I don’t know the private personality of value-pricing guru (and hourly-billing nemesis) Ron Baker, but he sure does care about price sensitivity. As I discussed in a post two days ago, Ron left a Comment asking me to read his work more thoroughly, before concluding that he’s insensitive to the ethical aspects of value billing and premium pricing by lawyers.
Yesterday, while waiting to see whether Ron would send me a copy of his latest tome, I clicked on a link from my Referer Page to the Google query [Ron Baker hourly billing], and instantly came upon his articles “Hourly Billing Limits Profitabilty” and “Pricing Strategies” (SmartPros, Jan. 2000), which eventually led me to a few other articles and then back to his book The Firm of the Future. I thought that many of Ron’s analogies and examples were inapt (e.g., airline tickets, insurance policies, mortgages) for pricing strategies to be employed within the special relationship of lawyer and client for the provision of legal services — especially to the less-sophisticated client. Mostly, though, I was struck by the centrality of price (in)sensitivity in Ron’s pricing strategy, as he campaigns against hourly billing and its “limited” profits.
Baker advises professionals to maximize their “leverage” over each client, maneuvering so that the client is far less price-sensitive. This allows the professional to charge “premium fees,” well over the amounts that would be yielded using the billable hour method, resulting in increased profits (and more leisure time for the professional). This is apparently Ron’s ethics-sensitive alternative to client dissatisfaction with hourly billing. His position is justified with a self-righteous condemnation of the billable hour system itself (rather than its abuse or the profit motive that fuels its excesses) as unethical. His definition of “value” is no longer the provision of a quality product at a reasonable price, but instead the provision of services at whatever price can be leveraged out of the client. The professional gets significantly richer and the client gets the subjective feeling of receiving more value.
So, yes, I’ve read more of Ron Baker’s teachings, and I’m even less convinced that “what-we-can-get-away-with” is an appropriate pricing strategy and ethos for lawyers. I’m also amazed by the ethical blindness created by the glow of pots of gold. Lord, please save the client from such professionals, such ethics and such fiducial protection!
click here to see excerpts from Ron’s writings on the subject of price sensitivity, leveraging and premium pricing in the context of so-called value pricing; some editorial annotation is also supplied. You might especially check out Mr. Baker’s proposed use of the Change Order to “leverage” premium fees from clients who have signed a Fixed Fee agreement. E.g, in “Change Orders: What a Concept!“, Ron says:
“A favorite way to make the client insensitive to premium fees is the use of Change Orders when services are needed beyond those covered in the initial fixed-price arrangement [no kiddies, pricing can’t really all be done up front]. “
Ed. Note: In addition to adopting a more guru-new-agey image, Baker has taken some of his most frank, troublesome, avaricious phrases out of articles mentioned here at f/k/a. In some instances, the version quoted is no longer available online, and we’ve had to link to subsequent, scrubbed versions.
for the fat green from
crouched on the log
time is flies
in my thicket
they’re out of time…
residents of this world
a short time
people without hoes