Are you underpricing your criminal defense services? My experience suggests that many are. And I think I know why.
Many criminal defense lawyers employ inefficient or inopportune pricing strategies when they position their service in the market. As a result, they leave tens, or even hundreds, of thousands of dollars on the table each year. Further, they’re forced to take on more files than necessary and wind up spreading themselves too thin. This reduces the level of service they can provide to each client.
Continue reading below to learn about five basic pricing strategies commonly used by service firms and which one of these is best suited to a market like criminal defense.
The 5 Most Common Pricing Strategies
As explained by the Business Development Bank of Canada, firms typically employ one of five distinct pricing strategies:
- Cost-plus Pricing – Determining the costs to you of providing a service and adding a set mark-up.
- Competitive Pricing – Determining the prices charged by your competitors and setting a similar price.
- Value-based Pricing – Determining the perceived value of your services to your customers and setting a price based on that value. This is the strategy most likely to work well for criminal defense firms.
- Price skimming – Setting a high price and lowering it as the market changes.
- Penetration pricing – Setting a low price to enter a market and raising it as your brand gathers momentum.
Not all of these strategies are effective for, or even relevant to, criminal defense lawyers. For example, price skimming simply doesn’t make sense in a highly mature and stable market like criminal defense. Instead, many junior lawyers engage in a combination of the other four options on this list. This is unfortunate, given that only value-based pricing is likely to result in an adequate price for the lawyer’s services.
The Economic Realities of Criminal Defense Pricing
There are many features of the criminal defense market that are relevant to the prices set by criminal defense lawyers. These are just a few.
- The demand for criminal defense services are highly inelastic. While more could be said about this topic, inelasticity of demand for a good or service refers to a low level of responsiveness to price changes. In other words, increasing or decreasing the price of criminal defense services across the board wouldn’t change the demand for those services much.
- The quality of criminal defense services are highly variable. It’s fair to say that the quality of criminal defense practitioners ranges from stellar to average to dangerously incompetent.
- The nature of criminal defense services are highly individualized. The services provided to an employed person without a record who’s charged with drive over 80 differ markedly from the services offered to a chronically unemployed person with a long record charged with sexual assault. (I don’t mean to suggest that the quality of that service should differ, but rather that the benefits the clients hope to gain from those services are very different.)
While there are many more unique characteristics of criminal defense that can affect price level, these three factors account for much of the unusual pricing behavior we see in the market.
How Not to Choose a Price
One of the most common methods of choosing a price is for a lawyer to estimate how much work will go into a file and then set a price based on their labor. This is a version of the cost-plus pricing strategy. While it has some intuitive appeal, it’s a fundamentally ill-advised approach in a service business. This becomes clear when you consider it from the perspective of the client.
Does the client care how many hours you’re spending on their file? No. Does the client care how difficult or technical this area of the law happens to be? No.
Clients pay for benefits. Perhaps they want to avoid or minimize a jail sentence. Perhaps they want to keep their driver’s license or escape the stigma of an embarrassing conviction. Maybe they want to be allowed to continue travelling to the United States or maintain control of a corporation.
Regardless of your client’s aims, one can be assured that they bear no relation to the number of hours you pour into a file. The client simply doesn’t care how hard you work. They just want results.
Consider an extreme example. Imagine you’re charged with drive over 80 and you’re choosing between two defense lawyers. One has recently graduated law school and the other is a renowned criminal lawyer with 20 years of courtroom experience who specializes in drunk driving law. The junior lawyer tells you that it will take him 50 hours of work at $200 per hour to adequately represent you ($10,000). The senior lawyer tells you that, because of his extensive experience and efficiency in the field, it will take him only 10 hours of work to fully represent you, but he charges $500 per hour ($5,000).
Do those prices make any kind of sense? All else being equal, would anyone hire the new grad at twice the price of the seasoned vet? I think the obvious answer is no.
The reason those prices don’t make sense is because they don’t take into account the perceived value of the services provided to the client. You probably perceive the junior lawyer as providing less value than the seasoned veteran, yet the former charges twice as much as the latter.
But what if, instead of focusing on how much work the lawyers put in, we consider the value provided to the client in determining the price. Consider two lawyers again, this time of relatively equal experience and reputation.
The first lawyer bases his services on hours worked and determines that the drunk driving file is worth $10,000, which is what he proposes to the potential client.
The second lawyer, based on an intake interview with the potential client, determines the following:
- The client works at a job that pays $70,000 per year plus benefits in salary.
