Are café owners smarter than lawyers? (Links fixed)

This is a repost of yesterday's post, which was beset by bizarre and crazy problems. The first problem was the accent in the word café. It turns out that a Mac or an iPhone can handle this no problem. But apparently, Windows boxes and BlackBerrys ne parlent pas français bien. Hat tip to the worldly Lance Goddard, author of the fabulous Are You Writing This Down? for figuring this out.

Second, I was able to successfully (and quite easily) embed the CNN video link into the post. Unfortunately, the link doesn't work in the RSS feed of the site, which is how many of you read this.

Here then, otherwise unchanged, is yesterday's post, unaccented and with a new video link. Sorry about the mess!

Are café owners smarter than lawyers?

When it comes to understanding how their customers value their services, the answer is probably "yes."

Over the past week, I've been talking to scads of lawyers — both in-house counsel and law-firm lawyers — about how our employment-law firm killed the billable hour and switched to 100% fixed fees. The question I've been getting most often from both types of lawyers is some form of "How do you set the price?" The law-firm lawyers all worry about getting paid enough when opposing counsel run up the interrogatories and depositions, or when a client unreasonably rejects a settlement and prolongs a case. The problem, I tell them, is that they're focusing on their costs.

But clients don't care about your costs. They only care about the value that the lawyer's service has for them. That value is by definition subjective, and it can be difficult to determine. But it's the only thing that matters. If your price is more than the value the client assigns to your service, then he or she is going to take their business elsewhere. Only if your price is less than or equal to that value will the client agree to do business with you.

"But how do I make money that way?" the lawyers ask.

The answer is: by having a service that is valuable enough to allow you to earn a profit.

One café owner in Ohio has taken this to the ultimate conclusion. Sam Lippert owns the Java Street Café in Kettering, Ohio. His menus have no prices. How does he determine his prices? He asks his customers. He tells the diners to pay whatever they think their meal was worth. Does he make money? Since he switched to a pay-what-you-want system, he says his sales are up 50 to 100 percent on any given day compared to his previous menu-pricing system. Why? Because his customers obviously feel that he provides a service worth paying for. And his prices always match the customers' value — because they set the prices.

So why do lawyers find this so hard?

The John Roberts interview on CNN's "American Morning" is above. Or link to it here. A transcript is here.