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212 posts categorized "Law Office Economics"

April 13, 2011

Watch Your Time Like Your Clients Do

Next time you're chit-chatting with a client over the phone, head on over to Lawyer Clock and watch how fast your "burning" your client's cash -- they certainly are.

Lawyer Clock


October 22, 2010

Cognitive Dissonance and the Low-Cost Lawyer

This interesting Wired Magazine piece, titled Why We Love Our Dentists, explores the unique relationship between price paid and perceived value.  According to a recent study, two dentists will reach the same conclusion when looking at an identical x-ray only about half the time.  Yet despite the fact that dentists are so frequently wrong (they can't both be right, can they?), people love their dentists more than any of their other medical providers.

The reason, according to the article, is due to cognitive dissonance, "the human tendency to react to conflicting evidence by doubling-down on our initial belief."  The study's author Dan Ariely attributes our irrational love of dentists to the pain they inflict:

 

I think all of this pain actually causes cognitive dissonance and cause higher loyalty to your dentist. Because who wants to go through this pain and say, I’m not sure if I did it for the right reason. I’m not sure this is the right guy. You basically want to convince yourself that you’re doing it for the right reason.

The article has a few more examples of irrational behavior influenced by perceived value.  Consider this study:

[R]esearchers supplied people with Sobe Adrenaline Rush, an “energy” drink that was supposed to make them feel more alert and energetic. (The drink contained a potent brew of sugar and caffeine which, the bottle promised, would impart “superior functionality”). Some participants paid full price for the drinks, while others were offered a discount. The participants were then asked to solve a series of word puzzles. [T]the people who paid discounted prices consistently solved about thirty percent fewer puzzles than the people who paid full price for the drinks. The subjects were convinced that the stuff on sale was much less potent, even though all the drinks were identical.

What does this mean for lawyers?  Know that your clients hold deep-set beliefs that the value of your advice is tied (even if subconsciously) to the price they pay for it.  In other words, if you're the lawyer offering the lowest prices on your services, understand that your clients believe your advice is less valuable than the same advice offered by your higher-priced peers.

An unanswered question: do lawyers offering that low-cost advice believe they're less competent than their higher-priced peers? Just as their clients expect to get what they pay for, do lawyers expect to deliver what they charge for?  What do you think?

 

October 19, 2010

Communicating Value and Price

I've been a big fan of Merlin Mann for several years now.  As I was checking out his website yesterday, I found his pricing page cheekily titled: Do You Charge Money to Do Things?  Here's how Merlin describes his pricing scheme:

For most all of my speaking, consulting, and advisory work, yes: I do charge a fee, plus expenses. And, candidly, I charge kind of a lot....  I learned a long time ago to only work for or with people with whom you have mutual admiration and respect—and who already think you’re valuable and great at what you do. In my experience, the folks who expect you to make a case for your own value make for terrible clients. They may be good negotiators and nice people, but working for them is a gut-wrenching travesty. And I don’t do travesties.

With all that said, I do a fair amount of (private, unpublicized, non-ribbon-based) work with non-profits and other deserving groups. And, no, I normally do not charge for this work. So, If you’re working for a good cause or represent an organization that’s trying to do something you know I care a lot about, please ask me. No promises, but I’ll do what I can with what I have.

So, yep. “Expensive” or “Free.” It’s a fee schedule that works.

I think it would work well on a firm website, and provides an important reminder every lawyer should have on their desk: "The folks who expect you to make a case for your own value make for terrible clients."

July 19, 2010

Profit by Giving Your Fees Away

I saw this little blurb on the Church Marketing Sucks blog:  
WaterFront Community Church says, “We’re going to give away 100% of our offering to help build and beautify our community.”
What would the impact be if your firm did the same thing, and donated one day's fees a year (or month) to make your community better? 

I think it is a great idea -- and could be even better if combined with a contest (like Pepsi's Refresh Project) that sought entries from school children or community groups.  What do you think?


July 14, 2010

How Much Should Legal Fees Be?

Lawyers, do you think clients would use a service that describes itself as follows:
We are an independent, unbiased resource designed to deliver legal fee and price transparency and the expert information legal clients need. Our team of expert lawyers has helped us comb through a mountain of flat fee and billable time data to ensure you have the information you need when it's time to hire a lawyer.
Well, that service doesn't exist for legal clients just yet (as far as I know), but it does for people with car trouble.  It is called RepairPal, and it gives people pricing advice (including printed estimates) for various auto service repairs.  Here's how it works:
RepairPal takes the mystery out of car repairs with a simple tool that will tell you the average price you should be paying for a repair in your zip code.  You just pop in a few details about your repair and car, and it will do the rest.  It breaks down the estimated repair cost in a few ways, showing you the range to expect depending on whether you go through a dealer or independent repair shop, the cost of labor and parts, plus the parts usually needed and how much they cost.  The result?  You can feel better about making an informed repair decision, and you don’t have to scramble to get your friend the “car expert” on the phone to ask a dozen questions.
Imagine a world where your clients' expectations of the cost of your services is driven less by the facts of their case and more by an "estimate" they got from the internet.  A brave new world is coming.  Are you ready for it?




