A/B Test Your Alternative Fees

All too often, firms view alternative pricing as an “all or nothing” proposition.  They fear a wholesale move away from the billable hour could drive their firm to financial ruin if they get the “pricing thing” wrong.  However, instead of rolling the dice with a firm-wide implementation of an unproven and untested pricing methodology, firms should take a lesson from the web design industry and do A/B testing.

What is A/B testing?  In The Ultimate Guide to A/B Testing, Smashing Magazine defines it this way:

At its core, A/B testing is exactly what it sounds like: you have two versions of an element (A and B) and a metric that defines success. To determine which version is better, you subject both versions to experimentation simultaneously. In the end, you measure which version was more successful and select that version for real-world use.

This is similar to the experiments you did in Science 101. Remember the experiment in which you tested various substances to see which supports plant growth and which suppresses it. At different intervals, you measured the growth of plants as they were subjected to different conditions, and in the end you tallied the increase in height of the different plants.

A/B testing on the Web is similar. You have two designs of a website: A and B. Typically, A is the existing design (called the control), and B is the new design. You split your website traffic between these two versions and measure their performance using metrics that you care about (conversion rate, sales, bounce rate, etc.). In the end, you select the version that performs best.

If you’re thinking of moving from the billable hour to alternative fees, don’t do it all at once.  Instead, identify two similar matters or clients (we’ll call them A and B).  Keep serving (and charging) “A” the way you always have.  However, with “B,'” change your pricing structure.  Give “B” a flat fee for the work you’re billing “A” for by the hour. 

Pay close attention to the metrics that matter to you and to your clients.  Measure time to complete tasks (not in minutes, but in days).  Keep track of the people and resources used.  Watch what folks are doing (and how they do it) instead of just asking them at the end of week or month how much time they spent.  Most importantly, measure both client and attorney satisfaction with the work and results.

If you do enough A/B testing across your client portfolio, you might find that alternative fees aren’t as scary or hard to implement that you thought they would be, but that they make your clients and attorneys happier and make your firm more money.

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