September 15, 2005
Law Firm Pricing Model to Win Business
I just finished reading the September issue of the Metropolitan Corporate Counsel and its special section on technology and legal research. The interview approach taken by the publication is a great source of “best practices."You need to read what your corporate customers are reading. You need to know what they consider to be their priorities. You need to know what they are looking for in a relationship with a law firm. You need to know their concept of service quality. Knowing your customers gives you a competitive edge.
I was particularly interested in the publication’s interview with Robert D. Rowe, chief operating officer of NEXTRA Litigation Solutions, http://www.nextralit.com. NEXTRA is in the business of reviewing documents in litigation cases. It is their pricing model that interested me most. I was also impressed at their technology and attention to process detail where seconds per page add up to hundreds of thousands of dollars in review cost. The interview is on page 29 and is worth your time.
The reality is that in spite of the “hype in the press and consulting world," use of alternative (fixed fee) pricing has not materialized to a significant degree. Part of the reason is the corporate decision makers fear they will pay too much. GCs desperately want cost predictability, but accepting a fixed cost proposal exposes the corporate decision maker to the risk that those who judge them will criticize the deal.
NEXTRA’s pricing model appears to be designed to overcome that buyer resistance. Under the NEXTRA pricing model, the buyer pays the lowest of three values:
1. A guaranteed capped amount;
2. An agreed upon blended rate times actual hours;
3. The amount of hours at the hourly rate of each timekeeper.
I’m not crazy about the model, but maybe it is a way to get the corporate buyer to drink from the water trough. Then, over time, the three value options can be replaced with a straight fixed fee arrangement that allows providers to benefit from their efficiency and technology. The pricing model does give NEXTRA a competitive edge. It does what a good salesperson does. They have taken the time to learn the buyer’s concern and then they have addressed it. In this case, NEXTRA has capitalized on the buyer’s need for a predictable cost by neutralizing the buyer’s concern about “overpaying."
Related posts
Filed under Alternative Billing by Tom Collins