Setting the right price
Pricing models need to take into consideration law firm needs as well as clients’ individual circumstances, says Sarah Charlton, chief executive officer at Eaton Evans & Morris.
The word ‘pricing’ can invoke many thoughts – solicitors undervaluing their worth, costs information, fixed fees, hourly rates, legal aid, CFA’s, bundled or unbundled. For the accountants hidden among you, perhaps thoughts jumped to realisation and utilisation rates? However, I would be intrigued to know how many of you immediately thought of value pricing?
The concept of value pricing feels like it is the new kid on the block but is it really that new? Or has it been around for a long time, just not in the regulated sector? Estate agents are always placing a value on a property – that doesn’t necessarily mean it is worth that amount of money. It is merely a case that someone might be willing to pay that value for it. You may be content to pay over the market rate if it is close to a school/college or family member, if it is an adjoining piece of land or close to where you work. With all this in mind, we are often prepared to pay over the odds for something that we really want or we feel that we need.
So how does this map over into the legal sector? I think it is fair to say that pricing probably doesn’t receive enough attention across the profession. As an accountant and a compliance specialist, I am always looking to be as commercial as possible within the realms of compliance and the spirit of the law. However, value pricing does leave me very uneasy.
Why do I feel so uneasy? Is it because of the regulator? The Legal Ombudsmen? The courts? Culture? Or possibly all of them!
Having read the SRA’s guidance around the transparency rules it is clear to me that it is not their intention to specify what pricing models you should use, or the prices you should charge. However, it is common for consumers (a word you either love or hate!) to procure legal services at a distressing time in their life – is this not a form of vulnerability? I am always advocating that the SRA Accounts Rules should never be read in isolation as there are much wider considerations to be taken into account such as VAT, Solicitors Act 1974 etc. With that in mind, perhaps the regulator doesn’t need to interfere with pricing when Rule 1.2 of the Code of Conduct for Firms requires you not to ‘abuse your position by taking unfair advantage of clients’. The SRA also promote this to consumers by advising them that they can expect to ‘receive advice and services from advisors who put your interests first’. I would be nervous about a team applying value pricing consistently within the confines of regulation and how I might spot someone going ‘off-piste’.
The Legal Ombudsmen deal with dissatisfied legal consumers (subject to eligibility). Assuming you have been clear, transparent and accurate about the value that is being placed on the piece of legal work that you are completing – it might be fair to say that the risk of recourse would be the same as any other, more common, pricing models.
There appears to be an emerging trend of consumers exercising their right to challenge legal costs through the courts. This sits in the backdrop of what feels to be a lack of tolerance by costs judges for overly inflated legal bills. This is resonated by a recent report that was commissioned and released during this summer by the Costs Lawyer Standards Board (CLSB) to ascertain how costs lawyers might be able to reduce the costs of legal services. How will costs lawyers, costs judges adapt to value pricing?
Finally, the term ‘culture’ has become a bit of a buzz word, with an increasing number of law firms actively looking to create a positive and inclusive atmosphere. Could culture be aligned to value pricing or are staff going to feel conflicted with pricing the value of what might be a lifeline, light at the end of the tunnel or a way out of an incredibly difficult situation? The question remains of how to evaluate a fair price for both sides.
