This week, we are joined by Shaun Jardine, former CEO of Brethertons Solicitors, where he was a champion of change and battler of the billable hour. Since departing, Shaun has founded Big Yellow Penguin, a consultancy that advises professional service firms on their sales and marketing, with a particular focus on the concept of value pricing.
In our conversation today, we are going to be talking about the obstacles that prevent firms from adopting a value pricing strategy, where the easy wins can be found and the degree to which this can all be systemised within one formulaic and repeatable model.
Shaun, thank you so much for joining us today.
Dan: Bit of a generic one to start things off just to give everything else that follows a bit of context, if you were to describe the greatest challenge facing companies, facing firms looking to implement value pricing, how would you describe that?
Shaun: I think the biggest challenge is that it’s a paradigm shift, it is a change of culture. It is a big project. It’s not a technology tool saying, “Here is something, use this, you’ll be fine”. You know, speaking as a lawyer, lawyers have got to want to embrace change and lawyers are naturally conservative. They’re naturally risk-averse. They’re naturally argumentative. And they don’t necessarily like change, coupled with the fact there’ll be lots of lawyers out there who say, “We don’t need to change the model because we have the billable hour and that works”. And to some extent, they might be right. It does work. Doesn’t mean that the clients like it, doesn’t mean that change has not got to happen and it doesn’t mean that they’re not leaving value on the table, which in many cases, they emphatically are.
Dan: Absolutely. So, when you look at the legal industry, and as you say, maybe it’s kind of intrinsic within a certain personality type that is quite dominant within that industry, that actually maybe there is a slight resistance to change generally, although I’m sure that is something of a generalisation, but if that is the case, then are there other industries that also sit perhaps within professional services and that face the same challenges and opportunities, but that are just doing a slightly better job of capitalising on those opportunities and avoiding those challenges?
Are there any particular sectors that you would look at and say actually, this is something that we could aspire to emulate?
Shaun: I think at the one end of the spectrum, we’ve got organisations like McKinsey, and they will talk about project-based and they will talk about what it is that the client wants to achieve, what is the outcome, and price the whole project on something like that. I think in the accountancy profession, there’s some good work going on there, in America in particular, I think accountants are embracing value pricing. One of the leading authorities on value pricing is an American accountant called Ron Baker, who’s written about 5 books on the subject. And accountants, to a certain extent, have a slight advantage over lawyers because they have a client base that has a recurring need. They will come back every year. They’ve got their tax returns, they’ve got the company accounts that need doing. And because they’re dealing with numbers, they can actually say, “Well, this is what the value is going to be. I can do something that will save you X thousands of pounds.” With the law, it’s slightly different.
I take the view that law is always a distressed purchase. I don’t think anybody ever wakes up in the morning thinking yippee, I’m going to spend some money with a lawyer. Clients have a problem that they need solving. So it’s outcomes-focused. People don’t wake up and think, “Brilliant, I’m going to spend x thousand pounds on having a will prepared today because I want a will with bits of Latin in it.” They think, “I need to get a will because when I die I want my kids to be protected”. So that outcome is peace of mind, same with divorce. People don’t go for a divorce thinking, “I really am looking forward to this court documentation I’m going to have to fill in about my reasons for wanting a divorce”, they want happiness. They want to get out of a relationship that’s made them unhappy. And so, you’ve got to focus on the outcome that the client wants to understand the value. And it’s the client’s understanding and perception of value that is key. Everybody’s perception of value is different.
I might have a watch that’s worth fifty quid, you or anyone listening to this might have a watch that’s worth thousands of pounds. They all do the same thing. And actually, do we need a watch anyway because we’ve got a mobile phone that’ll tell us the time and the date. Why do we wear a watch? And the answer is because we like to. And we might wear an expensive one because it makes me feel good, and you know, quite often, value is a feeling. It’s can’t necessarily always be translated into a number.
