Pricing is fiendishly difficult.
Lawyers and other expert professionals don't much like talking about it, but service pricing can vary widely.
Because of the ego, status, and power with which charge rates are imbued, it can even be difficult to get realistic information.
Traditional pricing tends to start on the supply side: by working out cost of production, plus adding required profit, supplemented by some market analysis, and adding a little for the "special" features of the particular firm.
In many law firms, pricing starts and finishes with "what have we been charging? - let's just move it a tad, without making waves".
Pricing this way doesn't take any real account of demand factors. At its core, it ignores intelligence about the wider market and individual consumers.
Some researchers (including Julian Midwinter & Associates) have found that overlooking consumer intelligence may result in underpricing of around 5%.
And, that's 5% which drops straight to the bottom line !
Getting to grips with how different clients respond to price is tough. But these are tools and techniques can take you a long way:
- in-depth, qualitative client research
- sophisticated data modeling
- industry analysis.
Price optimisation is all about trapping client perceptions of value and predicting how they will respond to price changes.
It runs counter to an old-style financial management preference for price standardisation.
While not as "neat and tidy" as uniform, across-the-board price schedule, there's profit to be found - and clients kept - by taking the price optimisation track. The trick is identifying which clients will pay more for exactly what services, and what pricing parameters will stimulate clients to migrate to other providers.
Take your first step towards price optimisation by summoning the courage to have straightforward discussions about price - with all your stakeholders.
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