RANCHO PALOS VERDES, Calif. — Budget predictability is of paramount concern for law firm clients. With continued financial pressures influencing clients’ decisions to bring more work in-house, many corporations are relying upon their own experienced pricing/sourcing officers to vet, select and manage outside counsel.
However, a major issue for many within this increasingly prominent group of legal professionals is the continued inability of client relationship partners — the law firms —to adhere to budgetary commitments.
High Noon: A Pricing Negotiation Master Class at the recent 24th Annual Marketing Partner Forum allowed attendees to engage directly with legal procurement professionals and General Counsel in mock pricing negotiation exercises. Participants were given hands-on, one-on-one coaching from procurement professionals and gained a unique insight around strategic conversations, client expectations and pain points.
Participants included: Lucy Endel Bassli, Assistant General Counsel at Microsoft; Justin Ergler, Director of Alternative Fee Intelligence and Analytics at Glaxo SmithKline; and Brandon Pace, Senior VP of Legal at Lending Club. I was the moderator.
It’s a very interesting time for procurement. More companies are sending out RFPs to select their panel of law firms with the aim of reducing the number of law firms with whom they do business. It’s very expensive for companies to track the billings and manage a multitude of legal projects conducted by numerous outside counsel. Some companies have gone from more than 200 firms to just 12 outside law firms.
That is why it is critical for law firms that they win these bids, and pricing is one of the key elements to doing so and keeping clients. It’s also why this session was critical, bridging the gap between procurement and outside legal counsel in a way to encourage participants to consider pricing from the buyers’ perspective.
What were some of the takeaways?
“Differentiation is key,” said Glaxo SmithKline’s Ergler. “How can you differentiate your firm? You need to address best practices.”
He suggested firms could take a periodic report on a generic legal matter or trend, and share it with clients, giving them valuable information before clients ask for something. “Be proactive,” Ergler said. “Firms do not share best practices with their clients — it would differentiate your firm if you did.”
Ergler also cautioned that law firms need to have their own pricing person at the meeting with clients. “If you don’t have one that speaks volumes.”
Microsoft’s Bassli agreed, adding that it’s important to find a match with an in-house lawyer to present your ideas and build on it. “Keep talking to those who are interested and you will have a greater chance for success,” she said.
She too, cautioned that law firms needed to be engaged in communication with clients around sensitive issues of pricing. “When it comes to the highs and lows of pricing you must explain the value when pricing high and justify when pricing low,” Bassli explained, adding that it’s important for a firm to demonstrate its experience in doing this.
The “feedback loop” with clients is vitally important, panelists noted, adding that is true especially when feedback may not be completely positive. “You need to seek feedback once you notice you are not being used as much by a client,” Bassli observed. “Hopefully, however, you seek feedback on an ongoing basis and don’t wait till there is a problem.”
Lending Club’s Pace concurred. “If a panel law firm is not getting work it is because of a pricing problem or a communication problem — but most likely, it is a quality problem,” he said. “There has been some kind of relationship breakdown.”
Pace said law firms should remember that from a clients’ perspective, quality is always key. And while being price-competitive is important, it should never come at a sacrifice of quality. “You have got to be able to do the work,” Pace said. “It’s about communication and relationships, or course, but when you do not have quality work you are done.”
Throughout this session, participants heard firsthand what clients want and were able to interact one-on-one with these experienced pricing professionals. Hopefully, the result will be a better understand of client pricing expectations and more successful bids in the future.