Pricing Approach and Alternatives
In today’s cost-driven professional services environment, especially legal services, almost all clients are demanding approaches to pricing and billing that limit costs, mitigate risks and tie the value of the service they receive to its cost. This drive for cost control has resulted in an increasing demand for discounted and capped fees and an increasing trend away from time-based (i.e. hourly billing) fees toward value-based (i.e. project/outcome-based) fees, often referred to as “alternative fee arrangements”.
At the same time, few firms have perceived pricing as a key to competitive advantage or invested sufficiently in strategic pricing which equates to tailoring their value proposition to client needs while assuring a fair remuneration for their services. Clients have different perceptions and priorities regarding value (e.g. quality of service, reputation, complexity of service) while firms also need to recognize that pricing structures vary by practice area and the type of service (e.g. ‘commodity work’ versus high value work).
Smart pricing approaches can strengthen client relationships (builds trust and reduces tension over fees) while optimizing profitability, especially if appropriate pricing is complemented by disciplined project management to ensure that delivery is efficient and pricing agreements are not diluted.
Edge assists clients to
- Review and adapt pricing strategies to improve client relations and profitability
- Develop and implement a pricing process, including resources and data needs
- Build awareness and provide orientation to partners and other decision-makers on different pricing structures and positioning