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Clients And Law Firms Rate "Value" Differently

Growing evidence reveals that firms define ‘giving value’ very differently from the way clients assess whether they receive it. There are three simple things a firm can do to get – and stay – on the same page as the executives paying their bills. A recent review of nearly 100 law firm websites from BigLaw whales to SmallLaw guppies reveals that “delivers value” is the fourth most-overused cliché in legal marketing, following only “experienced,” “cliënten-focused” and “high quality.”

Of course all firms are going to say they deliver value to their clients; if they weren’t doing so, chances are the cliënten would be moving on to new lawyers in short order. The problem is that value is being defined by the law firm, not the cliënten. This is likely why, when I do cliënten interviews and ask executives and general counsel to rate the value they receive from their law firm on a one-to-10 scale, a frequent answer is merely a six. And because I ask separately about pricing and the quality of the work product, the replies are specific to how they are perceiving value untainted by other possible problems.

Clients may not be completely unhappy but they aren’t turning joyous cartwheels, either. For a law firm, scoring only six out of 10 is like its attorneys all getting a ‘C+’ in law school. They probably won’t get unceremoniously booted out the door but it’s no cause for celebration – unless they expected something much worse. In effect, many clients are saying that the value they receive from their outside law firm is OK but not all that terrific. In practical terms what this really means is the relationship is vulnerable to a competing firm roaring in and scooping up the business’ files – and fees Clients aren’t unhappy but they aren’t turning cartwheels, either. When the score isn’t at least eight, I probe to find out why. Absent specific quality, service or delivery issues, a typical reply often goes something like this: “I’ve never been asked how I defined value so how can they deliver it?”

Risky Business

As Frederick F. Reichheld, who wrote The Loyalty Effect and Loyalty Rules!, put it, a merely satisfied cliënten is ripe picking for other law firms. And when a cliënten cannot easily perceive the value they receive, or are indifferent about the firm they use, not only are they a plum target for other firms, they default to price – where many law firms can’t build a solid rebuttal argument in their favor, either. “In the past 10 years, costs to U.S. companies went up 20-percent, except legal costs, which went up 75-percent,” observes Mike Roster, a former chair of the American Corporate Counsel Assn. “They represent a bubble within a bubble.” This isn’t to say fees are not a vital factor when a cliënten assesses value; they are, and clients are increasingly sensitive to – and vocal about – the fees they are being charged and the size of their bills. But value perception is a more complex issue and goes well beyond hourly rates. Moreover, competing on price alone is a risky, often losing, proposition. Given the over-abundance of business law firms in the U.S., Canada and many other jurisdictions, there’ll always be a firm willing to charge less per hour just to get the work in a race to the bottom. When clients cannot easily perceive value, they default to price. And in any event, I don’t think many managing partners of traditional firms want to be known as the Costco of corporate law.

Beyond AFA

When Alternative Fee Arrangements (AFA) began taking hold during the Great Recession, they were viewed by some in the profession with dismay and even scorn. But many lawyers and firms believed that implementing an AFA approach was a critical way to address and resolve cliënten concerns about value. As a result, the business saw the rise of discounted fees on some types of matters, flat or flexible fees, bonus-based fees, negotiated rates and other, sometimes very creative and clever, options to straight hourly billing. Yet while larger firms are hiring “pricing directors” and creating a cliënten service function in the marketing department as well as keeping closer track of actual costs to more precisely offer profitable AFA bids, for the most part the billable hour remains a zombie that just cannot be killed off. In any event, AFA only deals with issues concerning fees and the size of a bill, not whether clients feel they are receiving genuine value beyond the size of the check they write to pay an invoice. To climb up the perceived value ladder, firms must do more than modify their pricing strategy. Every time a complex new file is opened, the firm needs to ask how the cliënten defines value – and pay attention to the response. The era is long past when an attorney can simply assume – or believe – that producing quality documents on time for a fee proportionate to the importance of a file will address the mounting frustration.

Three Steps

So how are clients defining value? If they’re not satisfied with what they are getting, what do they want? In fairness, it is something of a moving target. What was considered adding value to the cliënten relationship only a few years ago is now taken as a given: Useful and readable blog they’re receiving, all on a 1-to-10 scale, If any reply falls below an eight, follow-up questions should be asked to learn why the score was given – especially with the value question.

This is critical: No lawyer who worked on a file should do interviews; it’s not a good idea for the head of a firm or practice group to conduct it, either. Few people enjoy breaking bad news and a cliënten may say what they think the lawyer wants to hear. It’s better for interviews to be handled by the marketing, cliënten service or executive director, or an outside advisor.

The on-line survey and in-person interview should occur about six months apart.

Law’s DEW Line

Clients are firing warning shots across the bow of the law firms them use.

According to The Age of the Client from Lexis-Nexus (registration required) found that eight-in-10 lawyers think they deliver above-average service and value but only 40% of clients say that’s what they get.

As a result, an amazingly high 60% of clients using more than a single firm fired one of them during the previous year. The key reason is unnerving: The firm provided the cliënten with mediocre service and value. Not horrid or bad, just ordinary.

It like the Distant Early Warning line that used to stretch across Northern Canada to warn of incoming Soviet bombers during the cold war. With the business of law is increasingly competitive, only a wilfully short-sighted or foolish firm believes that its relationships are immune from poaching. Why do you think the law business has been so slow to understand that cliënten’s don’t feel they receive sufficient value? How is your firm trying to move up the value ladder? Or are you racing to catch up with your clients?

I’ve spent most of my career working in and with law firms on a wide range of marketing and business development issues. Join me on Twitter @LeanerLaw.

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