July 08, 2010

Measure Time the Way Your Clients Do

Just a quick thought: Are you measuring time the way your clients do? 

Are you keeping track of the days (not minutes or hours) between when you first promised something and when it was finally delivered?  Are you measuring the time between your last client update and the next one?  Do you know how long -- in calendar time, not billable time -- that the average __________ takes? 

You should, because even though your clients see every moment you spend working for them on their bill, I bet they wish you'd pay the same attention to their calendar as you do to your stopwatch.

A/B Test Your Alternative Fees

All too often, firms view alternative pricing as an "all or nothing" proposition.  They fear a wholesale move away from the billable hour could drive their firm to financial ruin if they get the "pricing thing" wrong.  However, instead of rolling the dice with a firm-wide implementation of an unproven and untested pricing methodology, firms should take a lesson from the web design industry and do A/B testing.

What is A/B testing?  In The Ultimate Guide to A/B Testing, Smashing Magazine defines it this way:

At its core, A/B testing is exactly what it sounds like: you have two versions of an element (A and B) and a metric that defines success. To determine which version is better, you subject both versions to experimentation simultaneously. In the end, you measure which version was more successful and select that version for real-world use.

This is similar to the experiments you did in Science 101. Remember the experiment in which you tested various substances to see which supports plant growth and which suppresses it. At different intervals, you measured the growth of plants as they were subjected to different conditions, and in the end you tallied the increase in height of the different plants.

A/B testing on the Web is similar. You have two designs of a website: A and B. Typically, A is the existing design (called the control), and B is the new design. You split your website traffic between these two versions and measure their performance using metrics that you care about (conversion rate, sales, bounce rate, etc.). In the end, you select the version that performs best.

If you're thinking of moving from the billable hour to alternative fees, don't do it all at once.  Instead, identify two similar matters or clients (we'll call them A and B).  Keep serving (and charging) "A" the way you always have.  However, with "B,'" change your pricing structure.  Give "B" a flat fee for the work you're billing "A" for by the hour. 

Pay close attention to the metrics that matter to you and to your clients.  Measure time to complete tasks (not in minutes, but in days).  Keep track of the people and resources used.  Watch what folks are doing (and how they do it) instead of just asking them at the end of week or month how much time they spent.  Most importantly, measure both client and attorney satisfaction with the work and results.

If you do enough A/B testing across your client portfolio, you might find that alternative fees aren't as scary or hard to implement that you thought they would be, but that they make your clients and attorneys happier and make your firm more money.

July 06, 2010

For the Low Monthly Cost of ...

File this one in the "If Doctors Can Do It..." file.  Qliance is one of a number of medical startups that aim to deliver high-quality care directly to consumers for a monthly fee -- without involving insurance providers at all.  From the website:
We're using a monthly membership approach to health care, cutting out insurance and going directly to our patients to provide the most comprehensive, high quality primary care out there. The Qliance membership approach means you can see your doctor whenever you need to - even after work and on weekends. By eliminating the hassles of insurance, we are able to put our patients first and return control of your health care to you and to your doctor.
What services could you offer to your prospective clients on a monthly-fee basis?  Before you dismiss that question out of hand, check out the Qliance site.  If doctors can deliver high-quality medical service to patients (whenever and wherever they need them) for a set monthly fee, surely lawyers can do it for their clients.  Right?


June 17, 2010

The Creative Counsel

Here's the slide deck from my presentation to the Association of Corporate Counsel's meeting in St. Louis last month.  The audience was (mostly) in-house counsel, and the presentation was geared at getting them to think a bit differently about their relationship with outside counsel.  I hope you like it.

June 07, 2010

KickStart Your New Practice

Want to start a new law firm, but lacking the cash to make it happen?  Check out KickStarter, a really unique way to "fund creative ideas and ambitious endeavors" by reaching out to others who want to help.

Would-be entrepreneurs post an idea, and set the amount of money it would take to make it happen.  Site visitors agree to contribute a portion of the startup price -- though no money changes hands unless the project is fully funded. 

If you want to see how it all works, check out how a few entrepreneurs are using Kickstarter to raise money to expand their Snow Cone Stand.