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Analysis of Legal Billing -- 76 Percent of Firms Are Discounting Fees

Recall those $1,000/hr billing rates that had the blogosphere buzzing last summer?  Turns out, they may really be worth only $900/hr  based on the results of a 2008 Fees and Pricing Benchmark Report released by Rain Today and summarized by Enricho Schaefer at Greatest American Lawyer.  According to the report, discounting is a common practice, with 76 percent of all firms discounting their published fees by an average of 9.9 percent.  And interestingly, larger firms are more likely to discount; 89 percent of firms with ten or more lawyers discount, versus only 59 percent of smaller firms.  Nearly half of the responding firms employ service guarantees which allow clients to reduce payment based on dissatisfaction with value received.

The 76 percent discount rate really surprised me.  Is discounting used as a marketing tool, where rates are artificially inflated then discounted so clients feel that their getting a bargain (just like in some discount clothing stores, the $99.00 price tag will be prominently crossed out and replaced by a $40 tag though it's likely that the item was never originally tagged with the higher price)?  Are firms desperate for business and willing to cut their rates to bring it through the door?  Or do firms wind up effectively discounting rates after the fact because clients ran out of money and can't pay the full bill.  Understanding the reasons that firms discount rates is critical to developing an efficient and trust worthy pricing strategy.

So what's your view on why so many firms discount?  Or do you think even more firms should be discounting rates?

Posted by Carolyn Elefant on May 30, 2008 at 02:06 PM | Permalink | Comments (1)

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