What you charge is key to your marketing message

friday, 24 november of 2006

What you charge is key to your marketing message

By Trey Ryder

When hiring a lawyer, prospects want to make the right decision. Yet to thoroughly check out a lawyer, a prospect needs to conduct a fair amount of time-consuming research.

Since most people never have enough time, prospects look for shortcuts to help them determine a lawyer’s competence. One of those shortcuts is the lawyer’s hourly rate. (Contingency fees and flat fees also fall into this category, if the prospect can compare fees from one lawyer to the next.)

What do you think when you hear that one lawyer charges $75 per hour, another $160 per hour, and a third $325 per hour? Even if you know nothing else about the attorney, you immediately draw conclusions based on the lawyer’s hourly rates. You probably assume that the lawyer who charges the most has also practiced the longest and may be more skilled and specialized than lawyers charging the lower rates. And, depending on your experiences, you might also be skeptical if you’ve found that hourly rates do not always reflect a lawyer’s skill.

Some lawyers think charging less gives them a competitive advantage over lawyers charging higher rates. Their argument is based on the premise that they will make more money by increasing their volume of new clients than they give back by lowering their hourly rate. But this is rarely true because the marketing costs to attract a volume of new clients are usually greater than the profit you can earn from those clients. So no matter how much new business you attract, you almost never break even.

Often, one of the first things I suggest to my clients is that they increase their fees. This is because when they hire me, they have a new cost in their overhead, which they need to recover.

Fortunately, a higher fee is not negative. In fact, when creating a marketing argument, it’s easy to justify a high hourly rate based on the lawyer’s superb qualifications, in-depth experience and specialized skills. But it’s never easy to explain a low hourly rate, in a marketplace where everybody knows that “at best, you get what you pay for.” Prospects conclude, if this lawyer were any good, he’d charge more.

Remember: You are always better to be the most expensive lawyer and have people respect your knowledge ... than to be the cheapest lawyer and have people question your skill.

Over the years, I’ve learned that when my fees are low, I attract less desirable clients. And every time I increase my fees, I get better clients.

I encourage you to review your hourly rates and fee structures based on your prospects’ and clients’ perceptions. If you think you are already as high as you can reasonably go, that’s fine. On the other hand, if you provide excellent service and get good results for your clients, they might be willing to pay you twice what you currently charge.

But you can bet that’s one thing they will never tell you.