This year, I’m seeing a noticeable increase in interest from law firms in value pricing. The driver is clear: hourly billing is breaking down as firms find they can deliver the same work more quickly - whether through process improvements, technology, or AI.
Efficiency should be a good thing. But when clients feel they’re getting the same service as before, just delivered faster, efficiency becomes a trap. It leads directly to demands for lower fees. And increasingly, clients have credible alternatives if those reductions aren’t forthcoming.
You can see this dynamic clearly in a recently reported Financial Times article. KPMG - one of the world’s largest auditors of public and private companies - successfully negotiated lower fees from its own accountant, making it clear it would take its business elsewhere if a significant reduction wasn’t agreed. This isn’t an isolated incident; it’s a sign of how buyer behaviour is changing price pressurewhen credible alternatives exist. It might also reflect how some professional services firms view the value and distinctiveness of their own offerings.
In response, many firms are turning to value pricing. But too often, the approach lacks sophistication. Typically, it begins with the firm's hourly-rate fee and then adjusts based on factors such as efficiency, urgency, or complexity. This may feel like progress, but it still anchors pricing to the past rather than focusing on what the client truly values.
A more effective way to think about pricing comes from Jonathan Stark, whose work has shaped my own thinking. In a recent video post, he succinctly summarised the factors that determine how much you can charge. According to Stark, pricing depends on:
How much people want what you have (desire), and how much money they have (budget)
How many alternatives they perceive themselves to have
What we’re seeing now is that too many firms are trying to sell the same thing they always have, to clients who historically bought it because they had to.
Meanwhile, the number of alternatives is increasing rapidly. These alternatives now include AI models and platforms - like Claude and its recently announced legal plugins - alongside other new service providers and delivery models. When client desire and budget remain constant, but the number of alternatives multiplies, the inevitable result is downward pressure on price.
This is the trap: greater efficiency applied to an unchanged offering doesn’t increase value - it simply accelerates commoditisation.
So, the strategic response is not just to price differently, but to change what is being sold.
Specifically, firms need to increase client desire by focusing less on tasks and outputs, and more on the outcomes that matter most to clients. At the same time, firms must reduce the number of effective alternatives by designing offerings that are harder to compare, substitute, or automate. When done well, this will restore pricing power.
This Has Implications for Clients as Well as Law Firms
For clients with budget responsibility, this means pausing before requesting a discount. Instead, ask: what outcome do we really want, and what more could we reasonably obtain from the technology, expertise, and data available to us?
If law firms aren’t thinking this way yet, help them expand their thinking. Ask for multiple options: one for the same service at a lower cost, and at least one for a higher-value solution at a higher price. You remain in control of which option you choose and what you’re willing to pay. But you may find you’re willing to pay more to get more.
For law firms concerned about increasing commoditisation and substitution, we help design new solutions that clients actively want - not just faster, cheaper versions of what they used to tolerate.
And for in-house legal teams under pressure to do more with the same or less, we work with you to rethink how work is scoped, priced, and delivered - so you can achieve better outcomes and greater value for your organisation.