Dan: Absolutely, you mentioned America, I wonder, is there a bit of a cultural thing there? Because obviously in America, things are a little bit different, they are a little bit kind of ahead of the curve relative to where the UK market is in terms of how they’re kind of looking at that customer experience and how they’re defining that question of value. Is there a bit of a cultural thing going on there?
Shaun: It might be that people there are more disposed to having conversations about money. British people are quite reserved when it comes to talking about money. You know, there’s probably 84% of professional services firms, according to Ron Baker, are still wedded to the billable hour. So it’s not a huge proportion that are embracing value pricing.
Dan: One of the challenges can be trying to get an assessment of what the value actually is to that individual because as you say, it could be profoundly different from one person to another. You gave some consumer-based examples and of course, within a sort of business context, it’s exactly the same. One solution to this one company over here could be worth four figures, to another company over here, exactly the same work could be worth six or seven figures.
How do you go about actually establishing, whether it’s corporate or consumer-based, how do you go about extracting that information from the decision-maker so you can actually get a sense so that you don’t on the one hand underprice yourself, but equally, you don’t necessarily add on a couple of zeros where it may just never have been feasible to that to that individual?
Shaun: It’s all about having a conversation. And so that if you have a conversation with the client, work on the basis – as we all know – no two clients are the same. The way they’re going to communicate with you is different, their attitudes to risk might be different. It might be a very risky matter that you’re undertaking and then you want to build that into your price. It might be that when you’re initially engaging with the customer the way that they’re going to give you the information that you want might come in incredibly haphazard, you know, where you think I’ve got to spend hours just putting this into chronological order, whereas this other client has sent me the details and they’re all in apple-pie order. It might be, do you like this person? Do you want to work with them? Are they going to be a pain to deal with? And these are things that you can factor in, coupled with the fact, how busy am I at the moment? Have I got the capacity to take this on? Can I delegate it? And these are all things that a lawyer should ask themselves at that time, but also be prepared to think, you know what, you’re not a fit. This customer is not a fit for us. And be prepared to turn work away.
Now, that for some lawyers will blow their minds where they think I’ve got to take on every bit of work. And I’m a passionate believer that you don’t have to have every bit of work and deal with every bit of work, you want more than your fair share of the good stuff. That’s what you want, because if you do two jobs and there are a hundred pounds each, or you could get one job for 300 pounds, take the job for 300 pounds, because actually, you’re going to do half as much work and you’re going to earn more money and the benefits that flow from that to the firm, the client and the lawyer, you know the lawyer gets a better work-life balance. In theory, they’ve then got more capacity if they want to do more work, better for the firm, better for the customer if they’ve got an agreed price that they’re happy with. And lots of people always think, well the client is shopping around. They’re not. In the vast majority of cases, they’re not. They might have been recommended to you and actually clients when they approach a law firm have got four options. They can engage you, they can engage a competitor, they can do it themselves or they can do nothing. Now, the fact they’re ringing a lawyer actually means that they don’t want to do nothing and they don’t want to do it themselves, so we’re down to are they going to engage you or they’re going to engage a competitor. And if you’re a believer that people by people, then there’s no reason why you should actually treat every customer the same, because they’re not.
Dan: Presumably, there are certain areas of law where value pricing is more easily implemented than other areas. So where are the low hanging fruits, and conversely, which legal services represent a bit more of a challenge from this perspective?
Shaun: I Think where you can make you know some quick wins are in areas where you’ve almost got a fixed price already. So those are wills, residential conveyancing and things like that. Now, I’m not a fan of actually having calculators on websites that show put this value in it will generate this price. Again, it’s coming back to the thing that every customer is different, every house, by definition, has to be different. Every lawyer on the other side of the transaction is going to be different. You know, if you know that your lawyer on the other side of this transaction is absolutely awful, well you should factor that into your pricing. But with those areas, you have a conversation, and you can have a conversation where you say, “Well tell me about this property. Let me find out.” Okay, the price is one of the factors when you’re relocating. Speed is one of the factors. Where’s the money coming from? Is money being lent by parents? A gift? Because that might complicate it. How many people are going to own this property? All of these things. And when you start having a conversation with people about what is probably going to be the biggest purchase they ever make in their lives, you can engage with them on a human level.
