Is it true that law firm clients buy on price alone?

If you give your potential clients no other way of comparing you to your competitors, then it is likely that many of your clients will shop on price.

At the small business workshops I present, this topic comes up over and over again as many business owners feel that most of their customers are only shopping on price.

Now don’t get me wrong, price is clearly important. I am not saying that you could double your prices overnight and this would have no effect on your number of matters as it almost certainly would. You may find that small changes in your price however, may have little or no effect on your number of matters.

While those changes in price may have little effect on your number of new matters, changes to your price are one of the single biggest things that will affect the profitability of your legal practice, so this is a key issue in your business success.

If you feel strongly that client’s only shop on price, then I challenge you to do a survey. Pick 10 people that you know and ask them whether the price of all the goods that they bought last week at the supermarket, were the cheapest of anywhere in the area.

It is highly likely that they will tell you that they simply don’t know. If you then ask them why they bought the goods from that supermarket, if they don’t know for sure that they are the cheapest, it is likely that they will tell the real reason that they shop there. It might be,

  • That they always shop there; or
  • A relative works there; or
  • They like the staff; or
  • The parking is better; or
  • When they checked five years ago, it seemed cheaper.

So there will be lots of other reasons other than price, why a customer chooses to shop at a particular place.

That may be the case for a supermarket, but do these same principles apply for a legal practice?

How can you find out why your clients shop with you?

Ask them.

To explain why that is important, recently I attended a presentation put on by the local Chamber of Commerce. The guest speaker was talking about customer service and marketing and used an example of a butcher that used several strategies to attract customers. Firstly he sold his mince at a discount to everyone else in town and secondly he got his butchers to go to TAFE to learn how to be chefs, so that they could advise their customers on new ways to cook different meats.

That all sounds very progressive doesn’t it.

The funny thing was that the owner had done all that without talking to his customers to see what they thought and what was important to them.

When they actually did this, they found that the reason why most customers dealt with the butchery, was that it was the closest butchery to the car park, so they didn’t have to walk far with their meat after they bought it.

After asking their customers, they made the following changes:

  • They immediately employed some casuals who helped their customers to carry their bags to their car.
  • They also put the price of their mince up to what everyone else charged, because this was not a factor in why their customers shopped there.
  • They also stopped sending their butchers to the TAFE course, because even though the idea sounds great, it simply didn’t matter to their customers and after all, that is why they had started doing it in the first place.

The effect, the butchery become more profitable than before, because they weren’t trying to compete on price alone, but instead had found the other reasons why customers shopped with them.

So you ask, having asked my clients what they want, do I bet my whole practice on it, make the changes and see what happens?

The way I would encourage you to implement these types of changes, is the same way that you see what any other change has on your clients, you simply test it.

For example, you may test increasing the price of several services by a small amount and see what effect this has on the sales of these services. If in fact you find that the sales of these services drop, so that the extra profit from the price rise does not cover the loss from the reduction in sales, then you can drop the price back to where it was and the damage will be limited. The knowledge that you have got from testing however will be invaluable and you can now test another strategy.

Disclaimer
This report contains general information, it is not advice tailored for your specific circumstances. Before you act on anything contained in the following information, you should consult your financial adviser.