Getting a handle on the price execution gap: a marketing perspective.

• Author: Roch, Michael

In early 2010, we conducted a comprehensive, worldwide survey that sought to examine the structures that law firms have in place to manage pricing. The Kerma Partners Pricing Management Survey 2010 polled law firms from the United Kingdom, Continental Europe and the United States. for their approach to pricing in their law firms, ranging in size from 25 to 300 partners. The survey's results showed a significant execution gap in the context of pricing management: Law firms intellectually understand what management structures are needed to price legal services more effectively, but they struggle to execute to their advantage. One reason for this failure to execute is because the marketing and business development support functions do not manage to impose themselves on the pricing process with sufficient clout and vigor.

Pricing Management not Implemented as a Priority Element of Strategy Execution

More than 75 percent of our respondents considered pricing a strategic priority, but only 61 percent of respondents indicated that they have a clearly defined pricing strategy that is aligned with the firm's strategic objectives. At the same time, 54 percent of respondents were either neutral or disagreed that they effectively communicate their pricing strategy throughout the firm.

It may be down to lack of clarity in the firm's pricing strategy itself. On specific pricing strategies, for instance, 96 percent of firms agreed or strongly agreed with the statement, 'Our firm sets its fees to cover our costs and achieve an acceptable profit margin for partners.' Seventy-one percent said that, 'Our firm sets our fees to capture the full value of our services.' The problem here is that both statements are inward-looking and do not take the client-side of the pricing equation into account. Reconciling these two statements day-to-day between finance, business development and the partners is one of the most difficult issues to master to improve firms' pricing.

Pricing Management Structures: Insufficient Balance Between Partners, CFOs and CMOs

While 68 percent of respondents have in place clear decision rights for setting rates/alternative fee arrangements, very few have a single partner responsible for delivering pricing strategy beyond the practice head/managing partner or CEO. The majority agreed that each partner negotiates his or her arrangements and then asks for sign-off by the responsible person. This relatively limited supervision may work well for...