Billing Backlash and the Value of a Differentiated Law Firm Brand

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The legal services industry is going through an important inflection point. Changes in the industry’s fundamental competitive environment, brought on by a surplus of talented lawyers and reputable law firms; a resurgence in client resistance to “generous” legal fees; and the rise of new technology, including legal analytics software that brings an unprecedented level of transparency to legal bills, has led to the commoditization of many legal services.

Incredibly, despite these shifting market dynamics, rates at top law firms continue to grow, often much faster than legal budgets at corporations. All this has led to an escalating tug-of-war between in-house lawyers and law firms, and increased skepticism and distrust from clients. This is a major problem for a “client-driven” industry like legal services.

“It’s not just about saving money,” Alan G Badey, managing director at Citrin Cooperman, recently wrote in an article examining alternatives to the billable hour. “It’s about clients seeking value and accountability for the fees they are charged.” Badey goes on to suggest alternative billing options, including the hybrid system, value-based billing, in which law firms bill for the value they provide as opposed to the hours spent developing the solution. While this is more of an operational issue, outside the scope of branding, what we like about this approach is that the focus is on client satisfaction. It communicates a clear client-centric approach with easily understood benefits. And it steers the conversation away from price and toward value.

Whether a firm changes its billing strategy or not, the changing market forces suggest that it might be time for all law firms to re-examine their value proposition. Outside of price, why should a company work with your firm versus another? What is the reason to believe? A differentiated and compelling value proposition, one that is credible and unique coming from your firm, is one of the best ways to avoid being seen as a commodity.

We’re firm believers that a strong brand can help a company navigate inflection points, including the one the legal services industry is currently facing. Firms that communicate compelling points of differentiation, based on a powerful brand, will be successful at competing on value rather then price, and emerge from this transformation stronger and with deeper client relationships than before.

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