Most clients prefer flexibility in terms of rates and billing and many see AFAs as the answer, albeit not necessarily the panacea. Delivering “value” to the client is at the heart of the AFA discussion. And value can means so many different things. That’s why AmEx offers different cards-green, blue, clear, gold, platinum, or black, all with different features and benefits. If nothing else, AFAs make costs more predictable and ‘budgetable’ for clients. More often than not, cost certainty is more important to clients than merely getting the lowest price. In fact, if a price quote is extremely low, clients may worry that the low-cost provider may not deliver at that price. “There is no magic AFA,” says Toby Brown, Director of Strategic Pricing & Analytics at Akin Gump. “But it needs to be a ‘win’ for the client and it needs to be a ‘win’ for the firm. Anything else won’t work.”
Above all, firms must improve trust by more closely aligning their definition of value with that of their clients. AFAs can support this process. The ACC defined value as a combination of:
- A total focus on partnering/collaboration
- Rigorous cost-control (more than simply lowering cost)
- A commitment to risk-sharing and reward-sharing
- Longer-term relationships–continuity, predictability
- A focus on new skills, staffing, and lawyer development
- Lean, efficient, process-oriented management
- Continuous improvement/accountability
- Transparency through data
AFAs require a commitment to learn the intricacies of their clients’ businesses, anticipate their clients’ needs, and seek out close collaborations with the client. The larger effort requires honest communication, mutual flexibility, and openness to making tangible changes. “AFAs are as much about communications as they are about numbers. It is important to manage to the AFA, not just staying within the agreed-upon budget. If the assumptions change, lawyers need to be proactive about the communication with the client,” says Michael Byrd, Director of Pricing Strategy and Legal Project Management at Mayer Brown in Chicago.
Read my article Pricing as an Element of your Marketing Strategy in The Bottom Line, Official Publication of the State Bar of California Law Practice Management and Technology Section, Volume 33, No. 4 August 2012, pages 15-18 for the full article (member login required)