Putting the value in value-based pricing

I wont pretend to know anything about pricing legal services, but I do know a thing or two about the customers of those services. So it's through that lens that I've been enjoying reading Shaun Jardine 's excellent new book on value-based pricing.

To successfully implement value-based pricing, you need to understand what your clients value.

This sounds obvious, but common sense is not always common practice. In the first section of Shaun's book - P1 Paradigm - he gets right the heart of the challenge. What lawyers think clients value most, is not what clients say they value most.

A 'clear understanding of my particular needs', 'keeps to timetable' and 'keeps me informed along the way' are all higher up the client's priority list than lawyers realise. Sadly this is supported by data on upheld complaints by the legal ombudsman. The top two categories in 2020/21 were poor communications and delay/failure to progress.

Lexis Nexis call these blindspots the Riddle of Perception.

"I know my clients" is a common push back for client listening, or even for centralising client feedback. But too often the reality is that lawyers are asking clients a narrow set of questions based on what they need to know to do their work.

What's missing is the wider conversation about value, what a great experience looks like for the client and what a great outcome looks like.

How can you understand client value?

If value-based pricing requires a clear, shared and up-to-date understanding of what clients needs and expectations, where do you start?

The checklist at the back of Shaun's book is a great starting point. As you follow his 8 step approach from Paradigm to Passion, he suggests you:

• Design a pricing confidence survey - to understand how your teams feel about client value and hence value-based pricing
• Collate and review customer feedback and NPS data - analyse what they've already told you
• Collate and review complaints data - things that create a high level of frustration are a good indicator of what clients value most, but aren't getting
• Ask clients views about options and fixed prices - just ask the question, but in a consistent way
• Conduct a 'what do clients want' exercise to discuss and share what value looks like to a cross-section of the firm's clients
• Discuss the outcomes that clients actually buy from the firm
• Design and implement client journey mapping

Of course many of these aren't one-off exercises. Understanding client value is a continuous process, that can be measured through a wide range of signals - from formal research to informal discussions and analysis of operational data.

Is it worth it?

From a customer experience perspective, pricing services based on the value they deliver to clients makes sense to me.

But whether you're firm is looking to implement value-based pricing or not, it's still worth understanding what your clients value about your brand, your people and the services your firm delivers.

If that's not a big enough reason to read Ditch the Billable Hour, then do it for the funny but true cartoons, the engaging writing style, the actionability around every corner and to ensure that your iceberg isn't melting.

#lawfirmstrategy #valuebasedpricing #customerinsight