In the constantly evolving realm of legal pricing, it is imperative for law firms to remain abreast of their clients’ demands. This is where technology plays a crucial role, as evidenced in a recent trends analysis penned by Eric Wangler, President of Global Legal Market at BigHand. The analysis clearly indicates a growing client demand for flexible pricing and financial transparency.
This research gathered survey responses from over 800 senior legal finance professionals annually in the UK and North America since 2021. The findings revealed a significant surge in client demand for transparency and value demonstration over the past year. This encompasses not only financial transparency, but also operational aspects such as cost-conscious staffing decisions and consideration of associates’ career aspirations and DEI (diversity, equity, and inclusion) objectives.
The burgeoning need for transparency and value demonstration signifies that firms failing to align their pricing strategy with these demands risk losing clients to competitors. Despite this pressure, the survey also discovered that 91% of law firms have upped their prices in the past year, with 86% anticipating further price increases in the next 12 months.
In response to these demands, firms are acknowledging the necessity for more flexibility in pricing. According to the survey, 73% of firms concur that there is potential to introduce more value-based pricing and billing, while 75% agree that there is an opportunity to implement more alternative fee arrangements (AFAs) to remain competitive.
The survey also unveiled that 99% of firms have implemented more mandated budgeting due to heightened transparency demands from clients. However, only 32% have expanded mandated budgeting across the entire firm, presenting an opportunity for firms to budget more extensively across a wider range of matters. Clients generally seek predictability, transparency, and proactive communication in regard to budget overruns, all of which are underpinned by effective matter budgeting.
The encouraging news is that technology exists to streamline this process for firms. By leveraging technology to swiftly and easily replicate budgets from similar matters, firms can fine-tune their pricing strategy and ascertain margins and benchmarks at an early stage. Monitoring against matter budgets permits firms to adjust staffing or case strategy to deliver the predictability desired by clients.
Beyond the data, the survey also found that 45% of firms are currently using a dedicated pricing solution, with an additional 19% planning to implement one within the next 12 months. This illustrates firms’ recognition of the value of technology in meeting their clients’ demands.
Chris Oddy, Head of Pricing & Commercial Development at Womble Bond Dickinson, underscored the advantages of utilising the BigHand Matter Pricing solution, affirming that it provided visibility of the financial status of ongoing matters and assurance that the firm was prioritising matters efficiently.
In conclusion, the survey indicates that legal pricing and budgeting technology can enhance firm profitability by addressing clients’ needs for transparency, value demonstration, and predictability. With the appropriate technology in place, law firms can cultivate robust, enduring relationships with their clients and remain competitive in the continually evolving legal market.