Worth Reading - The Worth Reading series collects together some of the leading thinking and latest research relating to the pricing of legal services. As time goes on more articles and insights will be made available to help everyone get better at this critical skill for the business.
Wayne Gretsky, the fabled Canadian ice hockey player, is renowned for attributing some of his success to “Skating to where the puck is going to be, not where it has been”. Richard Burcher discusses the challenges and changes facing law firms and suggests how they will need to approach pricing in the future to anticipate where they need to be on pricing.
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Only 4 per cent of fresh instructions for law firms is won on price, the largest ever client research project has shown.
Two thirds of business is generated through reputation and trust, with 30 per cent coming from existing clients, 19 per cent by recommendation and 17 per cent based on the people or character of the firm.
The findings come from the biggest client experience research conducted in the legal profession, with almost 70,000 surveys and 5,000 anonymous experience reviews undertaken in the past six years by Lawnet, the collaborative non-profit network for independent law firms.
When it came to cost, clients were more interested to understand how charging schemes worked, rather than the price quoted. They also wanted to know the benefits of using the firm and to be kept updated as work progressed.
The findings reflect the conclusions of an earlier report by the Law Society that suggested that the public were unable to differentiate between firms.
Helen Hamilton-Shaw, a director at LawNet, said: “Many lawyers see negotiating as part of their core skill set, yet our research suggests there is often a skills gap when it comes to talking about costs with clients.”
The global legal service market will grow to more than $1 trillion after 2020. That is quite impressive — however, to the corporate clients who pay for these services, this increasing amount will generally be regarded as additional costs. And since most companies are under pressure to reduce their overall costs due to increasing competition and digital transformation journeys, they are also looking more critically at their legal spend than before.
This raises several key questions for general counsel: Do we pay too much to our legal service providers? And given the lack of transparency in current pricing techniques, how can we make sure we’re getting good value?
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