these days!

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

rws_01

Game: ‘Questions to ask your deal team about why your customer is happy to pay your fee?’

Business Development image

Came across the bones of a really interesting game you can play with your deal team at your next after action deal debrief/lessons learnt meeting.
Handout a piece of paper to each of your deal team members and ask them to rank, in order of priority, the top 5 reasons – from the following list – why the customer is happy to pay your fees in full (no discounts/write-offs, etc allowed):
  1. Demonstrated an understanding of the customer’s business/industry throughout the deal
  2. Demonstrated an understanding of relevant law
  3. Responsiveness to customer’s requests – phone/email/meetings
  4. Built good rapport and a trusting relationship during the deal (was in the trenches with the customer)
  5. Used expertise to help save the customer money (either on the deal or fees)
  6. Used Legal Project Management techniques to stay within the deal scope and didn’t allow scope creep without first taking to the customers
  7. Used technology, AI, Legal Process Outsourcing and value adds to make the customer’s life easier during the deal
  8. Offered the customer a great discount
  9. Hourly rate was attractive to the customer
  10. Any other reason(s)

Remember, they can only pick 5. And they need to be in order of priority.

I would love to hear feedback on which five were the most popular chosen.

rws_01

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.

rws_01

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!

“A lawyer’s time is the only commodity that we have to sell”

Earlier today I listened to a podcast on respected legal technologist expert/journalist/speaker Ari Kaplan’s Reinventing Professionals from May 2, 2019 in which he spoke with Josh Taylor, an attorney and the lead content strategist at Smokeball, a practice management software platform that started out life here in Australia and now appears to be mainly located in Chicago (although retains a presence in Sydney and Melbourne).

The first seven minutes (out of nine) I was entertained and thought were good.  But two minutes and twelve seconds from the end Ari throws out his last question (my transcript follows so sorry for any errors) to Josh:

Where do you see the use of technology in solo practices and small firms headed?

And Josh responds:

One thing that we struggle with so much, and I have saved it to the end here Ari instead of mentioning it as a pain-point upfront, the main part of the small law practice that we see people failing at day after day is accurately tracking their time and either on the the extreme cheating a client by over estimating, which is very rare, more likely and more often we see small law firms cheating themselves by under valuing every minute they have; when I go around speaking to bar associations around the country I always say “you know a lawyer’s time is the only commodity that we have to sell, we don’t make a thousand widgets in a minute that we can then sell for the same price, we have minutes in a day that is the only thing that we can sell out to our clients” because we cannot double bill people so to value and track time accurately I think is where legal tech is going to start leading the way…

Leaving aside the whole time-based billing versus value-based billing discussion, even if you only believe in time-based billing (cost-plus or however that looks) and never want to entertain the notion of any kind of alternative pricing method, to say:

a lawyer’s time is the only commodity that we have to sell

is so far removed from reality it’s not funny.

What a lawyer’s ‘commodity’ is, is the knowledge they have acquired, the experience they acquired to be able to apply that knowledge to the situation their client is facing, and the insight to do this in a valuable and respectable way.

Regardless of how you bill – as a lawyer that is the only commodity you have to sell.

rws_01

Want to know how Microsoft’s legal team measure value?

Screen Shot 2019-04-10 at 8.45.00 pm

Value” – specially how we create and communicate it – is probably the hottest issue in legal pricing at the moment. So how much would you pay to find out how Microsoft’s legal team measure value?

If you’re smart – nothing.

Instead you will listen in to the ‘Business of Law Podcast‘ where Karen Kepler (Law Procurement Manager at Cargill) talks with Rebecca Benavides (Director of Legal Business at Microsoft Corporation) and Jason Barnwell (Assistant General Counsel of Legal Business, Operations, and Strategy at Microsoft Corporation) about the process of designing and building an outside counsel panel.

And after you have listened to the podcast (around 40 minutes of your time), download the show notes and take a look at the 4 page slide pack on ‘CELA Law Firm Engagement: Strategic Partner Selection Process‘ – because you’ll then be able to recognise where the image at the top of this post comes from.

Big lesson learnt here: Our clients want to talk to us about this, but are we really willing to listen?

As always interested in your thoughts, views, feedback.

rws_01