I could talk to you saying, “Dan, you’re moving to Oxfordshire, brilliant. What brings you here?” “I’m relocating because of my job.” “That’s great, and where are you gonna be living?” All of a sudden, I’m having a conversation with you as a lawyer about other stuff. Now, when I come to deliver you the price, I’m 300, 500 pounds more than someone else, you might have thought, well actually, I quite like that guy Shaun, because he knows the area, he told me this, etc, etc. And all of a sudden, it doesn’t matter that you’re more expensive because you’re not buying on price. You’re thinking, do I trust this guy to get me through this transaction? Because my outcome is I want to buy that house in that period and move in on that day because the kids start school on whatever date. That is gonna be important to me. You want that outcome. And then you have that conversation.
And breaks my heart when you come across law firms that get mystery shopped but sometimes they only get as far as a receptionist, and it’s, “How much are you buying for? How much are you selling for? This is the price. If you want to instruct us, come back.” So they’ve given nothing other than a price and pushed the work away.
Well, if you train your staff to have conversations with them, you can actually say, “Well at the end of the conversation I’ve had with you, these are the prices, etc, etc. Shall we open a file and get this thing started now.” Do an assumptive close. Ask for the work. Lawyers are very bad at asking for the work.
Dan: So just finally then, my impression is that value pricing is just part of a, like you say, part of a broader change management process. Looking at it from my perspective with my marketing hat on, I would look at various different things including the question of productisation and better defining the customer journey and developing greater clarity and depth around this brand identity. And I guess the challenge is, if you just approach value pricing in isolation, it’s going to be a bit hit and miss.
I’d just be interested to get your thoughts on where a firm should be starting that journey if they haven’t begun already. What are the sort of foundations they need to establish before really attempting to tackle value pricing in a meaningful way?
Shaun: Step 1 has got to be that the leadership team wants to do it and that they’re behind it. Because if it’s not led from the front, it will fail. It’s got to become part of the strategic plan. It’s not part of the strategic plan, then it won’t work. And then you’ve got to make sure that your firm knows this is going to happen and explain the vision, paint the picture of where you’re going and then you’re going to create a guiding team. You’re going to create a little pilot group. And what’s interesting is when once that happens, because it’s impossible in a big organisation to go big bang, you create that little pilot group and when I was working with a team, I was being told, “No. We can’t version a will product. We can’t go gold, silver or bronze on a will product.”
At the end of the pilot, we had not only gold, silver, bronzed wills, we’d done the same for lasting power of attorneys. Did the same for lease reviews and things like that, because people are then thinking, well actually, take a detailed lease review, if somebody comes along and says, “Look, I just want to know as a freeholder, what are my repairing obligations in this lease?” That’s just looking at a discrete point in the lease, you can price for doing that. Somebody says, “I want to know what all my freeholder obligations are in a lease.” That’s a bigger piece of work. If somebody comes in and says, “Well, actually I want to know what all the obligations in this lease are, and I want it communicated in such a way that any property manager coming into my firm at any time in the future can read that document and understand those obligations from now until, you know, the next 100 years”, that’s an even more detailed piece of work. Give people the gold, silver, bronze service. When we go for a car wash, we all know our cars need washing. They’re all going to be equally dirty. But on that day we think, “Bronze will do today. I don’t want to spend that on the gold, because what you want to do on that day is your value decision. Your price. It is hard. It is a change management programme, but it can be done. There are firms out there who have been there, walked the walk, talked the talk and their lawyers, their customers and the firm themselves are all in a much better place because of that.
