As a profession, lawyers may be the most resistant to value pricing due to their conservative nature. However, this is the very reason Michael Bradley from Marque Lawyers considers it a strategic advantage. The outcome for the customer is the first priority. If Marque cannot create value for the customer, they will not engage simply to make money.
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Changing The Practice of Law
- What is the most important thing you can share about pricing?
- Value pricing is more profitable than the alternatives.
- To effectively move to value pricing, you have to give up all the trappings of hourly billing.
- For his business, it took 2-3 years to make more money than they would have with hourly billing.
- But, it is a false comparison.
- If they hand not priced by value, they would not have that differentiation in the market.
- It gives you a powerful competitive edge.
- They would be near at the bottom of the market if they had not started value pricing.
- Why do you want to change the way law is practiced?
- The small group that started Marque Lawyers came from a big firm.
- While they liked being lawyers, they did not like the way law was being practiced.
- Many internal processes were dysfunctional and counter-productive.
- They wanted to be able to enjoy life, be happy, and be lawyers.
- Changing how they engaged on price was part of it.
- The way most lawyers charge has nothing to do with the value that the customer receives.
- They often pay too much for things of little value.
- As a lawyer in most firms, you are only evaluated by your billable hours, which has nothing to do with why you wanted to be a lawyer.
- It is a soulless way to look at what you do and is incredibly unsatisfying.
- It is insane to measure the value of people or customers in 6-minute increments.
- It also rewards inefficiency.
- With time costing, a lawyer would get paid the same if he were in court advocating for a customer or having a cup of coffee in the cafeteria with him.
- Customers and lawyers become mired in cynicism with hourly billing.
- By moving away from it, you can make both customers and lawyers enjoy the practice.
- Working with a lawyer does not have to be an ordeal.
- If there is a positive experience, the customer will want more.
Using a Retainer for Litigation
- How do you approach using a retainer with a customer?
- They spend time with the customer upfront to understand the legal needs.
- They reach a figure that is a fair reflection of the value they will provide.
- They start retainer for a few months on a trial basis, then review and adjust.
- Afterward, they review annually.
- The approach is inclusive, and they are focused on the clients' end goals.
- A retainer works like an insurance policy.
- “What happens if you ‘underprice' it?” usually means, “How does this compare to an hourly model?”
- The difference is in the point of focus – the next 6 minutes vs. the outcome.
- Only a small part of the value of a customer has to do with what you are doing for them today.
- Most of the value of a customer is exponential over many years.
- Put the emphasis on the relationship, rather than how much you get paid immediately.
- It is important that you demonstrate longevity to the customer and earn trust.
- When you engage a customer that way, the customer starts to understand the long-term relationship.
- How can you offer a retainer for litigation when the process is uncertain?
- The best pricing model is a hybrid that includes a retainer and a fixed-fee.
- It is similar to building an office building, a long-term project with lots of moving parts, variables, and things that could go wrong.
- But, you can break it down into components.
- Any experienced litigator can pitch a ballpark figure for what a case would cost.
- It is a project, broken down by what they know will happen vs. what could happen.
- The retainer is about the day-to-day, and then a fixed fee is provided for each phase of the litigation.
- The concern about pricing litigation is affected by the time cost mentality; value pricing makes it more elastic.
- You need to be more flexible in your thinking and willing to take more risks.
- Transferring the risk from the customer to the professional helps build the relationship and create more value.
- Ron Baker says that time costing is suboptimal because it only works as long as you keep everyone busy.
- The value a group of lawyers can generate is extraordinary.
Value Pricing for Lawyers
- Why are lawyers reluctant to use their judgment to price?
- Jay Shepherd talked about how lawyers use their judgment with their customers.
- Hourly billing makes it easy to measure people and be profitable from a management perspective.
- For a long time, it produced very profitable businesses.
- Lawyers are risk resistant and trained to say no.
- Trying to convince them to move from something that does not seem broken is impossible.
- External force from the marketplace is the only way to change it; it is a slow process.
- The business model can become a competitive advantage in that kind of market.
- How do you approach a value conversation with a customer?
- They deemphasize the money part of the conversation so that they can focus on the customer's needs and goals.
- Get the relationship started first and then talk about money.
- There will be an agreement before any substantive work starts.
- If the first sense a customer gets is that you are a mercenary, it starts the relationship on the wrong foot.
- The approach is really about what the customer is trying to achieve, where Marque can add the most value.
- There are no specific questions they ask, but they try to get to the heart of what the customer is trying to accomplish.
- It is harder when they are dealing with in-house lawyers, due to the hourly billing mindset.
- Commercial customers are very receptive to the approach.
- If a customer has had a bad experience with another firm, it is usually due to hourly billing.
- Retainer customers will get the worst service in an hourly billing model because the lawyers do not get “credit” for working on the account.
- What is one of your favorite ways to offer options to a customer?
- When they are first engaging the customer, they talk about the retainer model.
- But, sometimes that is not appropriate at first because they are not sure what need to be accomplished.
- They will do a fixed fee at first to see how it works.
- They make it clear that they are flexible with how they charge while they advise what is best for the customer in the specific circumstance.
- Having fun is one of the core values at Marque, including social interaction.
- They invest heavily in social life as a firm, and they measure their business decisions against whether or not they will have fun.
- What is one of your best stories about creating value for a customer?
- A small creative agency did not have much money and had a few minor legal needs.
- They engaged closely with the agency and worked with it as strategic advisors and mentors to develop the strategic plan and branding for the marketplace.
- The agency will always be a customer, but the journey has delivered it a value that cannot be measured in numbers.
- The satisfaction and enjoyment of going on the journey with the agency have been great for the firm.
About Michael Bradley
Michael describes himself as the idiot savant of the legal profession, but then he also gave his team $400 each to spend on shoes. He practiced big law for several years. Then in 2008, he started Marque Lawyers. He specializes in trade practice and intellectual property matters. He writes and speaks about the legal profession, pricing, and general business.
- Michael's Website: marquelawyer.com.au
- Michael on Twitter: @marquelawyers
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