A value-based pricing strategy will pay dividends

Solicitors have to make tough decisions about how they do business along with value pricing their services and perhaps dropping those that are unprofitable.

The fundamental question should be: which services provided to clients are no longer viable and should be dropped? It is a tough decision, but ignoring the consequences will make firms financially unstable.

Value pricing

Strategically, we can only decide on what direction we take our firm once we know what it costs to produce each piece of work. However, we also need to assess what value we place on the services we offer.

Value pricing your services
will help identify your future strategy and obtain the best possible value from client relationships. Part of your differentiation strategy is understanding what clients
do and do not value.

Placing your client at the centre of your pricing strategy and engaging with them to choose various options and
take responsibility for that
choice should be paramount
in your thinking. For example,
if a client wants some work completed by a specific deadline, should they pay a premium for this additional service?

The choice is simple: you either deliver a processed
service with a deskilled workforce at a commoditised price, or you focus on delivering
a value-priced service at a premium price. I suspect
the answer for most firms
is the latter.

The debate that is often heard – “I am a professional and would always deliver a partner-led service” – does not stack up
when competing with panels and non-reserved legal services at commoditised prices.

You could argue that the quality and standard of service delivered by the commoditised provider should be of a high standard in any case.

Client care

Breaking the hourly billing habit can transform your firm. Your client will value the work you do and not the length of time you take to complete it.

It is imperative to determine what clients want and need, which requires genuine communication. Listen actively and understand what is on their mind. These value conversations will assist in finding the best strategy for pricing each matter.

The key principle is exceptional client care: you cannot embark on a value-pricing strategy without raising your game to service levels that ensure your clients value
your service.

There should be several options to offer a client, at different price levels, which
can help them think about what is really of value. The timing of the pricing proposition is crucial.

When considering yourinitial fixed-price estimate, begin with a budget based on what you think your normal billable hours would be then add a premium of 50 per cent. The two basic ways of pricing services are cost-plus pricing and value-based pricing.

Cost-plus sets the price at the cost of production plus a profit. In value-based pricing, the price is based on what customers are willing to pay.

The more value your product or service has to your customers, the higher the price you can charge. Value-based pricing strategies, therefore, are based on the value of the product to individual clients.

It is far better for you to control your own destiny and accept that many traditional services that you currently offer may not be around for much longer.

Be prepared to invest
in your future and adopt a value-pricing policy if you wish to retain your independence. SJ

Viv Williams is the CEO of 360 Legal Group