Newish to many lawyers, rarely to their delight, is a growing realization that when clients start talking about the price for legal services, they don’t (really) care whether that price is arrived at by summing a whole lot of billable hours, a negotiated “AFA,” a successful RFP submission, or drawing straws. What clients really want for their money is Value. And you should under no circumstances equate value with “cheapest;” value can be found at every level of the food chain from the top to the bottom, and the lowest overall price is one of clients’ very last priorities. (Survey results on this are consistent; you could, as they say, “look it up.”)
But this merely changes the subject of the problem in most lawyers’ eyes, from Cost to Value. “When clients talk about value,” I hear many lawyers say with a combination of exasperation and wounded pride, as if the privilege of receiving their services didn’t speak for itself, “I don’t know what on earth they’re talking about.”
I’m here to help. Up to a point.
Circulating out there in our collective noosphere is a recognition that part of the process of coming to understand this or that phenomenon at a profound level—which is to say, being able to explain how it arises, its lifecycle, and its end, and not merely being able to fix labels on it—can be a process of developing and testing a series of hypotheses about the mystery phenomenon. The hope, and the great promise of the scientific method, is that each refinement will bring one closer to the goal of genuine comprehension. The objection that some of these interim hypotheses will not be correct is inadmissible, or, as the pithy but wise quip has it, “all models are wrong, but some are useful.”
So our mission today is to take a simple, but I hope ultimately profound, step towards unpacking what clients mean when they speak of value.
To our aid comes Any value proposition hinges on the answer to one question, from the redoubtable Harvard Business Review. It seems to begin innocently enough (emphais original):
Any strategy lives or dies on the basis of its customer value proposition. There are many typologies relevant to crafting a value proposition, because there are many ways to win customers. But the key issue is always: what is the center-of-gravity in our approach? Do we ultimately compete on the basis of our cost structure (e.g., Ryanair and Wal-Mart) or another basis that increases our target customer’s willingness-to-pay (e.g., Singapore Airlines and Nordstrom)? In other words, will we sell it for more or make it for less — and allocate sales resources accordingly?
Nearly all competitive markets confront firms with this choice. In retailing, there is Wal-Mart, Dollar General, and category killers. But there is also Nordstrom, Louis Vuitton, and many high-end boutiques.
Let’s take a closer look at each option.