This blog has previously taken note of nationwide surveys of corporate counsel demonstrating the continuing decline of the billable hour.
But commercial law firms have a bigger and broader problem on their hands right now, and that is the corporate client perception that legal services are too expensive generally speaking.
For example, according to one LexisNexis survey from 2010, more than 70 percent of corporate counsel believe that legal service pricing is the number one issue facing the legal service industry, and 71 percent say that law firms are not doing enough to respond to budgetary pressures faced by their clients.
That explains why 69 percent have shifted more work in-house and 56 percent have reduced outside counsel spending while most have added to in-house staff.
Of course, according to the same survey, 77 percent of law firms believe their corporate clients are too focused on reducing costs at the expense of quality.
What is the bottom line? The bottom line is that the customer decides what the fair price of quality is. They decide what value they attach to your services. You can adapt or you can lose their business.
Law firms need to take two steps to keep their clients in the continuing economic storm:
- They must figure out ways to deliver services more efficiently, so that they can maintain profit margins while lowering costs (this is what every other business in every other industry must do every day); and
- They must figure out how to raise the perception of value contributed by lawyers and by legal service (i.e., do studies showing the cost of going “bare” without legal services or the cost of going with lower quality services, demonstrate the return on dollars invested by showing what they recovered or prevented for a client vs the legal spend, and/or come up with other creative ways of raising the perception of value associated with the safety and brand protection that comes with high quality service).