How Pricing Transparency Can Improve the Legal Experience
By: Ray Allen, Founder, ContractsCounsel
Technology is rapidly changing the way we do business. It has created opportunities to solve problems and improve customer experiences, and it’s fundamentally reshaped industries. Consider the impact of e-commerce and customer data for the retail industry, or the introduction of virtual health for medicine.
Tech has also impacted traditional industries slow to change, including the legal market. Independent attorneys, and small and medium-sized firms are limited in their means of growth, relying on word-of-mouth marketing and referrals.
By comparison, legal platforms leverage tech to offer what small firms can’t — new ways to find and retain customers, access to data that helps identify and solve client pain points, and the ability to develop competitive offerings. Small firms can get access to tools that enable them to compete and grow, and ultimately, better serve a larger portfolio of clients, by offering services via these platforms.
All of this sounds great in theory. Legal platforms help solve challenges not only for the clients, but for the lawyers as well. The problem? Many of the first (and largest) legal tech companies in the market today — like DIY and form companies — focus on the client side of the market, but fail to address the needs of the service providers, the lawyers.
Even more, many legal tech companies now use technology to replace the knowledge, expertise and work of lawyers. I firmly believe this is the wrong way to use technology to improve the legal market. Instead, we need to build technologies that empower both the client, and the attorney, rather than building software that replaces the lawyer, and creates bad experiences for the client. No algorithm is sophisticated enough to understand the unique nuances of any one client.
We need to build technologies that empower both the client, and the attorney, rather than building software that replaces the lawyer, and creates bad experiences for the client.
The good news? Technology does not need to be a lawyer’s competition. When applied correctly, legal tech platforms can solve client pain points and improve client experiences. But just as importantly, they can break the limitations of independent attorneys, and small and medium-sized firms, allowing them to compete with much larger firms by tapping into the opportunities legal platforms offer.
Technology, when applied correctly, can solve pain points, break limitations, and enable individuals and small firms to compete at the level of a tech-first company.
Let’s take a look at the real estate market to understand how this might work.
How Zillow Created a Better Real Estate Market
When tech-first companies such as Zillow launched into the real estate market, brokers, realtors, sellers and buyers suddenly had access to more information than ever before. Zillow’s marketplace created a platform for buyers, sellers and realtors to connect, while making critical data on hyper-local market fluctuations public.
Previously, buyers and sellers relied solely on the information they received from their agent. As a result, agents had to work to build and sustain trust, often navigating relationships with uninformed buyers or sellers, making their work that much more difficult.
Zillow’s public data, however, provided real-time, verified visibility into market activities. It led to better informed clients on both sides of the market, making it easier for the agents to drive negotiations, because both the buyer and seller understood the true value of the property in the current market.
As a result, the experience for both the buyer and seller — and the realtor by extension — improved. A well-informed buyer or seller makes for a happier client. And Zillow served as a third-party authentication for the realtor, with verified data the realtor could reference for themselves. By contrast, an uninformed client — one who lacks access to information and pricing transparency — often makes for an unhappy client.
An uninformed client — one who lacks access to information and pricing transparency — often makes for an unhappy client.
The Problem with Murky Pricing
Consumers today have little cost expectations when hiring a lawyer. This leads to sticker shock, which means lawyers can kick off relationships with new (and sometimes existing) clients from a negative place. Clients are left wondering if the lawyer is pulling a fast one on them.
What’s actually happening is that clients lack a necessary understanding of the lawyer’s cost structure. When discussing the costs, clients consider the lawyer’s rates negotiable, assuming the billable amounts are pure profit. This is particularly true for clients hiring a lawyer for the first time.
Like many others, the legal field is a regulated market. But unlike many industries, the legal field does not offer pricing guidelines for firms, independent practices, or consumers of legal services. This creates inefficiencies across legal engagements, and, I would argue, is one of the main factors stalling innovation for both attorneys and clients alike. It keeps clients in the dark when it comes to the associated fees necessary for their legal needs. It also makes it more difficult for lawyers to offer services on legal platforms.
If this is true, then why haven’t more firms shifted toward pricing transparency? One major hurdle: the billable hour.
Taking a Second Look at the Billable Hour Pricing Model
Sure, the billable hour is an industry standard. But it’s also an archaic pricing model. Many lawyers today understand this, particularly given that so many adjacent industries have shifted toward productized pricing models.
The problem with the billable hour is that lawyers fear “mission creep”. Sometimes referred to as scope creep, mission creep is when two parties assume a project will take a certain amount of hours to complete. But because of unforeseen variables, the project takes much more time. The fear, then, is that the lawyer would make less income because of the additional hours. Or, even worse, engage in unprofitable work.
That seems logical. But when you take a step back to look at other services-based industries, you realize that significant mission creep is quite rare, particularly when the value and reputation of the service provider is placed upon a job well done, and done quickly.
Let’s return to real estate. When a buyer or seller hires a broker or realtor, they do not agree to an hourly fee. The value of the realtor’s commission is based upon the value of the home purchase — or a fixed fee based on the transaction. The realtor is incentivized to work quickly to sell the home at the highest price point — or, on the opposite side, to quickly find a home for the buyer to purchase at the lowest price point.
As a result, both realtors put their client’s best interest at the forefront, in order to make their commission, and move onto their next client. Beyond speed and value, both realtors are incentivized to do the very best job for their client, knowing their reputation is on the line, which is critical for future business.
Much like a broker or realtor, attorneys are incentivized to do their best work on behalf of their client, and do so as quickly as possible. But that focus on expediency often goes unnoticed by the clients, because the emphasis for valuing the work is overly focused on the billable hour.
Empowering the Lawyer by Empowering the Client
Picture instead if the legal market operated more like the real estate model. If clients had access to a pricing guide for various types of legal services and contracts, what might their experiences look like? And how might that improve the lawyer experience as well?
A pricing menu — based upon real-world legal services data — would successfully set the client expectations from the start. They would have a deeper understanding of the true costs of legal services, filing fees, and additional legal expenses. It would also make it easier for attorneys to productize their services.
At ContractsCounsel, we feel so strongly that the legal market can be improved through offering pricing transparency, that we launched a new legal platform that showcases not only the breadth of experience of our lawyers, but clearly states their flat fee pricing to complete a project.
We offer clients the opportunity to post their project for free on our platform, receive fair-market bids from lawyers, and initiate the relationship from a position of transparency from day one. We started with the simple mission of offering clients and lawyers a place to connect in order to draft and review contracts, because this is one of the easiest services for lawyers to offer flat fee pricing.
Launching a platform designed with this purpose was an experiment, one with which we continuously receive positive feedback on — from both sides of the market.
Lawyers prefer starting from a position of transparency with regards to their legal fees because they build partnerships with fully-informed clients.
Clients prefer pricing transparency because they know they’re getting fair market value while helping to solve a legal problem critical to their business or personal life. And more importantly, it makes the experience of hiring a lawyer feel easy.
Lawyer and client responses such as these motivate our team to continue to identify pain points within legal work, and design solutions to empower both sides of the market, including building more pricing transparency into our platform.
Have some feedback? Let us know in the comments below.
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