We hope that the following synopsis of some of the most popular and widely republished of our 2014 law firm pricing blogs will provide you with some inspiration and guidance as you perhaps ponder what your firms' approach to pricing will be over the next 12 months....
The road to hell is, so the saying goes, paved with good intentions. Firms often know that pricing is something that they need to address, or at least would benefit from addressing but aren't quite sure where to start.
Managing Partners and people in senior management roles often bemoan the fact that they have had a couple of attempts at implementing change from within but have been met with indifference if not resistance.
So, where might you start? There are broadly speaking three areas you need to tackle; the list under each heading below being anything but exhaustive, they are:
Pricing governance and policy:
The firm needs to debate and reach a consensus on such things as;
- A shared and consistently implemented approach to pricing
- Pricing policies that are well understood and universally enforced – for example do you have firm wide policies about what is written off, by whom, for what reason and up to what level?
- Do we have strong pricing leadership in the firm – 'Law Firm Pricing Leadership: Shoot Someone Occasionally'
- Do we as a firm have a preoccupation with turnover as opposed to profit? Which is more important to us and why?
- If you have international offices, is there a coherent strategy to pricing – 'Necrotising Fasciitis: The International Law Firm Pricing Dilemma – Part 1' and 'Part 2'.
- Price and market position disconnect – most firms do not understand that price is a powerful proxy for quality. Firms claim a certain market position vis quality of advice and service and then price below that, thereby undermining the message.
- Poor or non-existent induction training on pricing – the blind leading the blind?
- Do you have a strategy for increasing prices in 2015, other than the banal and asinine annual rate review letter – 'Time To Increase Prices: I Forget, How Do You Do That Again?'
Pricing Analytics & Reporting:
- Practice management software has historically provided plenty of data, but data on its own is largely useless unless it also provides actionable insights – 'Pricing & Analytics: Houston, We Have A Problem'
- Fixed fee arrangements in particular suffer from high write-offs and poor realisation rates due to lack of historical analysis
- Any firm serious about utilising contingent or conditional fee agreements must invest in proper analytics capability, and not simply something cobbled together in an Excel spreadsheet
- Misaligned reporting dashboards – 'Pavlovian Pricing & Meritocracy Structures'
Pricing Skills, Resources & Pricing Execution:
- Do you understand what value you are delivering and how to capture that - 'Pricing: What Is Your Firms' IP Worth?'
- A broad lack of price negotiation skills and a lack of awareness or understanding of the many pricing strategies and tactics available to lawyers results in pricing that is often a poor 'fit' for the client and/or the firm.
- A lack of pricing collateral, templates and pricing precedents.
- Is our approach to pricing still relatively one-dimensional – 'How To Leave Fees On The Table: 21 Things I Must Ignore'
- Are you improving around the management of bids, pitches, tenders and RFPs - 'More Than One Bite At The Cherry: Pitches, Bids, Tenders & RFPs'
- Confidence is absolutely critical to good pricing behavior. Do you set and negotiate prices confidently or from a perspective of fear; fear of losing the client and/or fear of losing the job?
Clearly, these issues can't all be tackled overnight or simultaneously. Which issues are picked off and in which order very much depends on the precise status of pricing in a firm at any given point in time. There simply isn't a one-size-fits-all answer to that question.
Before riding off in all directions at once therefore, it can often be helpful for firms to do a pricing 'stock-take' first. “Where are we currently with your pricing? What resources do we have? What are we good at in the pricing space and where are we doing poorly? What parts of the firm are doing well on pricing and which areas are struggling? Why?"
This kind of candid stock-take can help to provide a solid platform for further decisions about pricing.