Pricing Strategy

 The 4 P's of marketing are Product, Place, Price, and Promotion. The 5th P is People. Now, legal services are about all these 5 P's but most important one is "Price". 

There are different pricing strategies in general. Most common among them are:

1. Cost-plus pricing - your selling price is based on the costs involved and margin of profitability involved. 

2. Competitive pricing - your selling price is based on the selling price set by your competitors. 

3. Value-based pricing - your selling price is based on the worth or value being provided to customer.

Now, there are different pricing strategies for legal services. It is not called selling price but fee or charges. 

1. Hourly Fee - the fee is based on the number of hours spent by the attorney (or attorneys) to complete the matter and provide deliverable. 

2. Flat Fee - the is fixed or set, irrespective of the number of hours spent to complete the matter and provide deliverable. 

3. Retainer Fee - the fee is fixed on a monthly basis. 

4. Mixed Fee - the fee is a mix of discounts, hourly fee, flat fee, deliverable based fee, etc. 

5. Contingency Fee - as the name says, the fee is dependent upon certain condition, for e.g., a positive outcome will be charged at 10%. 

However, the customer is getting price sensitive and wants to pay less money for the same quality work. Typically, in legal space, customer or client works with multiple law firms to hedge the risk. It is same like not putting all eggs in one basket. This also provides the client to observe how different firms are providing the services and at what cost. The emphasis here is "how" because the "what" is categorized between "commodity deliverables" and "value deliverables".  

This coupled with the inflation, bonus, salaries, operating costs, and competition with other law firms puts an enormous pressure on the law firms. Yes, educating the attorneys, involving them in decisions make sense but end of the year appraisal discussions do not play happy tunes. 

This is where the legal tech can help as below for developing pricing strategy:

1. Analyzing when "value deliverables" become "commodity deliverables". 

For e.g., once a query has been replied after conducting through research, reply to similar queries become "commodity deliverables". The first query can be charged at hourly fee while the next ones at flat rates. 

However, this can be tricky wherein clients ask query only if the same is answered at no cost. 

2. Analyzing which client is often asking for free work or at discounted work. 

Answering the question whether to work at any price or whether to work not below than a certain price is crucial. 

3. Analyzing if tiered pricing makes sense.

Giving different rates every time is a headache and justifying those rates during invoicing is migraine. Having tiered pricing and tiered discounting structure for the type of client can make a difference between peaceful dealing and haggling. 

The legal tech solution captures all the relevant details and provides the above analytics. Hence, it is crucial for a law firm to understand and define what is the requirement and then dosing or obtain a corresponding solution and not the other way around.