The 6th annual meeting of the True Value Partnering Institute in Miami offered law firms a valuable Master Class in Pricing with several critical takeaways
MIAMI — Last week I was fortunate enough to attend the 6th annual meeting of the True Value Partnering Institute, which kicked off with an outstanding pricing master class put on by Kevin Doolan of the Møller Institute.
It’s hard to boil down an intensely deep three-hour session into a blog post, but I did glean a few key takeaways that are worth sharing:
1. Be cautious of the impulse for filet mignon at taco prices
This is one of those inside references where you may have needed to be in the room, but allow me to explain. Doolan opened the session by sharing a very funny video of people negotiating for everyday items the way legal pricing is often handled — after the fact, because budget wasn’t appropriately considered up front. In one vignette, a man is trying to negotiate down the price of his steak dinner by citing tacos from a taco truck. “Filet, ground beef. They’re both from cows, right?”
The impulse to try and equate steak and tacos can actually happen on both sides of the table — law firms and clients. Indeed, clients may want to get the legal equivalent of a filet mignon but pay for a taco because at one point in time another firm did something tangentially related at a rock-bottom price. Similarly, law firms may want to offer filet mignon service because the impulse they want to put their best foot forward and go all in, when all the client really needs is a simple taco.
I’ve thoroughly worn out that analogy, of course, but the underlying lesson remains: Both sides need to understand scope and budget up front. Absent that, services will be offered or asked for that no one needs or intends to pay for. And in the end, no one will be satisfied with the outcome.
2. If you can’t differentiate what your firms brings, you’re doomed to compete on price
The work your firm is bidding on today might involve work that is already commoditized, or it could be niche work that involves a high degree of expertise. An inexorable truth in the legal profession, however, is that all work trends toward commoditization. Lawyers work off of precedent, and once something has been done and made public, it can be reverse-engineered. The classic example is the poison pill — what was once revolutionary is commonplace today. This will be true for pretty much anything lawyers do. And those offering commoditized work, all other things being equal, most often compete on price.
So, assuming you don’t want to always be the cheapest vendor in the market, why should a client choose you?
To figure that out, you must first determine who your competitors are. That doesn’t necessarily mean firms within your Am Law tier. It means other firms representing the client you want. What do you bring to the table that is unique to your firm, defensible from your competition, and most crucially, important to your client?
To build your answer to this, you must start with what matters to the client. That’s the touchstone of what your client values. The options are nearly limitless. Understanding whether your client values improved cycle-time, institutional knowledge of their business, average judgement value, or your firm’s diversity or corporate citizenship will tell you what you need to show them so they can experience your firm’s value. That will inform what unique features of your firm you will want to highlight to clients and to the market.
3. Understand why you’re giving a discount and why the client is asking
Imagine for a moment that you bid on a piece of work, and in response the client calls and says they have a competing bid that’s $15,000 cheaper. How do you respond? For many firms, they’ll either match the lower price, or at the very least counter to try and meet somewhere in the middle.
But why? The gut-check answer is because you want to win the work. But why are you so quick to offer the discount? What was wrong with your original number? Maybe you didn’t really have a basis for the original proposal, it was just your best guess. Or maybe you knew you were higher than you needed to be, but you thought the client wouldn’t object. Neither option makes you look particularly good.
Doolan made a great point concerning this situation. If the client is calling you, the lower-priced competition is likely already out of the running. After all, if the lowest-cost vendor was really the first choice, why isn’t the client just calling them and signing on the dotted line?
Most of the time when we as consumers see a number that we know is too low for what we’re expecting to get, we instinctively know that what we’re getting is either too good to be true, or just plain no good.
That’s not to say you shouldn’t move on the price. But have a reason to move. Discuss the assumptions and plans that went into constructing the original bid, and discuss with the client what they’d like to change in order to corral the cost.
Think of a kitchen remodel — a good contractor will be willing to revisit the price with you. But keep in mind that it will likely involve discussing whether you really need the top-end appliances or imported Italian marble countertops, or if those are areas where some compromise could be made to save costs. Take the same approach with your client.