A worthy tradition in economics that has gotten an undeserved bad name is “price discrimination,” which can mean the politically incorrect but utterly understandable and rational impulse of charging more for snow shovels on the eve of a blizzard, but can also mean practices we readily accept such as charging last-minute travelers a higher airfare than those who book months in advance. In essence, price discrimination means charging different clients different amounts for the same product/service depending on how badly they want it.

I won’t go into the theoretical justifications for price discrimination, but they are many and importantly they include two critical components that are a pure-good gift when they come together: Higher profits for the seller/producer and a greater number of buyers/clients satisfied. What’s not to like?

Here’s a very simple alternative McKinsey suggests: “Next best alternative pricing.” That is, have your client team engage with themselves in deep discussion—including role-playing—about how a pricing discussion with the client would go. This will be daunting at first and will surely take practice, but try it out. I have high hopes and you should too.

You may need to coach people on this stuff

Partners may need coaching for a variety of reasons:

  • As they will all too happily tell you, they “didn’t go to law school to be used-car salesmen.” Having a serious conversation negotiation with clients about price lands in the innermost rings of their discomfort zone.
  • I just mentioned role-playing, as in partners actually playing the roles of partners and of clients. Horrors. Send in the coaches.
  • Anyone, including most definitely your firm’s partners, who isn’t used to negotiating on price on behalf of themselves needs to identify some concrete decisions and “break points” in advance. Such as:
    • Your starting point
    • Your drop-dead/walking away point
    • What clients actually do value mostly highly (hint: keep reminding them of this)
  • Even McKinsey, whose audience is presumably more mainstream businesspeople (dare I say an audience that is statistically more “normal” than lawyers?), advises training.

Specifically, McKinsey advises a type of “experiential learning” called “field and forum.” This technique starts with a two or three-day workshop consisting of case studies and interactive periods. After each “forum,” participants go into (you guessed it) the “field,” where they test-drive their new skills in the company of some of the experts or managers who can provide tips and guidance going forward.

So: Does this actually pay off?

According to McKinsey, one global firm that tried it on a pilot basis increased its bottom-line by £10-million (about $16-million) in five months. (We aren’t given the baseline, but let’s assume $16-million is enough money that you’d want to pick it up off the sidewalk if you could.)

Follow through, follow through, follow through

We know what happens to the best of intentions:

In our experience, even the best pricing programs will fail in the long term without a deliberate commitment to overcome the entrenched habits and shifting priorities that doom most change programs. Ingraining pricing success over the long term requires putting in place an “influence model” that includes role modeling, fostering understanding and conviction, developing talent and skills, and implementing reinforcement mechanisms.

Yes, changing behavior—particularly the behavior of partners interacting with clients in what will at first seem like a semi-adversarial posture—is tough. But if you’re serious about running your firm as a professional business operation, and if your partners would agree finding another (say) $16-million is worth a bit of initial effort on their part, this is something you should try.


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