Record Associates
Pricing ideas to beat the recession
19 February 2009
In this newsletter...
scoping first
smarter pricing
price erosion
strategies for the recession
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Scoping first

With budgets being tightened, clients are more inclined now to protect themselves from 'scope creep'.  Scoping matrices help clients and internal teams know what needs to be delivered and their allocation of time to deliver it.  They also help you sell your solution by breaking down each element into a 'priceable chunk' - whether fixed, capped or variable.

Agreeing scope and time inputs with clients before a project commences enables you and the client to discuss whether certain work stages need scaling down or if they can be done in-house.
Need some ideas?
 
Record Associates undertakes interim support and project consulting to law firms on:
  • sales campaigns
  • tender support and bid improvement
  • market segmentation
  • client listening
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Greetings!
 
Law firms are leaking large amounts of profit through pricing indiscipline, lax controls and sign-off procedures, a failure to 'sell' their value and lack of market information.  With work volumes falling and partners feeling under pressure to reduce prices, here are some ideas to build and protect your business and margin.
Smarter pricing
 
Clients now expect complex projects to be priced differently to commodity and routine legal work.  This requires price tariffs to be developed which split work by practice area (or indeed work types), complexity, and client's perception of importance to them. 
 
Pricing menus can recognise and reflect the client's perception of value and help you capture it.  Have you considered who your clients view as your competition?  It is their rates than your clients will use as a comparator.  Click here to find out how you can stop under or over-pricing.
Price erosion 

This can be the result of more demanding clients, poor communication or inefficient working. McKinsey describe the 'pocket price waterfall' effect as those factors which lead to a steady reduction in the actual amount of profit you finally recovery from each piece of client work.  Read it here
 
Auditing past transactions at the tender preparation stage, which have a similar profile to the work being bid for, can enable you to accurately price work, highlight risks and sell your solution objectively.
Pricing strategies in the recession
 
As well as pricing strategies based on market rates and service leadership (where your service is genuinely unique), the recession has thrown up two others which existing clients will consider genuinely innovative.
 
An 'innovation strategy' seeks to link renumeration to the amount of money/time/hassle you can help a client save from their overall legal budget.  It's objective is to persuade clients that through the more efficient way you work with them switching some of their other work to you will help them reduce overall spend.  It must be backed up by superior processes and examples.
 
A 'value strategy' is designed to cement loyalty with a client by agreeing to short term rate reductions - a proactive approach which shares some of the pain clients are currently feeling.  If you can link it to an agreement by the client to shift more work to you and a review period, it will have limited long term side-effects.