Fixed fee pricing is on the rise. According to a recent study by Pitcher Partners nearly 3 in 10 law firms offer it.
It’s not an easy strategy to implement and the study suggests that many firms are not yet getting it right in terms of profitability. Estimating the hours required for a legal service is notoriously complex. This is made all the harder when the client’s conduct can have such a big impact on how many hours end up being required.
Nevertheless its growth suggests there is client demand for alternatives to the old model of – this is our hourly rate, here is an estimate, but the final bill might be quite different.
From the client point of view this fee uncertainty causes anxiety. This is particularly true because the client lacks the expertise to understand what’s possible. The client experience of the traditional billing model is poor. The client feels like they have no control over the bill. Which is, of course, largely true.
Fixed fee pricing can take away the risk of ‘bill shock’. The client feels like they are more in control and they know what to expect.
In short, for many and perhaps particularly for those that use lawyers rarely, it is a better client experience. And this can remain true even if the fixed fee amount is higher than what the client might have paid under the hourly rate model.
Of course an even better client experience might well be ‘value’ pricing but that is not suitable in all cases.
For the firms offering fixed fees – whilst clearly much more attention needs to be paid to accurately pricing the service – it is an example of professional services trying something genuinely new from a client experience point of view.
Whether or not a client ultimately recommends your service to others doesn’t depend on the price they paid for your service. It depends on how paying that price felt to the client. Most complaints to legal services regulators around the world relate to complete mismanagement of clients expectations around fees. The effective management of those expectations is one clear benefit of fixed fee pricing.
The challenge for many working in marketing in professional services is to identify what is truly different about being a client of your firm compared to the firm down the road. Why should someone choose you? Adopting a fixed fee pricing model can be a key plank of your differentiation story.