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Law departments face price inelasticity, and have three ways to deal with it

A speaker from a financial-services firm, who obviously has an economics background, describes law departments as “businesses with no price elasticity” (See my post of April 27, 2006: explains the term elasticity.). By that he means that law departments cannot raise their prices to their clients. Because of that limitation, all they can do, in terminology borrowed from the dismal science, are three things.

First, they can lower the cost of their supplies, which means squeezing the nickels of law firms and other service providers.

Second, they can increase production, which means getting more work out of the available inside and outside resources at the same cost (See my posts of in the category “Productivity.”).

And, third, law departments can make more of what clients want, which means they must be in tune with their clients and keep them happy (See my posts under the category of Client Satisfaction.).

Abstract? Certainly. Thought-provoking? Somewhat.