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Does Discount Culture Belong in Law Firm Business?

Today, I was blessed to have one of my best friends invite me to a Raptors Knicks game at the Air Canada Centre today. It was an enjoyable game: amazing seats, the Raptors won, and some incredible plays were made. I was a bit disappointed by the number of turnovers in the 2nd quarter though.

But I digress. This gift from my friend was in its kindness…genuine. Yet it was in this gesture that I have come to contrast the other ‘favors’ offered to me. In particular, I want to focus on the bittersweet experience of certain referral networks (including family members) who refer me clients, only if I agree to provide this referral with a discount.

I continually struggle alongside my legal brothers and sisters with the annoyance of the expectation of free advice and services. Of course, to close family and friends, this is an option that I gladly provide at my discretion. But when the expectation is made BLINDLY without strategy, or at the COERCION of the referral source, and FOR basically anyone under the sun, then the seemingly ‘positive’ referral (while mostly genuine in its intention) becomes a poison that may actually kill your business.

Here is why a lawyer who relies on blind discount culture for clients may suffer:

1) IT WEAKENS YOUR BRAND

Discount culture weakens sales and undermines your brand when done inappropriately. One of my favorite Canadian culture comedians is Russell Peters. His portrayal of cheap culture, while hilarious, is also an effective contrast of how low cost becomes synonymous with low quality. In the legal profession, this is a toxic mindset for clients to adapt with your legal practice. When a client hires a lawyer, cost may certainly be one factor in their decision. However, clients also need counsel who are professional, competent and who can protect their client’s legal interests. Yet when a client knows that they have retained a cheap ‘discount’ lawyer, they may associate that cheapness with inefficacy. Lost a trial? Maybe it was not the facts of the case but rather the incompetence of the lawyer? At best, the lawyer becomes the victim of the adage, ‘you get what you pay for’. At worst, an unsatisfied client may leave scathing reviews, or even make a law society complaint. 

Discount culture also tends to attract the wrong type of clientele for a firm. These clients focus more on the bottom line as opposed to the nature of the work, the complexity of their matter, and other important factors that contribute to the final result and the success of their claim. They are also uneducated to the nature of the legal business and tend to only care for themselves with no regard to the lawyer’s business and the simple concept that almost all lawyers do not work for free.

Lawyers who are trained to sell their services with the cheapness mindset (instead of focusing on quality aspects such as customer service, level of expertise, or peace of mind), will more likely become transactional: communicating prospective information and then offering whatever the client wants…in some cases offering discounts without even being asked. This is the ‘stab in the back’ that my well-meaning family members do. They do not focus on the numerous aspects of my professional style (including but not limited to):

  • Taking the time to meet and speak with clients in depth when necessary;
  • Providing regular scheduled updates;
  • Ensuring that all legal advice is well researched and accurate;
  • Allowing for ways to provide convenience to clients (driving to homes or hospitals for example)
  • Reasonably being there when the client needs me; and
  • Responding to all communications and inquiries promptly.

Instead, they focus on the ‘Filipino’ benefit of heavy discounts. Sadly, some family members do this simply to further their own career and social progression. Yet, the lesson is the same…Sorry, but the Groupon mentality of “winning with discounts” as a lawyer, may already mean I lost.

2) IT CAN AFFECT YOUR PROFITABILITY

Discount culture that is improperly incorporated in your business plan can have crippling effects:

  • It can infuriate your regular clients who were loyal and paying your regular fee rates. Clients talk and eventually they may find out that you offered services cheaper to someone else. Your referral sources or prospective clients have no interest in your existing clients aside from a review of their satisfaction. As such, unstrategized discounts run the risk of accusations for deceit and/or unfairness by past clients who relied on your ‘best offer’ at the time.
  • It makes your revenues harder to predict. You will have a harder time estimating what a client’s actual worth is.
  • It makes the business unscalable. If you’re giving unstrategized discounts, you will have a harder time handling increased workloads at minimized revenues.

