27 Apr Fixed fees and underpricing: seller beware!
Offering fixed fees should not be seen as a cure-all for the silliness of under-pricing!
After my last blog on low-balls and low costs estimates, I received a number of responses advocating the use of fixed fees. I’m a big fan of some fixed fees (proper value-pricing), but there are different varieties and they can actually lead to poorer (lower) pricing if you are not careful.
Let me explain.
Time-costing, for all its faults, does actually apply some discipline to the estimating process: solicitors should feel at least some pressure to ensure that the price is accurate and that it exceeds the costs of production. Without the discipline of time-cost as a guide, solicitors can focus on one or more of the following strategies:
- value pricing – pricing according to the client’s perception of value after you have communicated / sold this value
- market rate
- what they think the client will accept
- Menu pricing: fixing the price to the product and offering everyone the same price. Will $250 / Will plus EPA $370. Do you want fries with that?
- Fixed fee, fixed scope: fixing the price to the specific client and matter but limiting your profit risk by detailed scopes and staging
- Value pricing: fixing the price to the specific client and matter – but based on the client’s perception of value and offering a broad scope, genuinely accepting pricing risk.