The Client Revolution

What scalpers can teach law firms about discounts

Interesting piece in Tuesday's Boston Globe about how scalpers around Fenway Park are having a tougher season than the injury-riddled Red Sox. In anti–free market Massachusetts, scalping remains mainly illegal (although there are now some licensed resellers who perform the very same service). The Red Sox currently enjoy the longest consecutive-sellout streak in Major League history, at 608 games and counting. But that streak may be in jeopardy, as are the profits of the scalpers outside the oldest Major League ballpark.

Some people blame the economy. Some blame complacence in the Sox fan base after winning the World Series twice in the past decade (after a famous 86-year championship drought). In any event, the Globe article by Robert Mays follows around a few scalpers as they have difficulty selling their tickets for a recent game. Even after the game has started, one scalper is still trying to unload seats at a 200 percent markup. Here's the (ahem) money quote:

Like many of his colleagues, he is having trouble moving the seats. To a casual onlooker, the solution seems simple. Drop the price. But when the idea is brought up, the man in the gray cotton T-shirt quickly shoots it down.

“Let me ask you something,’’ he says. “If you owned a store, and you sold milk, and all your milk was about to go bad, and everyone held out until the last minute to buy your milk, and you dropped the price, what would happen?’’

He doesn’t wait for an answer. He explains that no one would be willing to buy milk at full price. The integrity of the product would be compromised.

(That's my emphasis on the last sentence.)

Law firms are often quick to throw discounts out to clients to get the business. Maybe they figure they can make it up with extra hours later on. But what lawyers tend to forget is that discounting the price of their services compromises the integrity of the product. The discount tells the client that the legal advice or representation is worth less. (Which is why I say that discounting is worthless.)

Price your goods (legal services, illegally resold baseball tickets, etc.) carefully. But don't give in to the easy temptation of discounting. It devalues your goods in more ways than one.

What do you think? Feel like legal services differ from baseball tickets in some fundamental way? Sound off in the comments below.

Seltzer, September baseball, and billable hours

I like seltzer.

No, I mean, I really like seltzer. I go through it like it was water. (But with bubbles.) I throw back about two or three liters of the stuff a day. No flavoring, of course; just plain old water and carbon dioxide.

We used to buy one-liter seltzer bottles by the case. (We wouldn't buy two-liter bottles, because they lose their fizz by the time they're half empty.) But our seltzer tab would quickly add up, even at a wholesale club. Plus you had all those environmentally insensitive plastic bottles you had to recycle. Plus, cases of seltzer are heavy — each bottle weighs a kilogram (that's the weight of a liter of water, FYI), so each case weighs about 26 pounds.

Then we hit upon a solution: we got our own seltzer machine. You get reusable plastic bottles, add filtered water, and use the machine to pump carbon dioxide into the water. The company, Sodastream, then delivers more carbon-dioxide cylinders and picks up your empties. If you like seltzer as much as I do, I recommend this.

But here's something I've noticed about my own soda-pumping behavior. (Finally, a point coming.) As I get to the end of my supply of CO₂, I start to get stingier with my pumps. I prefer my seltzer on the fizzy side, so I usually give it six or seven pumps per bottle. But as I start running out of gas, I'll be more parsimonious with my pumping — I'll try to get away with maybe four or five shorter pumps. I was doing that this past weekend, as I waited for my newly filled cylinders to arrive.

Yesterday, my cylinder replacements showed up, and since then, I've been gassing up like nobody's business.

Now think about that: there's no physical difference between the gas at the beginning of a shipment and the gas at the end of a shipment. It's not any gassier. It costs exactly the same per CO₂ molecule. Yet I use the gas more sparingly when my shipment's running out than I do when I've just gotten a fresh supply. Why?

Another example: There are 162 games in a Major League season. Whether you make the playoffs depends on your won-loss record at the end of the 162-game season. To make the playoffs out of the AL East, my beloved Red Sox probably have to win 97 or 98 games (looking less likely as they suffer yet another injury to a key player). Only the number of wins matters, not when they occur. A win in the first week of April is worth exactly as much as a win in the final week of September. Yet anyone involved in baseball will insist that wins are more important in September. Theoretically, then, players will bear down and try harder to win late in the season.

And what does that have to do with billable hours?

Plenty. What the Last-CO₂-Cylinder Phenomenon and the September-Baseball Phenomenon show us is that scarcity (of gas, of games left in the season) makes us value the scarce thing more, and make us spend the thing more carefully (pump less, try harder to win). A lawyer who bills hours has no scarcity. All the hours are equal, because there is an unlimited supply of them (at least until the client squawks). A young associate never feels like a ballplayer in the fall, or me at the end of my carbon-dioxide supply. She's never going bear down (or pump parsimoniously) because of the scarcity of hours.

On the other hand, for the lawyer using Open Pricing (fixed pricing), all your time is scarce. You always have to bear down. You always have to use your fizz wisely. When you're not billing hourly, it's always September baseball.

What do you think? Not buying that billable hours = fizz? Tell me why in the comments below.

Finding your why

If you have a law firm — or any business for that matter — the 18-minute video below may very well change your life. It has mine. When I first watched it in early May, I was blown away. It had shown up in an Apple-related blog (because part of the video discusses Apple), so I tapped the link and watched it on my iPad. As soon as I finished watching it, I immediately went over to iBooks and found and downloaded the book, which I read over the next few days. Since then, I have spent countless hours trying to figure out my "why." (That's where I've been, if you're wondering.)

The video is from the acclaimed TED (Technology, Entertainment, Design) series of 18-minute talks, and the speaker is marketing consultant Simon Sinek. Since most of my reading covers business books and much of that are marketing books, I was surprised that I never heard of Sinek before. Turns out most people hadn't. But that will change.

Sinek's speech and book are called "Start With Why." His big idea is that successful leaders (actually, he prefers the term "those who lead"), whether in business or politics or any other walk of life, first talk about why they do what they do rather than about what they do or how they do it. His money quote, repeated mantralike throughout the 18 minutes, is "People don't buy what you do; they buy why you do it." To succeed, then, you need to start with your "why." Your purpose. Your central belief.

My why, and the why of this blog and my firm, is "to fix the practice of law through innovation." Knowing this why will make it easier to identify potential clients — namely, innovative companies who believe that dealing with lawyers doesn't have to suck. The how of our firm is what I've spent much of the time here talking about — namely, our firm's innovations in fixed pricing, plain English, and other areas. And the what, of course, is the actual legal service we sell.

Watch the video. As I said, it's just 18 minutes. Then, if it moves you as it moved me, start figuring out your why. Share what you come up with in the comments below.