3) IT CAN GET YOU IN TROUBLE WITH THE LAW SOCIETY

The burden of volume work at reduced revenues due to discounts may result in difficulties with allocating resources and staff. This also leads to more human error, difficulty in work life balance, and other factors that can increase the risks of negligence/inadvertence that lead to a LawPro claim.

LET YOUR DISCOUNT BE A BUSINESS BLESSING & NOT A SIN

As a Christian, I have learned that money in itself is not a sin. It is a tool. But it is the love of money that becomes sinful.

In a similar contrast, discounts alone are not a ‘business sin’. But they can be if done wrongly.

Discounts are not Halloween candy just to be given freely. Treating them as such just gives a lawyer more work, less revenue and increased legal liability. You burden your staff, you create unfair favoritism that undermines loyal clients, and you expose yourself to more stress and risk overall.

So how do you turn a discount into a ‘business blessing?’

First, use discounts to create healthy reciprocal business relationships. Do not get ‘bullied’ by referral sources or potential clients who only promise their business in return for heavy discounts. If that is their main strategy, it seems to be their only negotiation strategy for their sole benefit and this may not be an ideal referral source or client. The referral’s business and their strategy may also be incompatible with your own firm’s values, branding and scalability.

Some suggestions I have to foster healthy business relationships with prospective clients include:

  • Ensuring that referral sources are willing to learn about and sell your legal services on its merits and customer service INSTEAD of on its fees. A discount should be incentivized ONLY by you and operate as an added bonus instead of a separate selling factor to your legal services.
  • Considering value added services instead of monetary discounts. For example, existing legal clients get free notarizations for themselves and their immediate families while they remain as active clients.
  • Structuring workflow to maximize client value and taking the lead on client expectations (e.g. explaining to the client that you can save them money by having the work assigned to a clerk or a junior lawyer, and then assuring them that you will supervise the work and send them their updates via email personally.) The discount can be taken as a contrast to your regular billings vs. this optimized work efficiency.
  • Offering a discount in exchange for a mutual benefit such as a client undertaking to provide a review or testimonial of services, adhering to set scheduled call times or meetings, acceptance of email updates for their file as opposed to in person meetings or calls, etc.
  • Provide a discount when the client refers your firm, subscribes to your newsletter, or provides you with a connection/lead to a strong prospect.
  • Potential bartering arrangements (does the client have a product or service you need?) 

Second, make sure the discount is standardized with respect to monetary amount, conditions to be fulfilled in order to receive the discount, and who can issue these discounts. It is important that planning and strategy is implemented in the discount plan to maximize its benefit to the firm. There should be NO exceptions to your standard, or discounts offered that are outside those agreed to in the marketing strategy. Your marketing staff will also thank you because this helps alleviate the stress from negotiations.

Finally, optimize your regular fees so they remain competitive with the market. There are many ways that lawyers achieve this. “Volume” lawyers such as real estate lawyers might charge a lower up front fee but limit the retainer so additional services are charged extra. They also allocate a lot of work to clerks in order to minimize their own costs. Also, technology needs to be embraced in a law practice. Society and its demands are changing so lawyers cannot afford to be blind to this reality.

When this is done, it is easier to justify your fees instead of “padding” your bills in the hopes of having leverage during negotiations with a client.

Discounts should not be a taboo subject in a law firm. Rather, they should be a strategized incentive used to benefit the firm’s marketing strategy. While I may still face the annoyance of dealing with family members who solely insist that I give their friends and referrals a ‘big discount’, I have taken this experience as a way to learn how I can better handle the situation and preserve my reputation (especially as a lawyer who has just been recently called and is already managing a personal injury department.) In some cases, I have learned the power of “no” and refuse to engage in these discussions because my services are being exploited or undervalued. In most cases however, I seek to better educate both my referral sources and clients why what I have to offer as Kristoffer Diocampo makes more than just “cents”.

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