Most recently, we published a trends analysis for legal pricing and budgeting, containing significant insight from our surveys. In this article, I’ll focus on how the numbers show an increase in client demand for flexible pricing and financial transparency and the way firms are responding to this trend.
The growth in client demand for increased transparency is evident when examining the research. We asked firm representatives: “Has your firm witnessed an increase in client demand for any of the following in the last 12 months?”
| Service | Percentage of firms that saw an increase |
| Demonstration of Investment Value | 48% |
| Financial Transparency | 30% |
| Detailed Matter Budgets | 30% |
| Competitive Discounting | 30% |
| Alternative Fee Arrangements (AFAs) | 29% |
| Comprehensive Client Reporting | 25% |
So, what does this mean for firms? It’s safe to assume that firms that have not built their pricing strategy around meeting these pressures can risk clients going elsewhere.
Take, for example, the fact that 48% of firms witnessed an increase in demand to demonstrate the value in client investment. This demand extends beyond basic financial transparency and includes operational elements like how law firms are staffing matters in a cost-conscious way, and to consider the career aspirations of their associates and DEI goals.
To surface the information required to provide a genuine demonstration of investment value, firms must look towards technology for data-driven insight. For example, we’ve heard from our clients using our recent AI-enabled timecard analysis feature in our Matter Pricing and Budgeting solution that they can provide additional transparency for clients by converting complex and often poorly coded timecard data into reliable pricing insights.
Despite this pressure from clients, most law firms (91%) have increased their prices over the last year. This trend looks to continue into the next 12 months, with 86% of firms anticipating further price hikes. I recently wrote about price hikes in my article about long-term profitability for law firms and, over the last several years, firms have successfully driven and retained above-average rate increases. Time will tell just how sustainable this approach is, as the demand for transparency also doesn’t seem to be slowing down.
Regarding transparency as a method of boosting firm profitability, we’re seeing from BigHand clients that the effective implementation of value-based pricing also leads to higher client satisfaction with strong, long-lasting relationships and improved firm profitability. However, our research reveals ample room for improvement:
Clearly, firms seem to recognize the requirement for more flexibility in pricing, but are they doing enough to prioritize this? With the global economy starting to stabilize, firms need to listen to clients’ needs to gain a competitive edge through differentiation and take advantage of the likely growth in demand for legal services. We are advocates of firms working in partnership with their clients to define what is valuable to them, and then actively delivering on it.
An encouraging statistic reveals 99% of firms have introduced more mandated budgeting because of increased demand for more transparency from clients. That said, just 32% have increased mandated budgeting across the whole firm, with 35% mandating in certain departments and 32% for specific clients. This reveals the opportunity for firms to budget more across a wider range of matters. Clients generally desire predictability, transparency and proactive communication to budget overruns which are all underpinned by effective matter budgeting.
The great news for firms not yet practicing this approach firm-wide is the technology exists that allows them to clone budgets from similar matters quickly and easily, leaving little reason not to refine their pricing strategy! By adapting matter budgeting approaches, firms are identifying margins and benchmarks at an early stage. From here, they can foresee the impact of discounting and overruns to ensure better recovery for budgeted matters and increased client satisfaction. Tracking against their matter budgets allows firms to adjust staffing or case strategy to deliver the desired predictability clients are clamoring for. If nothing else, most clients react better to overruns if/when they are proactively communicated with, showing a level of case management that differentiates firms in the market, and helps them build long-standing relationships.
45% of firms are now using a dedicated pricing solution, and a further 19% plan to implement one within the next 12 months. Beyond the data, we're also seeing BigHand clients benefit directly from our matter pricing solution. In the words of Chris Oddy, Head of Pricing & Commercial Development at Womble Bond Dickinson:
“[BigHand Matter Pricing] helped us to make sure that our teams had visibility of the financial status of any large and ongoing matters. We could provide reassurance to the team that we were prioritizing those of most importance to the business and that we were doing so in the most efficient way with the right resources.”
Read the full report for more data insights on how legal pricing and budgeting technology can elevate firm profitability.
BigHand Matter Pricing is a next-generation legal matter pricing, budgeting and cost management solution. Turning data into actionable insight and transparency that empowers your teams to make objective pricing decisions, armed with accurate real-time business understanding. Gain a data-driven understanding of matter profitability drivers like leverage, effort and costs, to give your teams the autonomy they need to boost productivity.
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