Professional Service Consulting - Pricing Models
Examples of case studies of professional service firms that generated higher profits because they transitioned from hourly pricing to another pricing model such as value, performance, or project-based pricing include the Bongiovi Law Firm, Counsel for Creators, and LegalAdvice.com.
BONGIOVI LAW FIRM
- The Bongiovi Law Firm's change from hourly pricing to a subscription pricing model led to a "fair balance." The entity chose the subscription model because it aids small business owners by offering more financial predictability.
- Bongiovi used different pricing models in the past for clients to access services and to get discounts off the firm’s flat fee services. However, customers like the subscription because there is no secret as to how much they are expected to pay for a service. Given that payment is made upfront reduces any chance (i.e., hassle) of chasing receivables.
- The company is comfortable with the model because it serves as an incentive for the law firm to unearth ways through which the company can help its clients.
- The transition from the previous pricing model was necessitated by the existence of downsides that needed to be corrected.
COUNSEL FOR CREATORS
- Counsel for Creators is a professional service firm that transitioned to a subscription model in 2015. This took place after realizing that most people had basic legal issues that they wanted attorneys to handle at affordable prices.
- In its subscription model, members sign up for memberships periodically or month-to-month. The implementation of this model at Counsel for Creators was successful because it focused on scale and the abilities to manage many clients.
- This pricing model also brings the need for the organization to stay oriented towards the provision of ongoing value instead of billing for time. The change in the model was also motivated by the firm's focus on scale while the hourly pricing model was at odds with all aspects of scalability.
- The new model is suitable for the entity because it can be scaled even if the firm grows to be a large one.
- It is also convenient for customers and makes it possible to budget expenses which leave room for working towards increasing revenues and consequently profits.
- The leadership at LegalAdvice.com changed from an hourly pricing model to a subscription model in 2012. Customers who register for the service commit for six months.
- The marketing expense incurred by the firm is in the form of the cost of keywords needed to get a new client. However, the business is faced by aspects of unpredictability regarding the pricing of keywords and revenue from subscription clients.
- The firm focuses on maintaining a low rate at which customers stop their subscriptions and on gaining new clients.
- As a result, keeping a customer for extended periods, the firm benefits from the subscription pricing model because it translates into keeping the firm into operations and aiding the slower entities to continue providing services to their clients.
- The transition to the subscription model saved the online service from the adverse effects of an hourly pricing model such as misaligning customer interests and shifting focus away from value to hours which increased the chance of losing the customer.
To identify the examples of the professional service firms, we consulted journals and scoured sites such as ABA Journal, Klipfolio, Inc., Remarking Law Firms and Theory Biz. We focused on firms that have revenue between $4 million and $5 million. Based on these resources we identified case studies of professional service firms that generated higher profits because they transitioned from hourly pricing to another pricing model are Bongiovi Law Firm, Counsel for Creators and LegalAdvice.com.