Competitive pricing is about getting smarter, not cheaper
The standard response to increased competition is to drop prices but lawyers would do better to “actually talk to their client” about how to create value for money, according to the chief pricing officer at Allens.
“If you are one of a number of firms that [a potential client] considers capable of doing the work but they chose the firm that could do it at the lowest price then your pricing strategy has failed,” said Pier D'Angelo (pictured), speaking at the Australasian Legal Practice Management (ALPMA) Summit last week.
"As American entrepreneur Seth Godin once said, ‘Perhaps the reason price is all your clients care about is because you haven't given them anything else to care about’," continued Mr D'Angelo.
He said that lawyers dislike the idea of selling: “Lawyers are often introverted and they don't like talking about money. They love the practice of law. The last thing they want to do is sell.”
Mr D'Angelo said a typical scenario could play out like this: “Client invites partner to bid for some work. Email arrives in partner's inbox maybe 10 days out. Partner ignores email.
“Four days out partner thinks, 'I've got to do something with that email'. Partner flicks email to junior lawyer or senior associate […] who knows nothing about the client.
“One hour before it is due partner says, 'we've got to put a competitive price here because the market is tough'.”
In the absence of any information about which firms are competing and minimal understanding of the client’s pricing preferences, it is no wonder that this process is ineffective, Mr D'Angelo explained.
Be prepared to negotiate price
Clients are professionalising the way they buy services and will pass on firms that cannot articulate value convincingly, Mr D'Angelo continued.
There is a segment of the market that buys at the lowest price to achieve the minimum result, he said. But most of the market buys based on perceived value for money.
“[Lawyers must] accept the fact that it is their responsibility to give the client reasons to chose you [and] not let the client make up their own reasons why they should choose you over someone else,” he added.
However, lawyers often fail to engage in conversation even though talking to clients is often the only way to understand the client’s needs.
“Not all clients are the same,” he said. Some clients want the certainty of fixed fees, but others care more about quality than price and prefer hourly rates.
Mr D'Angelo concluded by saying lawyers should address these points when selling their services to clients: "How can you help the client increase revenue, decrease expenses, decreasing risk and protecting the reputation of their business?"
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