Dan: I can’t help but think as well that a company that nails the question of value pricing, by extension, almost certainly nails other points of their brand messaging, their customer communications as well. If I think, for example, there’s a company called Farewill, who I think is a really nice example of this, who entered the wills market about 6 years ago or so, and within a couple of years, they’d become the largest provider of wills within the UK.
You talk about totally, radically rebuilding the commercial model. I mean, the second biggest player in that space was I think Co-Op at the time, and they had nearly 10 times the number of people working than Farewill. And fundamentally, I think what they were really nailing was that question of value pricing. They were crystal clear that people were extremely worried about what was going to happen with it, and it was that question of reassurance. So rather than it being viewed as a burdensome, administrative task, they turned it into a profoundly emotive experience by asking the question, ‘Give me a name of somebody that would be a recipient of a proportion of your will and write the first line of the message that you would communicate to that individual.’ And the chap actually got me to do it and the hairs on the back of my neck stood up and as I say, it completely transformed what was essentially an administrative burden into this totally emotive experience. And you look at every part of their brand messaging through social media, every moment of the customer journey on the website, and you could look at a company like Farewill and say, well it’s kind of like a techy startup, but actually, the technology is really rudimentary. I mean to my knowledge, they weren’t using anything that hasn’t been available for the last twenty years, but they were nailing the question of what was actually driving the customer and then just building everything off that.
Dan: So my question is, from your perspective, do you see some sense in that? If you nail this question of value pricing, are there then sort of ramifications for other components of the organisation and of the brand?
Shaun: Absolutely, but all you’ve described is somebody spoke to you in a different way. It’s a question of engaging with people. You know, you talk about what might be a unique selling point for a law firm. Well, it might be that we don’t bill by the hour, we will never present you with an invoice that you haven’t agreed to. You will control the process. We will talk to you about a matter if it goes out of scope. So if you’re making assumptions on a litigation matter, for example, you’re the client and you’re saying, “Well, I think there’s going to be four people involved in this matter in my case.” I’ll make the assumption that it’s going to be four people. If it transpires later on that we need to interview 8 of them, I’ll say, “Remember when we talked at the beginning about 4 people. It’s now 8. I’m afraid for me to interview those additional 4, it’s going to cost you x. Can we agree that?” Let’s agree on the price and then I’ll bill you that price that you’ve agreed. What I won’t do is do the work and then present you with a bill that you weren’t expecting. That’s when you know people will bill and duck. Customers quite rightly come back and say, “Hang on. You told me it was 2000. Why have I got a bill for 4000?” “Oh, it was it for that extra work.” “You didn’t tell me about that.”
That’s where you can engage with people on a human level, have that conversation, build that trusted client-advisor relationship that all lawyers aspire to have and very few do, because they don’t necessarily have these conversations, they don’t necessarily understand their clients’ businesses inside out. They will say they do, and lots of them don’t. Lawyers don’t often ask what the budget is. Ask: what is my budget for doing this piece of work? I might have in mind it’s a hundred thousand pounds piece of litigation. You might have in mind the fact I’ve got ten thousand pounds. That’s it. Okay, well let’s work within your budget. These are now the options. This is what we can do.
I always take the view that law has been around for a very long time and it’s just the way that you apply the process and the conversation with the customers, to the customers. I know some people actually hate me talking about clients as customers, but that’s a debate that you can have on another podcast. But it is engaging with people, having a conversation and finding out what their perception of the value might be, and then pricing accordingly.
Dan: Absolutely. It’s been fascinating, Shaun. It’s kind of made me realise, as a marketer, I sort of like to believe I fundamentally have a good grasp of value propositions and what that customer journey looks like and what the real value is that the customer derives from an exchange. But certainly, you’ve said a number of things today that have made me think that I need to maybe immerse myself in this subject matter a bit more than I have, so thank you ever so much.
Shaun: Thank you.