I was fortunate enough to moderate a session at our August ILTA conference on 'Defining and Delivering Value in Pricing and Client Relationships ' with a wide array of thought leaders in this area.
Over the next two weeks, we (the Business & Financial Management Peer Group) will be issuing a short series of blog posts which will share some of the top tips highlighted during and subsequent to this session from a number of those on the panel.
For our first blog post on the topic, I asked Patrick Johansen (Director of Business Development for Brinks Gilson & Lione) what he thought the term 'value' meant to those of us working in the legal profession, especially to those working for law firms.
Here is what Patrick observed:
"Law firms are not immune from the basic principle of a market economy: buyers want to buy at the lowest price possible; sellers want to sell at the highest price possible. Where they meet is where a value compromise occurs. “ The real essence of value revolves around the tradeoff between the benefits a customer receives…and the price he or she pays for it.” (McKinsey & Co.)
Here is a simple formula for calculating value: Value = Benefits – Cost (V=B-C)
Value, like beauty, is in the eye of the beholder. Different clients buy different value. Therefore, value is unique; it is relative to individual clients; and it is relative to the competition. Value is about proving the benefits your firm offers are greater than the fees you charge, and value is about proving you are different and better than your competitors.
Value communication begins with value propositions (VP), a clear and concise ‘statement’ of the tangible and intangible benefits a customer gets from using your services that clearly differentiates your offer from your competitors.
- First, a VP requires you to know what your firm is good at (knowledge management).
- Second, a VP requires you to know who your competitors are and what they are good at (competitive intelligence).
- Third, a VP requires you to know how you are better than your competitors (differentiation).
- Fourth, a VP requires you to know who your target market is and what they value (market research).
- Fifth, a VP must be well written and persuasive.
More than 40 years ago, management guru Peter Drucker observed, “The final question needed in order to come to grips with business purpose and business mission is: ‘What is value to the customer?’”
Once a law firm can define value for its clients, it can focus on differentiating itself in the marketplace."
(For more of Patrick's thoughts on value and pricing, check out his blog at http://www.patrickonpricing.com/ )
In our next blog post, we will get the Law Department perspective from John Thomson (Purdue Pharma LP). #BusinessandFinancialManagement #VeryLarge(over500) #Medium(151-250) #Small(under151) #CorpLegalDepartment #Firm #Large(251-500)
We look forward to seeing you then!