Low service pricing cannot be a good strategy for a professional law firm

In the legal industry, where credibility, quality, and trust play a core role, service pricing is an important strategic factor that directly affects the sustainable development of a law firm. Many law firms, especially those that are just starting up or looking to compete in the market, are often "tempted" by a low-pricing strategy to attract clients. However, the "law of proportionality" to achieve balance or fairness is something that many law firms overlook when pricing their services.

In this article, we will analyze some of the limitations of underpricing legal services and from which law firms can consider and find a service pricing strategy that is most suitable for their unit.

1. Impairs customer perception of service value

One of the main reasons why undervaluation is not suitable for professional law firms is that it can impair clients' perception of the value of services. In the legal field, customers often associate price with quality. A low price may make the client doubt the competence, experience, or reliability of the law firm. The fact that a law firm values its contractual or litigation consulting services significantly below the market level may be seen as lacking expertise or insufficient resources to handle complex cases, with many legal relationships intertwined.

Furthermore, low valuations can create a negative spiral as the law firm is forced to cut costs to maintain profitability, leading to a decrease in the quality of services, such as hiring less experienced lawyers, reducing the time spent researching a case, or using outdated technology.  ineffective. This not only affects the performance of the work, but also damages the company's reputation in the long term. A 2019 Harvard Business Review study[1] has shown that in professional services industries, clients are willing to pay a higher price if they perceive superior value, such as professionalism, dedication, and reliable results.

2. It is difficult to attract and retain talented lawyers

A professional law firm relies heavily on highly qualified lawyers and staff. However, a low pricing strategy often means that the company has fewer resources to invest in human resources. Low compensation or an insufficiently competitive work environment will make it difficult for a company to attract and retain talented lawyers who often seek opportunities to work at companies that are likely to pay higher salaries and offer better working conditions.

It is easy to see that a law firm with low service pricing will have a hard time competing with large and reputable law firms, where lawyers not only receive attractive salaries but also have the opportunity to participate in complex cases.  improve skills and build a personal brand for long-term professional activities. According to Legal 500[2], leading law firms in Vietnam such as YKVN, Tilleke & Gibbins, or VILAF have invested heavily in their human resources, with average salaries significantly higher than smaller firms that adopt a low-cost strategy. As a result, these firms not only retain talent but also build an outstanding reputation in Vietnam's legal services market.

In addition, the lack of talented and experienced personnel at law firms can lead to overload for the current team, reducing the quality of services and increasing the risk of legal errors, which a professional law firm cannot allow to happen and accept for this to happen.

3. Impact on the brand and reputation of the law firm

Trademarks are one of the most important assets of a professional law firm. A low pricing strategy can undermine a brand, especially in a competitive market like Vietnam, where customers are increasingly sophisticated and demand high-quality service. When a law firm undervalues its services, they risk being seen as an average, low-ranking, or incompetent law firm to compete with large, big-name firms in the market.

Furthermore, the clients of professional law firms are often businesses, organizations, or individuals with complex legal needs, such as mergers and acquisitions, international commercial disputes, or legal compliance advice. These clients often prioritize highly reputable law firms, with impressive track records, rather than focusing solely on price. A low price can make them doubt the company's ability to handle complex legal issues, thereby reducing the chances of cooperation, reducing the chances of serving large clients with abundant finances of law firms.

The competitive reality shows that international law firms such as Kirkland & Ellis, Baker McKenzie or Allen & Overy often price their services at a high level, but they still attract a large number of clients thanks to their global brand, top-notch team of experts and ability to provide multinational services. This shows that investing in brand and service quality is much more important than competing with low service prices.

4. Financial and sustainability risks

A low valuation strategy is often accompanied by low profit margins, leaving law firms vulnerable to financial difficulties, especially during periods of market volatility. Professional law firms face many fixed costs, such as office rent, legal software, personnel training, research expenses, marketing expenses, advertising,... If the revenue from the service is not enough to cover these costs, the company may face the risk of loss or even bankruptcy.

Moreover, the low-price strategy often results in the company having to increase the number of customers in order to maintain revenue, which can put great pressure on the HR team and reduce the quality of service. Meanwhile, a law firm that values its services at a reasonable level, based on the actual value it brings, will have more resources to invest in technology, training, and scale-up, thereby ensuring sustainable development.

Practice has seen some small law firms in Vietnam try to compete by reducing service prices, but ultimately cannot maintain operations due to lack of financial resources and failure to build credibility in the market.

5. Creating unrealistic expectations for customers

When a law firm adopts a low-cost strategy, they run the risk of creating unrealistic expectations on the part of their clients. Customers can expect high-quality service at a low cost, which puts the company in a difficult position when it comes to balancing meeting customer needs and maintaining profitability. If the company is unable to meet this expectation, customers will lose trust and easily switch to competitors.

In addition, clients of low-priced law firms tend to be "price-sensitive", meaning they will quickly switch to another firm if they find a lower price. This leaves the law firm in a never-ending race of price reductions, undermining its market position and profitability as well as maintaining its operations.

6. Focusing on added value is an effective alternative strategy

Instead of competing with low service prices, professional law firms should focus on providing added value to clients. This includes:

Outstanding quality of service: Invest in a team of highly qualified lawyers, use modern legal technology such as case management software or artificial intelligence for legal analysis, and ensure that the results of work are always up to the best standards and gradually approach the service standards of the world's leading law firms.

Build a strong brand: Build credibility through participating in prominent legal cases, publishing professional articles, or participating in professional contributions to legal seminars to improve the company's image. At the same time, the law firm must also clearly define the areas of focus and the client file that it aims to have strategies and actions in accordance with the set goals.

Tailor-made services for each specific client: Providing legal services, including legal advice and solutions that are "designed" specifically for each client, instead of applying general contract templates or processes. The law firm must know and understand the model, core of the operation and business of the client in order to have in-depth and suitable solutions for the client that the law firm is providing services.

Enhance customer service: Ensure customers receive fast, professional and dedicated support, thereby building a long-term, sustainable relationship that is mutually beneficial.

It can be seen that a low service pricing strategy can provide short-term benefits, such as attracting some new clients or increasing revenue temporarily, but in the long run, it is not the right strategy for a professional law firm. This strategy not only undermines the perception of value, makes it difficult to attract talent, and affects brand credibility, but also creates financial risk and unrealistic expectations from customers. Instead, law firms should focus on providing added value, building strong brands, and investing in quality of service. Only by focusing on this strategy can law firms achieve sustainable development, maintain and strengthen their position in an increasingly competitive legal market in Vietnam.

Lawyer Nguyen Van Phuc

HM&P Law Firm

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