Value based pricing for law firms with Keith Maziarek

Lawyers and firms have long struggled to find the right way to price their services.

The hourly billing model focuses on the amount of time spent on a matter, project, or case. This can often lead to inefficiencies and frustration for the lawyer and the client. Value based pricing is an alternative that takes into account the value of the service being provided rather than simply the time spent. It means that lawyers and firms are paid based on the results they achieve for their clients.

The incentive becomes focused on getting better results. Value-based pricing can also help build trust and improve communication between lawyers and clients.

However, that doesn't make pricing or pricing conversations any easier. In this episode, we go into the rabbit hole of pricing. 

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Special thanks to Paul Stroka of LexFusion for making the introduction to Keith.

Episode content

• Introduction and summary ➡ 1.24
• Power of buyer ➡ 4.30
• Power of supplier ➡ 7.34
• Elastic economic market ➡ 9.42
• Price discrimination ➡ 13.14
• Client sophistication ➡ 17.08
• Inflation and pricing for specialized services ➡ 23.46
• The next service delivery model ➡ 31.04

Here are some of our favorite takeaways from the episode (edited to be reading-friendly).

Value of work

One of the things that get ignored in discussions with clients or in the clients' calculus and how they determine what they're getting for the bills they're paying is that there's never a very accurate way of measuring the value that was captured from the services, and what the outcome was.It's always what was that bill? That bill is high. Maybe you bought a company, in an M&A scenario, that had subsidiaries or locations in highly regulated, highly risky territories - where there's a ton more work to be done. It's not an apples-to-apples kind of company. So you don't look at what I got for the price I paid? You're just saying the bills are higher now.

Price discrimination

Ab: How do you demonstrate that we're going to charge you X, and it's worth more than X to you as an outcome?Keith: Price discrimination is the short answer to that. Not everything is worth the same amount. By nature, and this is not any judgment or me trying to take a position on the actual value or the value of the practitioners doing this kind of work. But by nature, there's a spectrum of complexity, and the stuff that's really complex on the highly complex side tends to be more scarce. There is a more scarce supply of people who can do it.On the opposite side, on a more commoditized side or the more routine side - it's not as complex, and there are more options to avail yourself of to do that work.

Client sophistication - apply the scalpel, not the hatchet

My particular role is to ensure that the firm is as profitable as possible and that we're making our clients as happy as possible in terms of service delivery models and getting the outcomes they want.

The conversation with the client depends on the level of sophistication:

I'd say architecting and implementing some of those solutions depends on the sophistication that the client or the person on the buy-side has. There are only so many le