Law firm pricing strategy to cope with rising costs

Marc Gericó advises firms to combine three perspectives to correctly calibrate their pricing strategy

Over the last year, there has been a global increase in costs and, as a result, law firms are facing a sharp reduction in their profit margins. It is therefore a good time for law firms to focus on optimizing their pricing strategy.

Cinco Días, aware that law firms are facing a difficult situation, wanted to count on Marc Gericó, managing partner of our consulting firm, as an expert in the search for these strategies which, for many firms, is still a taboo subject.

The first thing to consider is that, in a legal market with increasing competition and ever more demanding clients, fee planning must be proportional to the other variables involved in the firm’s strategic plans. That is, it cannot be done separately on a client-by-client basis.

As the article explains, “law firms have two ways to improve their margins”.The first option is to simply increase the price, and the second option is to maximize lawyer occupancy. “Therefore, it is necessary to innovate in the pricing strategy and provide policies to offer greater added value that justifies an increase in fees and, at the same time, a benefit for the client“.

How to carry out the pricing strategy

Firms such as Cuatrecasas have developed new methodologies for internal use, to calculate through algorithms price bands applicable to a client depending on each transaction, the resources required to deal with it and the objectives of the advice. Its pricing director, Borja Pascual, explains that “using data and information on fees, we can find market behavior patterns that help us to correctly adapt prices and position ourselves based on our clients’ expectations”.

The pricing strategy is established by analyzing the costs of legal advice plus a profit margin, the market prices that serve as a frame of reference and the perception of value appreciated by the client. Gericó advises firms to “combine these three perspectives to correctly calibrate their pricing strategy.” By doing so, law firms will be able to anticipate potential adverse situations in their market and provide those who use pricing strategies with a strong competitive advantage.

“For there to be loyalty, that is, for the two parties to continue working together on more than one matter and over time, it is essential that the perception of the value of the exchange is positive,” says Gericó.

Client acquisition

As the article explains, “pricing strategy is based on a value equation in which the clients get the service they need in exchange for a fee that also satisfies the firm. When it comes to entering new markets, when law firms talk about pricing, they should not think about costs, but about value“.

Gericó explains that the vast majority of large firms have priority client programs that, because of their complexity or size, have “particularly significant cross-sell or growth potential in different jurisdictions”.

If you want to read the full interview in Cinco Días, click here.