Challenger firms face a high cost barrier to usurp an incumbent law firm

“If, for instance, two law firms have an equivalent reputation and location, one study found that clients will not switch firms until the prices in the old firm are 34% higher than its competitors.” For a law firm trying to horn in on a competitor’s turf, that is a staggering economic gap. It also shows how price is not the driver for most law departments as to which firms they favor.

This research is reported in the J. Prof. Serv. Marketing, Vol. 3, 27-28 (1987) and Susan Samuelson, Law Firm Management: A Business Approach, Sec. 6.4.2.1 (Little, Brown 1992). Samuelson explains some of the factors affecting price insensitivity: “Specialized knowledge is willingly paid for; prices are difficult to compare; high cost is often viewed as a sign of superior quality; legal fees represent a small proportion of income; and switching costs are substantial.”

Translated to law-departmentspeak, that means “We will pay whatever the guru charges since we haven’t time nor interest to canvas other firms. Importantly, the brand-name firm/partner with the high price tag means the CEO will appreciate that we are getting the best talent and, given our budget, what difference does it make? Besides, it’s such a hassle to change firms.”

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