Wednesday 24 May 2017
Chaired by Scott Addison of Infinite Global, this session featured insight from Richard Burcher, Managing Director of Validatum and Daniel Pembroke, Head of Pricing at Simmons & Simmons.
The presentations and following discussion covered some of the overarching principles of pricing strategy and at a more tactical level, how best marketing and BD professionals can work with pricing colleagues and partners in ‘setting the agenda’ within firms.
The Evolution of Pricing in Firms
In the beginning, there was little in the way of finance function and for many firms that meant perennial cashflow problems. Daniel Pembroke traced back to how the first stage in the evolution of pricing was the introduction of credit control, simply to ensure bills got paid. Next came time recording systems and the accompanying training to see that billing was done consistently and accurately.
Daniel believes we’re now at a third stage: maximising profitability. Whereas the previous stages put the onus on finance and fee-earners, profitability is multi-faceted and requires coordination among different parts of the firm. It also requires more of marketers and BD professionals because value for money is open to interpretation depending on how it’s framed.
The paradigm Daniel applies sees the main drivers of profitability as costs, volume and pricing. The most important of those three? None. All are equally important. This means there’s a need for central teams that operate across functions and that can collaborate to model different options. If one party tries to price alone, they risk missing vital information and making a costly mistake.
But Why Change?
Richard Burcher, drawing on insight as a former managing partner, talked about the psychology of pricing and where firms get it wrong. One striking metaphor he uses is of a General Counsel who asks for a tree-house but gets the Shard: misalignment when it comes to understanding client needs.
Another issue discussed was simply lack of partner confidence in pricing their own services – underestimating the value of work and being too prone to discounting. This is a symptom that undermines other efforts to position the firm in the marketplace.
Equally lack of skill in being able to differentiate their skills and service offering was another issue. Clients cannot easily see the benefits a lawyer’s skills without the right supporting materials.
Tips for Better Pricing
Richard chose three concepts to highlight and offer specific advice on:
We should understand price as an aid to buying decisions; it sends a message to the market. That’s why BD and marketing must be involved. If price doesn’t match the firm’s other messages it results in confusion from the client perspective. A premium service offer demands a premium price.
Awards and accolades are evidence of value and provide verification of a price point. It’s important to exploit endorsements from a pricing perspective, supporting a premium offering. Even after a ranking or award is not retained, there is residual benefit that reinforces a brand’s position.
The GC who asked for a tree-house and got the Shard is an example of the need to segment clients based not on old-fashioned market research segments but on actual client needs. If you understand a client’s requirements and budget expectations then it’s possible to tailor an appropriate solution. If you know they’re after the Silver package not the Platinum one then you can resource the job in a way that meets expectations and may well reap a better margin.
Making a Difference, Not Splitting the Difference
Both speakers agree the rise in pricing professionals within firms will continue to grow. That comes in part because partners are more willing to yield control where others can demonstrate means of increasing profitability but also because of broader market pressures and the advance of new technologies. But no matter the cause, increasing profitability depends on collaboration and teamwork across functions.
Graham Archbold, Nisus Consulting