Friday, November 30, 2007

Productization versus Commoditization in the Legal Industry

Little has been said about the problem of the perceived commoditization of legal services. It is clear that professional service providers are suffering from a perception that what they do is a commodity. The problem is so pervasive that many professionals actually believe they are a commodity. Here are some of the contributing factors:

-- The ratio of lawers to non-lawyers has doubled since the 197Os [there are twice as many competing for half the business]

-- The adoption of a pricing model that commoditizes the product (Lawyers sell time. . . even though clients don't want to buy time, they are left in a position of attempting to compare professionals based on time and rate,

-- The behavior modification of the hourly billing model that creates a disincentive to invest time up-front in order to differentiate or educate the client on the "real" product, which is the solution that will be achieved through your expertise

-- The lacking business savvy and diversity of attorneys in general, perpetuating the perception that lawyers are all "the same"

-- The belief of attorneys themselves that they are indeed a commodity.

-- The focus on expertise/experience as the sole basis used to convince clients to hire them. Remember, clients are not in a position to know what level of expertise is required for their job. By leaving it to expertise alone as a criteria, you are causing the client to have to make a decision based on their law opinion, which can be dangerous.

Law firms and attorneys really need to address this problem to remain relevant in the future. The purpose of this post is to suggest that the productization of legal services can be an effective way to deal with this issue and help the clients to understand your "Unique Value Proposition" and make an informed decision. At first glance you may think that producization would contribute to the problem, but in fact it helps to reduce it. Clients are simply not in a position to compare products they do no understand. Attorneys do not, generally speaking, invest the time to educate the client and set out a road map of the case or strategy with them to get buy in on their process before proceeding. There is nothing more amorphous to a law client than a legal engagement. . . . most clients don't know exactly what is happening. . . . to them, their problem goes into a black box and sometimes comes out with a solution, but costs a hell of a lot anyhow.

By creating a product [bundling valued services] together you are turning a mystery into a known quantity. It is now something that is understandable to the client. What's more, you can use your diversity, unique skill, and creativity to craft an offering that simply cannot be acquired anywhere else. In this case, clients have peace of mind, are able to make decisions based on the benefits to them rather than attempting weigh comparative values of attorneys by time and rate against a lay person's own perception of how much expertise they really need to begin with. To date, very few corporate firms have attempted to differentiate on this basis. Few have put together fixed-price packages on the low end to entice clients to use the firm, which is a false promise and cold shower for clients when they realize their next engagement they will be buying more of that amorphous "time" again rather than something they can actually understand!

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