Many lawyers, gnawed by doubt, regularly ask themselves, “What should I charge?” It’s the question with a million right answers — which is to say, with no right answer at all. Whatever number you finally settle on, however, is less important than the process by which you arrived at it. As far as I can tell, lawyers’ most common methods of determining price are:
- Find out what comparable lawyers are charging and, depending on your self-confidence, charge more, less or about the same as them.
- Calculate your internal costs of doing business, tack on a percentage equal to your desired profit margin, and charge that.
- Keep quoting slightly higher prices for successive clients until one of them winces or balks, then hang out at that price for a while.
Each of these approaches has its merits, I suppose. But you’ll probably notice that each has one thing in common: the client is not asked to participate. Lawyers have rarely if ever invited the client into the pricing process, mostly because they assume the client will do everything in its power to drive the final price down. That’s not an unreasonable assumption, on the face of it, but it means that the lawyer is left groping alone in the dark for a number in which the client has an equal interest.
An emerging line of thought in alternative (non-hourly) pricing, one with which I’m in strong agreement, asserts that the client is in fact indispensable to the pricing process. “Pricing your product is actually simple, as long as you consider it from the buyer’s point of view,” says Seth Godin, who knows more about pricing than most people. “The real trick is gaining an understanding of what [clients] actually do and do not value in a given piece of legal work. … [and t]he only effective way to understand a client’s value priorities is to have a direct conversation with them,” says Toby Brown, who knows more about pricing than anyone else in the legal market.
Now, I’m certainly not saying that you let the client determine what the price is going to be. I’ve said elsewhere that it’s the seller’s job to take responsibility for price, Toby emphasizes that the client’s value proposition must be reconciled with the lawyer’s, and Danny Ertel adds for good measure how critical it is that the lawyer learn what line of reasoning led the client to its own price estimate. Pricing is a two-way street. More to the point, it’s a conversation — not a monologue or a directive or a statement of fact by the lawyer. You cannot have a grown-up conversation about pricing without the client.
I want to take this line of thought another step further. I want to suggest that not only does client participation make pricing easier and more satisfying, but that clients themselves can actually be the basis of your pricing. Matt Homann points us to a great article called “Pricing strategies for creatives” (a category that I think includes lawyers), which included this powerful excerpt:
It’s a little-known secret that you can charge not only for your creative work, but also for the client experience around the work you deliver. In essence, you can price things that have nothing to do with design, but have everything to do with the experience your client encountered throughout the process of engaging with you on their project.
I think this is completely applicable to the legal profession. So many lawyers (as so many clients will ruefully attest) can barely bring themselves to notice how clients experience the legal process. We pay close attention to the nature and quality of the legal work we do, but we pay relatively little attention to how we deliver that work, how our services are received, and how the client feels about it. A small minority of lawyers and law firms, for reasons of personality or branding or both, do pay attention to the “how” of legal services, and they reap the benefit of happier clients (and often, happier lawyers). But I’m not aware of any firm that has explicitly said, “The client experience will be a key component of our pricing strategy.”
Think of it this way. One law firm might say, “We have the very best lawyers in the city, and we charge a premium for that unique characteristic.” Another firm might say, “We are the biggest firm in the country, and we charge a premium for that unique characteristic.” What if your firm said, “We make the client the center and purpose of everything we do here — and we charge a premium for that unique characteristic.” The nature and value of how your client receives your services can be the basis of your pricing, so long as hardly anyone else makes that their unique competitive foundation — and that, in the legal profession, is not a concern that should keep you up at night.
Law, as usual, lags behind other sectors in this regard. In any other service business, how you are served is a differentiator, if not a full-scale driver, of pricing. If you don’t believe this, think back to the last time you tipped more (or less) than 15% at a restaurant, and ask yourself why. I can almost guarantee that it had nothing to do with the food or the decor; the menu already priced those out for you. The tip is what you pay for service. And what you tipped your server had everything to do with whether or not you received service that was cheerful, responsive, quick, inquisitive, memorable, and genuinely focused on your enjoyment of the experience — or that was the opposite. That’s what you pay for when you’re buying services. Why would your own clients be any different?
If the way you treat your clients is cheerful, responsive, quick, inquisitive, memorable, and genuinely focused on their interests, you can charge for that. In the legal marketplace, in fact, it’s such a huge differentiator that you can probably charge a lot for it. You can charge for hiring people obsessed with client satisfaction. You can charge for returning calls within 24 hours. You can charge for giving clients 24/7 access to their files and billing status. You can charge for entering your clients’ birthdays into your CRM system and sending them a card on the big day. You can charge for asking, “Is there anything else, anything at all, that we can help you with today?” For crying out loud, you can even charge for not charging by the hour! These are real client benefits. They make clients’ lives easier or happier. And most lawyers don’t offer them.
Are all these things entered as separate line-item charges in the bill? Of course not! But they’re part of the service experience at your firm. They’re what make you special — because they make your clients feel special. And that is not a commodity. That is not subject to the vagaries of the market. The price of almost every lawyer product — the deliverable or outcome at the end of the lawyer’s efforts — will decrease over the coming decade. But the price of a lawyer’s service — the personal, customized, convenient, anticipatory, strategic, counseling, caring way in which the client is treated and their interests looked after — will hold steady and will very probably rise.
There is always going to be exquisitely challenging or important legal work for which clients will pay virtually any amount billed in any format, even if delivered with an impersonal touch bordering on disdain. But most legal work is not in that category, an emerging fact that’s cutting the legs out from under the standard billable rates that many lawyers and law firms have traditionally commanded. We need a new basis for asserting our value and differentiating ourselves from each other. We’re all smart and knowledgeable and hard-working. But we’re not all great at service. We don’t all care the same about our clients. We don’t all engineer our billing methods and matter management and client communication so as to maximize the client experience.
Markets reward scarcity. Great client experience in the legal market is scarce. It’s time to think about client-experience pricing.
Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.
Great post, Jordan. Mind if I steal that line “We make the client the center and purpose of everything we do here — and we charge a premium for that unique characteristic” for my marketing? ;-)
Be my guest — just make sure to send me a royalty cheque every Christmas. :-)
I think some lawyers will also charge based on results, such as charging a set amount for utilizing their skill and expertise to achieve a desired result, even if such amount is not proportionate to the actual time spent on the case.
I believe clients need to be made aware at the outset exactly what they will be billed for. There are certainly many clients who cannot believe the amount of a final statement of account, not realizing that all those 0.2’S for calls and letters really add up after a while.