How Pricing Experts Elevate Practice Management and Client Service
The professional services field is typically a late adopter of practice management innovation, but over the past five years, many larger providers have established a new role within the firm: pricing czar.
These individuals tend to have MBAs, and are highly analytical, extremely comfortable with spreadsheets, and focused on pricing and profitability rather than billing. What’s driving this trend? Client demand for greater transparency and predictability when it comes to fees.
Clients are asking for detail about what a project will cost before the work is awarded. And firms are gaining stronger understanding of their clients’ interest in price, not just hourly rate. Pricing experts offer insight and knowledge that can bring better alignment between the clients’ need for budget assurance and the firm’s objective to provide profitable services. As decisions are made about allocation of resources and dedication of expertise for particular matters, they examine historical and other data mined within firm systems.
To be effective, a pricing expert must establish respect and credibility with the partners and be well acquainted with the inner workings of the firm. How is workflow typically handled? What is the overhead, beyond staffing, associated with the work? What are the usual margins associated with this type of assignment? They are fundamentally curious and able to distill from RFP’s, correspondence, and discussions with lead partners the project and budget management factors most important to the client—such as price, predictability or means and frequency of communication.
The evolution of the pricing role tends to be incremental. Initially, there may be an informal request to the accounting department to look at numbers. Many firms take the step to hire dedicated expertise to take a deep dive into profitability, review and/or approve agreements with clients and recommend staffing levels. As time goes on, these positions may work with practice groups and lawyers on fundamentals that make pricing strategy an essential component of firm operations. At the most sophisticated level, the pricing expert will be involved in negotiations with larger clients to develop mutually beneficial agreements.
With firms of all sizes experiencing fee pressure and stiff competition, an administrative role focused on pricing and project management is a growing imperative.
Melissa Croteau advises professional services firms on strategy, structure, processes and tactics to achieve growth and optimize go to market effectiveness. Reach her at email@example.com or at 617-755-2080.