Good article in Monday's Wall Street Journal about pricing strategy, something most lawyers never think about. The main premise is that most businesses shouldn't be competing on price — that is, by lowering prices. Instead, if you turn out a high-performance product or service, you should be able to charge a premium for that. The article is called, aptly, "Raise Your Prices!" and is written by Harvard Business School professors Frank Cespedes and Benson Shapiro and by consultant Elliot Ross. And despite my natural aversion to Harvard and to titles with exclamation points, it's a good article and one that all lawyers should read. Strangely, it is not (currently) hidden behind Rupert Murdoch's paywall, so you don't need a subscription to read it. (Maybe the Journal failed to take the article's advice.)
There's also an excellent sidebar piece, "Seven Mistakes of Poor Pricers," which briefly describes many of the same objections lawyers give me when I talk about Open Pricing. Read it, and see if any of it sounds familiar to you (such as "Cost-based pricing is easier to explain" and "Everyone else prices it that way").
Here's one of the money quotes (ignore my pun) from the main article on the benefits or pricing based on performance:
By competing on performance instead of price, you shift the battle to where your company's strengths lie—in the ability to deliver unique benefits. So-called performance pricers are adept at three core activities: identifying where they can do a superior job of meeting customers' needs and preferences; shaping their products and their business to dominate these segments; and managing cost and price in those areas to maximize profits.
But wait, you say. I thought all your talk about Open Pricing or fixed fees or value pricing was about saving the clients money? Why now all the talk about raising prices? My clients aren't going to tolerate that!
It's oversimplifying things to say that value pricing is about saving clients money. Instead, and much more importantly, it's about aligning your prices with the value the clients place on your services. Without that alignment, there is enormous waste and client frustration. Plus, the perverse incentives and unintended consequences of hourly billing artificially inflate client costs. So yes, you can raise prices for premium service and still save clients money.
Bottom line: clients will pay for value. If you're constantly discounting your fees, what does that say about the value you provide?
Private-practice lawyers: What do you think? Is there something you're so good at that you can command a premium? And in-house counsel: Are you willing to pay a premium for higher-quality service? Sound off in the comments.