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Research. Reveal. Rescue

Why fear and fire don’t help in the PSF pricing war

March 5th, 2013 |

This post is a really helpful insight into why law firms and their corporate clients often appear to be chasms apart on fees. And it's not just law firms that are under fire. To varying degrees accountancy, consulting engineering, management consultants, patent attorneys and all other business-related professions seem under attack. What's changed? And what's to be done about it?

How is it there is such a disconnect? Larry Bridgesmith draws on the fear-related psychological phenomenon of arousal attribution error. And he uses a powerful metaphor of law firm and corporate legal department relationships hanging in the balance: "230 feet above the chasm and 460 feet from cliff to cliff". (To get the full explanation, I suggest you read the post for yourself.) He concludes law firms "can be predictably irrational in the face of such a crisis".

Beaton agrees there is a (looming) crisis and firms are by and large being "irrational" in their responses to pricing pressures from clients. We base our opinion on hard quantitative research, some of which we have recently published.

Firms, their leaders and practitioners do not sufficiently deeply understand what drives clients' perceptions of value. Consequently all over the world the supply side of legal services is subjecting itself to arousal attribution error. In plain English this means, firms are discounting when it's not necessary.

And this is true for all the professions we study.

At Beaton's Gro Pro Forum in Sydney next week Tristan Forrester's presentation will explain what firms are missing and what they can do about it.

Don't miss it. The Forum hashtag is #beatongropro.

By George Beatonis a director of Beaton Capital and Beaton Research + Consulting. You can find George on Google+ at +George Beaton.

Posted in Accounting, beatonbenchmarks, Engineering, Law, Professional Services | Comments Off on Why fear and fire don’t help in the PSF pricing war

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