- The job requires that he maintain a driving license and travel periodically to China.
- The client is deeply embarrassed by the charge and hasn’t even told his family and friends about it yet.
- The client is terrified of going to jail, even though you’ve explained to him that this is unlikely given his lack of a record.
Based on this information, lawyer #2 recognizes how much value the potential client would likely receive from her services and proposes to the client a $20,000 fee.
Which lawyer is the potential client likely to choose? While you might assume he’ll go with the cheaper option, you’d be neglecting one key factor in the client’s decision-making process.
Price Serves as an Indicator of Quality
As in many markets, price serves as a primary indicator of quality in criminal defense services. For example, suppose a patient seeking life-saving brain surgery is faced with a choice between two surgeons of equal experience and reputation. One charges $10,000 for his services while the other charges $250,000. The patient is likely to conclude the latter surgeon is more skilled, even if all other outward factors are similar.
This fact is especially pronounced in markets where the customer has difficulty gauging the skill level of the professional he or she hires. In criminal law, the typical client does not know, and cannot know, if a lawyer’s abilities and work ethic are above average, average, or below average. The customer instead bases their decision on representative factors, the most important of which is price.
The Most Attractive, Not the Least Expensive, Option
Because of the role that price plays in communicating the quality of your service, the mathematics of price competition amongst criminal defense lawyers changes. Due to the importance of an effective criminal defense in the life of a potential client, they will tend to choose the lawyer who offers the most benefits within a price range they can reasonably afford.
In the example we discussed above, the drive over 80 client is likely to be able to afford both the $20,000 lawyer and the $10,000 lawyer. He will go with the lawyer who is most able to help him meet the challenges identified in the example. The main role that price will play in the decision is in communicating the comparative level of quality of both lawyers.
Therefore, relying on a competitive pricing strategy is likely to lead you into error. The primary function of choosing a price in criminal law is to communicate your level of efficacy and, unless you want to communicate that you’re exactly as effective as your competitors, you’ll want to avoid charging the same price as them.
Value-based Pricing and Price-Brand Alignment
Rather than try to match what your competitors are charging, and rather than try to calculate how many hours you’ll spend on a file, attempt to identify for each client how much value you would bring to the table.
At the same time, ensure your prices communicate a message that’s consistent with your brand. If you hope to be known as an affordable option in a sea of high-priced lawyers, by all means keep your prices low. If, however, you want to communicate a message of exceptional quality, you would be wise to charge a high price.
The Affordability Objection
Some lawyers are hesitant to charge based on the full amount of value they bring to their clients on the grounds that many will not be able to afford this price. I have a few responses to this objection.
First, identifying what your services are worth to each of your clients does not oblige you to charge that amount. If you’re passionate about access to justice you’re free to explore ways to reduce the amounts you charge to all or some of your clients. But you should still be alive to the reality that you’re leaving money on the table so you can keep track of how many services you’re giving away.
Second, you’d be surprised at how much money even less well-off people can pull together when the chips are down. And the chips are definitely down when you’ve been charged with a criminal offense.
Third, some lawyers have a moral objection to charging for the full value of their services, especially when much of their clientele might be breaking the bank to afford those services. Or they may just feel guilty taking money from people who don’t have much of it in the first place.
If that’s the case, as I said above, there’s no reason you can’t discount your services after you’ve determined what their full value to the client is.
But, more importantly, a proper application of value-based pricing shouldn’t result in exorbitant prices for any of your clients. Remember, you’re trying to determine the perceived economic value of your services to the individual client. If that individual is a relatively poor and the consequences of a conviction would be relatively minor, your prices will necessarily be relatively low as well.
Finally, remember that a proposed fee is just an offer. In all but the smallest markets, your potential client is free to choose another lawyer. If you propose a large fee and your client agrees, its because they believe its in their interest to do so and that you’re the best person to provide the benefits they need. Only if you don’t intend to follow through in providing those benefits do you have any cause to feel guilty.
If I can leave you with only a handful of takeaways from this article, I’d ask you to remember the following:
- Base your prices on the perceived value of your services to your client. If that price wouldn’t justify the work you’ll put into the file, don’t take the file.
- Be cautious about underpricing your competition. In markets for specialized professional services, price serves as an indicator of quality. Ensure that your price reflects the brand you’re building. There’s nothing wrong with being inexpensive, as long as that’s consistent with the firm you’re trying to make.
Hopefully, this article has been of some use to some of you. Please leave a comment below, especially if you have anything to add about how you determine pricing at your firm. I’d love to hear about it.