We have covered a lot of the building blocks that go into good pricing. From understanding your data sources, to keeping track of budgets, to how to price for value. But really successful pricing is about taking all of your sources of information, all of your strategies, and putting them to good work. But how to take all of this theory, and put it into practice?
For the final part in our pricing series we speak to Eugenia Frenzel, Director of Pricing and Practice Management Economics at Perkins Coie. Not only does Eugenia understand the human element of pricing, but she is an expert in bringing data in firms together to make better decisions. Eugenia shared with us some top tips, a few pitfalls to avoid, and how to understand your pricing lifecycle.
Three pricing essentials
As we have explored, good pricing needs a foundation in clean and accessible data. However, very often it is perceived that technology and data is where it ends. According to Eugenia, real pricing success requires key additional elements.
- A stellar team
This may sound self-evident, but too often people fail to really think about the type of people they will need on a pricing team. Pricing is likely to affect every department in some way, so you need people who play well with others, who will inspire change, and influence choices.
'I need a flock of eagles. You think of eagles as solitary birds. But you need your teammates to be able to lead when they need to provide their expertise. And when they come together, they need to be in a flock, where teamwork is essential and everyone needs to be in synch, and bring to the table their ability to create, think, and collaborate. Highly functioning and agile pricing teams are comprised of individuals who can carry the torch of the goals and ideals of the firm's strategy, without the color of a personal agenda, with enthusiasm and humility.'Eugenia Frenzel, Director of Pricing and Practice Management Economics at Perkins Coie
- The support of management
Law firms are (for the vast part) uniquely structured as partnerships. Which means decision making is a very collaborative process with many different voices weighing in on the direction of the organization. Because pricing is so influential, it is inevitably going to be a point of discussion and debate. As such, having a mandate from the management of a firm is essential to ensure you can effect real change.
Every firm has a different culture. It takes time, just as with a large ship at sea, to maneuver a firm. That is not just a metaphor for the size of the firm but also for how weighty the perception of the pricing decisions is in the firm. Pricing decisions made at the outset of an engagement percolate throughout its lifecycle into all business processes within a firm. In one way or another, pricing - fee arrangement - decisions impact matter profitability and partner compensation. This is where it all comes full circle - pricing best practices that drive profitability require solid endorsement from the management.Eugenia Frenzel, Director of Pricing and Practice Management Economics at Perkins Coie
- A solid pricing strategy
A good pricing strategy, and leadership support are often connected. After all, it is difficult to have a successful pricing strategy without the support of firm leadership. According to Eugenia, your pricing strategy must be woven into the fabric of the firm itself. Check out our introduction to pricing strategies here for more information.
A solid pricing strategy is woven into the culture of a firm and it cannot be dictated from the top, especially in the context of a partnership business model. It is misguided to assume that a directive from the top will simply be accepted. Equally, it cannot be done in isolation from the partnership and partners that are involved. Anyone embarking on setting up a pricing function should get comfortable with the fact that it is a journey, with evolving priorities, that will require collaboration and achieving consensus.Eugenia Frenzel, Director of Pricing and Practice Management Economics at Perkins Coie
How to scale pricing
Having collected all of the elements of a good pricing department, it is time to understand how to scale that success. According to Eugenia, this is the moment that technology comes into play.
Introducing technology before you understand what you want pricing to achieve, or what the firm wants to get out of pricing, is ineffective. Technology is not a magic wand, it is a tool that can be applied to gain insights and reduce repetitive work. It must work to a purpose. One of the first essential steps is to create a good working relationship with your IT department. 'They are the ones that either going to implement the software you buy, or they are going to help you built things internally. They are going to be the ones that support your technology needs.'
The second step is to identify either the repetitive work or the analysis that you need technology to perform. 'Some of the tasks performed by humans need to be automated. If it's not automated then you just have an army of people doing things that a machine should be doing and most likely wasting talent.' Remember, technology does not need to solve every problem you have. It is better to combine multiple best-of-breed programs, using APIs, than having one large cumbersome program. Solutions like Clocktimizer can integrate different APIs, or share their own, to integrate programs together to have the best solution for each firm's unique requirements.
Avoiding pricing pitfalls
Clearly, not everything is going to go smoothly. According to Eugenia, there are two key pricing pitfalls that you should avoid. The first is to agree with everything, the second is to agree with nothing.
In pricing, as in surfing or skiing, you will need alternate between leaning forward and leaning backward to hold your balance in order to ensure progress. It is important to maintain your convictions and keep the strategic goals in mind, because there are going to be headwinds and bumps in the road that you will need to maneuver around to reach your goals. Sometimes, you can get stuck in the weeds, sucked into the process, and lose track or momentum for what you need to do.Eugenia Frenzel
And the flip side of that is going in with all guns blazing, it's my way or the highway, without considering other processes or interests that may be at play already. Either one of those approaches is likely to lead to unproductive consequences and possibly jeopardize goodwill of future cooperation for your pricing team. Seek a balance.'
Tips to successfully build your pricing team
For the final part of our interview with Eugenia, we collected some tips and tricks for all of those looking to set up, or change, their current pricing structure. What follows are Eugenia's top four tips to ensure success.
- Assess why you need pricing.
Is it to stay afloat? Is it to maintain your current market share? Understanding the purpose of pricing for your firm will help you build a strategy which works to those aims. Remember, for each firm this will be unique. Additionally, try to be as honest in your assessment, and as in depth, as possible. The more focused your goals, the greater your chance of success.
- Assess how you will integrate pricing and have a strategy in place.
Good pricing does not exist in isolation nor can it be the sole source of influence. Which means it will impact almost every area of the firm. Have you planned out how pricing will interact with other functions within your firm? Have you considered how the pricing team will be supporting practice groups? Will pricing and legal project management roles be under the same umbrella and how do you envision their collaboration? Thorough assessment of pricing function's integration into the firm will ensure success. Socialization and communication are essential.
- Get technology to automate.
Whether you build or buy, technology can help your team streamline processes, time-saving tools like Clocktimizer can vastly reduce the repetitive data analysis tasks needed to make good pricing choices. 'Previously, the only way to dig into a matter was to read through the timecard narratives to understand who did what work, how long it took, and what was actually done. On matters where no phase or task codes were used, I often had to spend days coding timecard narratives. Clocktimizer changed that. Furthermore, in firms where precedent is not easily available, tools like Clocktimizer help fill the gap.'
- Foster talent.
Fostering talent for pricing is about bringing on board legal, finance, or business development professionals and training them to work in pricing. Equally, it is about fostering pricing champions in other departments who can support and help integrate with the pricing team. The better the inter-departmental integration, the more informed your pricing choices. When bringing on board younger talent, it is important to clearly identify their career path and options for growth. An aptitude for financial skills is as essential asare the soft skills. Attract and develop talent that brings diverse perspectives to the team. Look for complementing skill sets and personalities, and have patience - a great team takes time to build.
This concludes our blog series on law firm pricing & analytics. We hope our content has been able to give you new insights on your firms pricing and analytical strategy. We bundled all content in easy to read guide called 'Law firm pricing & data analytics: A practical guide to increase the impact of your pricing strategy; which can be downloaded here.
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