Making alternative billing a marketing tool

Published on: 
05/03/2010
Published on 5/3/10

The debate continues over whether the billable hour is dead, but there is little disagreement that both clients and law firms are increasingly interested in billable hour alternatives.

This leaves open the issue of deciding how to replace hourly rates with a better billing method.

In any alternative billing method, the skills of a lawyer and the way in which services are marketed and delivered to the client must coincide with what the client wants and needs.

The most effective marketing effort possible is a billing approach that provides more service while reducing inefficiencies, duplications or unnecessary effort. That is the starting point to identify alternatives to the billable hour.

A law firm's commitment to the use of alternative billing as a marketing differentiator requires commitment to three basic premises for success:

  • Communication is essential.

    Surveys uniformly show that clients are unhappier with surprises and unexplained costs in their bills than they are with high bills themselves. No firm should fall into the trap of simply cutting fees, because it sends a message that they were overcharging in the first place. Instead, tailor your communication about fees — and the fees themselves — to individual client preferences. The client defines the perception of value.

  • Clients, including corporate counsel, are still not particularly knowledgeable about billing.

    Clients' understanding of what equitable arrangements may exist is typically not substantial. Law firms must seize the initiative by working with clients to develop specific pricing alternatives based on each client's preferences. Being proactive avoids having the client fixate on fee alternatives that may be unworkable or impose such alternatives through an unrealistic RFP process.

  • There is no universal best billing alternative.

    Client preferences and each firm's operations differ, and the factors of each project or case can accommodate various billing options. Opinions vary on which alternative provides the best measure of value to the client. Ultimately, alternative billing is a matter of trust and agreement between lawyer and client, such that they act as a team and create expectations for how services will be billed.

    The best way to balance the interests of both sides is by developing a budget at the start of an engagement. Getting fees and budgets in writing at the start of every matter is at the heart of any agreement on alternative fees.

    Some lawyers resist budgeting a matter because they believe it's merely an attempt to reduce the fees they receive by constraining their actions beforehand. Actually, preparing a budget at the start ensures greater productivity and cost effectiveness for both sides.

    Flat fees, or any other alternative, will not magically cure client dissatisfaction. Service is the one factor that clients want from lawyers more than anything else, including lower fees. Despite what clients say, they will not put a priority on cost cutting if they fear it will hurt service.

No matter what alternatives are used, firms should work with clients to measure the value desired, convey how it will be provided and render legal services accordingly. That way, “value” becomes the marketing message, not “lower price.”

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