Business development and pricing professionals at law firms who are in tune with the demands of clients can play an important role in recommending what rates to charge for legal matters and services, according to Timothy B. Corcoran, a legal pricing consultant and former law firm CMO.
Increasingly sophisticated corporate clients are demanding that pricing for legal services should fluctuate depending on the type of matter, as well as the specific service being provided, Corcoran said.
Because law firms are "multiline businesses," they have to offer various prices – even for specific services within a given matter – and offer varying rates by individual attorneys depending on the task, he said.
"We have to get away from 'one rate per timekeeper no matter what they do,'" Corcoran told the audience of approximately 25 at the May LMANE Boston lunch program, entitled "Rethinking Pricing in a Changing Marketplace" and hosted by the Sullivan law firm.
"Sophisticated buyers in corporate legal departments are focusing on process improvement and how legal work is done," Corcoran observed. Consequently, law firms who are willing to adjust prices must also focus on ensuring that legal services are delivered more efficiently in order to avoid dilution of profits, he noted.
"You can't effectively set pricing without the other three 'Ps' – project management, process improvement and profitability," Corcoran said.
"What's changed in recent years," he said, "is that procurement and legal operations professionals are opening the eyes of in-house counsel to measuring quality, and linking quality to price."
Firms should recognize at least three tiers of legal services – repetitive, important and strategic – and charge rates commensurate with those services, Corcoran said. For example, fixed fees could be charged for "commodity" legal work, while more specialized, strategic legal counsel can justify higher hourly rates.
In fact, some law firms are guilty of underpricing their services based on a misunderstanding of what clients are willing to pay, according to Corcoran.
"The key for pricing professionals," Corcoran said, "is assessing what the market is determining is commodity work, versus important or strategic work."
The traditional approach of law firms – cost of services, plus pricing – is often completely independent of the perceived value of legal services in the market, Corcoran warned. This places paramount importance on acquiring the information needed to accurately assess what clients are willing to pay for given tasks and services – a knowledge gap that business development and pricing professionals can help fill, he said.
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