Pricing Matters: Using AI to Deliver Higher Profit and Better Client Value
Professional services firms face a variety of pressures surrounding pricing, competition, and client expectations. As a result, firm leaders must make pivotal strategic decisions around profitability and client development efforts.
In the 2020 Law Department Operations Survey, 75% of respondents revealed their companies are actively trying to save costs by bringing more work in house. The recent Legal Pricing and Project Management (LPPM) Survey also pointed to a client-driven innovation trend, with firms implementing new processes for budgeting, proposals, and fee arrangements driven by the LPPM function and partner-led change management.
“As the competitive landscape changes, firms need to be more creative in providing and communicating value to clients as a means to secure new engagements,” said Jill Nelson, Senior Director of Operations and Finance Business at Intapp. “At the same time, firms need to hit profitability targets while keeping clients satisfied.”
To balance these competing demands, firms are taking a more sophisticated, analytical, and data-driven approach to business and practice development. By improving processes and investing in AI-enabled software, they can deliver better service to current clients and also analyze various factors to determine whether to take on new clients and matters.
Pricing Matters Expertly with AI-Derived Historic Insights
When it comes to pricing matters, firms must ensure that prices accurately reflect both the client’s goals as well as the firm’s profitability margins. However, this can be extremely difficult to do without the proper tools and technology.
“Without AI, firms struggle to quickly develop accurate and thorough budgets,” said Sharon Scenna, Industry Advisor to the OnePlace Operations & Finance team at Intapp. “They endeavor to price matters based on previous matters, spreadsheets, or rough estimates.”
OnePlace Operations & Finance, an Intapp suite, helps practice management and finance professionals overcome these very obstacles. The suite’s AI-enabled software supports pricing and LPM efforts, including alternative fee arrangement (AFA) effectiveness, innovation, profitability, staffing, and matter components.
Firms with sophisticated LPPM approaches can also use AI-powered software to develop AFA strategies and conduct analysis that continuously identifies opportunities for improvement and innovation. This, in turn, delivers the insights and informed decision-making required to remain competitive and profitable.
“Using AI, firms can leverage reliable insights on how long litigation is going to take, or what the risk and reward might be for filing in one jurisdiction versus another, and then collaborate with their clients on the best strategy for the engagement,” explained Scenna.
Winning Higher-Margin Business
Historically, firms focused on revenue generation rather than profitability, largely because they lacked visibility into actual costs. With advanced technology, firms can help service teams manage across the entire matter lifecycle, monitoring actuals against budget.
“Many clients are asking their firms to manage to a budget,” recalled Scenna. “They want help with projecting expenses from the outset, and expect their firms meet that prediction.”
Using integrated dynamic modeling, firms can scope various pricing, staffing, and resourcing scenarios, and assess the impact on the bottom line.
“Using AI helps law firms to scope matters and model how different pricing, resourcing, and work allocation choices would affect the bottom line,” said Scenna. “From there, firms can forecast the anticipated revenue and profit margin on the engagement or portfolio of services.”
Analyzing costs and promoting higher-margin business is a key feature of OnePlace Operations & Finance. “OnePlace Operations & Finance lets firms reliably scope matter cost up front, protecting both the client’s budget and the firm’s profitability,” explained Scenna.
Leveraging Technology to Build New Opportunities
When determining whether to take on new clients and matters, firms must consider numerous factors, including:
- Does the new business align with the firm’s legal service area goals?
- Does the firm understand the client objectives, guidelines, value drivers, and success metrics?
- Does the firm want to grow the client relationship, given prior financial performance, practice capability, and risk concerns?
- Can the firm satisfy the client’s OCG requirements (e.g., Coca-Cola’s requirement to have at least 30% diverse relationship partners at its most-used firms)?
AI-enabled software provides insights into matter budgets and trends as well as historic milestones, allowing firms to accurately price matters and develop profitable pricing strategies. Software-derived insights can also help firms select the best-suited service team for a particular matter.
“By analyzing a comprehensive dataset built from team experience, matter history, and other relevant and adjacent data, we give lawyers, business development, and pricing teams insights into similar matters,” explained Nelson. “We help them compare the client engagement across practices, and use these insights to inform business development strategies to expand client relationships.”
OnePlace Operations & Finance is the only software that gathers relevant data across the entire matter lifecycle, from origination through final disposition. Using this solution, cross-functional teams can easily take on a data-driven, streamlined, AI-based approach to track new opportunities and win higher margin business using integrated dynamic modeling.
Facing rapidly-growing demands for agility and responsiveness from both internal and external sources, firms must not only collect accurate data but also apply intelligent insights to their client development strategies. Firms that invest in AI-driven software — and fully deploy the software to analyze past, current, and potential matters — will find themselves better positioned for future success.
Learn more about using AI to deliver higher profit and better client value:
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