With Validatum Pricing Espresso® we aim to bring you your morning pricing 'shot' - the best, most interesting, thought provoking and informative material we can find globally which will be of interest, relevance and help to you in your legal services pricing challenges. [Note: we don't always agree with the content of others that we post but the philosophy of Validatum Pricing Espresso® is shared perspectives, not a personal 'soap-box']
Law’s Distribution and Price Problems
Law has a distribution problem. Too many corporate firms vie for a shrinking pool of outsourced work. Competition is also fierce in the retail segment of the legal market where, paradoxically, tens of millions of individuals and small businesses are unrepresented while thousands of lawyers are unemployed or under-employed
Law has a related problem: price. Legal services are too expensive. That applies equally in the corporate and retail segments of the market. Corporate clients have asserted leverage and can now exact discounts and send out RFP’s. But retail clients do not have that leverage (that comes from large legal spend) and, so, are effectively denied representation because the price is too high. This is often referred to as the “access to justice crisis.” Read more...
Law firms and procurement : Creating a level playing field
More and more law firms have acquired additional pricing and price negotiation skills or brought in external pricing professionals to participate in the negotiation process.
They have also become considerably more rigorous about whether to throw their hat in the ring on new client 'opportunities'.
Triaging of invitations to tender or opportunities to pitch for work is critiqued more robustly and systematically than before. Read more...
If fees too high, GCs will quietly look elsewhere
A new report from TGO Consulting says in-house counsel will avoid difficult fee negotiations with law firms with whom they’ve had long-running relationships. Instead, they’ll move the work in-house, or send it to a lower-tier firm or an alternative service provider in order to meet budgetary needs.
This means while law firms say they do not experience pressure about their rates, the report says “for most firms the blow is yet come.”
“[I]nstead of hard negotiation on price with their lawyers, the in-house department has found an easier and far less confronting way to realize savings on the budget; instead of negotiating they push work down. In effect they ‘vote with their feet’. Work that is deemed too expensive is simply taken from one law firm and given to another that is less expensive to start with,” says the report, called The Trend is Clear, the Blow is Yet to Come. Read more...
Is $5,000 an Hour Next?
The bull market in high-end work makes hourly rates defy gravity.
The dramatic increase in clients’ need for complex and bet-the-company work is bad for clients but downright awesome for law firm rates. The highest rate in the market now commands 2.9 times the average rate clients pay. Clients* give BTI 6 reasons they pay law firms top rates:
- Attorneys bringing deep understanding of the business risk
- Penetrating command of the solution or path to a solution
- Unmatched commitment to help
- Clearly grasping the magnitude of the enterprise level risk at hand
- Easily anticipating the needs and obstacles from the start
- Eagerness to discuss strategies and actions before being hired
Law Firms that Discount have more Past Due Clients
[2014 article but still completely relevant] Law firms that discount or write off legal fees prior to invoicing clients, also tend to also have more past due clients.
That was one of the most interesting findings from a cross-tab analysis stemming from a law firm billing survey published late last week. The chart published nearby compares the percentage of past due accounts between law firms that said they “never” discount legal fees and those that said they do so “often.”
Law firms report confidence drop
New research suggests independent lawyers and mid-sized law firms are feeling less confident about the future than they were last year.
Despite a rise in confidence reported in The Bellwether Report by LexisNexis last year, both confidence and performance have dipped back to the levels reported in 2013/14.
...clients want value for money – a good service at a fair price – and not a cut-rate service at a cut-rate price. But lawyers have yet to fully absorb this distinction between price and value... Read more...
