01 Mar Price Wars in the Bankruptcy Industry
How to win a market of competitive price wars
Prices are important, but they aren’t everything. In the bankruptcy industry, however, prices are becoming the focus for attorneys and consumers to such an extent as to harm both consumers and attorneys in the process.
Effects of lowering prices
Many attorneys lower their prices dramatically to compete in the market. While this may seem like a great strategy to increase clientele and profitability, this strategy is having adverse effects on the industry as a whole.
1. Consumers become overly focused on price and not on quality or results. While consumers should make sure to get affordable services, when they focus too much on price they often end up getting worse results and lower quality service.
2. Lower prices lead to lower margins for attorneys. Each case becomes less profitable for attorneys.
3. Attorneys need to file more cases in order to maintain profitability. Instead of making more money per case, attorneys are forced to file more cases at a lower revenue per case. This further increases the intensity in the marketplace to compete for all potential cases and can escalate to further price competition.
4. Quality of service declines. Attorneys are often forced to use paralegals more and cut other corners in order to justify their lower prices. This leads to a worse experience and lower quality results for consumers.
5. Bankruptcy becomes a less attractive option for attorneys. At some point, bankruptcy may lose its appeal as it becomes too difficult to compete in.
How to survive the price wars
All is not gloom and doom with prices. In fact, there are several things you can do to compete effectively in a market with lowering prices.
1. Know your competitors’ prices, but don’t stress over them. You should know what the low end, high end, and average prices are from other firms in your area. This will help you form your own pricing strategy.
2. Strive for mid-level prices. Ideally, your prices shouldn’t bee too high or too low. If they are too high, consumers may not be able to justify choosing you over another attorney. If they are too low, you will lose your margins. A mid-level price will allow you to compete without hurting yourself with low prices.
3. Justify your prices with quality. You should be able to explain why your prices are higher than your lower-priced competitors. Do you have a better success rate? Are you faster? Are you easier to work with? Do you provide convenient service? There are countless ways that you can highlight the value and quality that you give consumers. This, in turn, will justify your slightly higher prices.
4. Turn conversations about price into conversations about results. Often times potential clients will ask about prices. Be honest with them. Tell them your prices. Explain that you are in the mid-range. Then explain how you can help them and why they would be better off choosing you than the cheaper firms in the area. They should understand that a few hundred dollars extra is worth it because they will have a better experience and higher quality results with you than with someone else.