Is selling legal services like selling jam?

Almost anything is capable of differentiation. If this were not true, how is it that Fortnum & Mason can charge £5.25 for a pot of strawberry jam compared to £0.29 for substantially the same thing at Tesco? The name gives a clue – “Tesco Everyday Value Strawberry Jam” doesn’t have quite the gravitas of “Coronation Royal Sovereign Strawberry Preserve”. But clearly there is more to it than that.

The problem the profession is grappling with has its origins in the conflation of two completely different concepts; efficiency/effectiveness on the one hand and genuine commoditisation on the other hand.

On the issue of efficiency and effectiveness, there is no doubt that there is a very real need for the profession to address its production and delivery methods. Initiatives such as process improvement and legal project management aim to identify waste and duplication in the production process, thereby reducing production cost for the benefit of the firm in improved margins and the client in terms of reduced fees, or both.

With an eye to resisting undifferentiated offerings and the resultant commoditisation of their services, some firms have focused relentlessly on becoming known for certain practice areas. In the US for example, think Skadden, Arps, Slate, Meagher & Flom that ranked first in BTI Consulting’s Client Perceptions of the Best Branded Law Firms report for successfully branding itself as “the transactions firm”.

Other firms have chosen to spotlight their business models. Jones Day, which ranked second in BTI’s survey, is recognised for client service, value and experience.

For an example of how this works in practice, in an industry that is every bit as ferociously competitive as law, one needs look no further than the airlines. As with law firms, they impose a minimum standard on themselves (get you and your luggage safely from point A to point B) but by offering widely divergent service experiences (on-board and peripheral), they can achieve pricing innovation with a differential of up to 500%.

While technical capability can be a factor justifying a pricing differential between firms, it is far less of a point of difference than firms might think. In future, service and all that this entails will be where the pricing battle is won and lost.

Richard Burcher is Managing Director of Validatum (UK) Limited, an international legal services pricing consultancy  www.validatum.com

Filed Under: Legal Services

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