By Michael Feit | Feit Consulting
Feit Consulting’s Optimizing Legal Information Pricing book helps firms optimize their legal information vendor spend. What surprises firms, however, is what this really means in hard dollar savings. In just the first year, a typical 200 attorney firm could achieve over a million dollars in savings. Watch the video below to learn how it works!
By Michael Feit | Feit Consulting
One would think that customer sentiment and pricing would be like a dot-to-dot exercise with a straight line easily drawn from high levels of satisfaction to steady, if not incremental, year-over-year price increases. Instead, other factors like hitting the price ceiling and reaching critical mass with ancillary products also influences forecasted pricing.
This disconnect is what we found as a result of our analysis central to Feit Consulting’s 2019 Legal Information Pricing book. When juxtaposing customer sentiment with the pricing forecast analysis, there are some striking discontinuities which at first glance, may seem even contradictory.
The market, for instance, has a very favorable opinion of Westlaw; in fact, the most favorable opinion of any provider.
However, our pricing forecast went on to show Westlaw as the only product covered in 2019 Legal Information Pricing whose price will decline over the next five years. How could this be?
Ironically, Westlaw’s consistent strong performance in comparison to Lexis, makes it extremely vulnerable. Currently at nearly double Lexis pricing, the report fleshes out the unsustainability of this price gap. In short, Westlaw–and the market–may have found its pricing ceiling.
Flipping the sentiment, on the other end of the scale, 32% of respondents were extremely or moderately dissatisfied with Lexis. However, this did not correspond with linear drop in price as Lexis now offers an array of products that most firms consider indispensable. Lexis may have reached a ‘critical mass’ with well-used ancillary products that are creating different outcomes than expected.
In terms of sentiment, Bloomberg is by far the biggest loser with 64% dissatisfaction. However, our guidance indicates price growth for Bloomberg as they have important content. In addition, the market now expects aggressive price increases. As Bloomberg improves, we expect its pricing to stay competitive with Lexis and move toward Westlaw over the next five years. If you believe Bloomberg’s hype, its product will improve each year substantially and unlike with Westlaw and Lexis, and firms will not have to purchase add-ons as the product improves.
A comprehensive discussion is outlined in 2019 Legal Information Pricing.
By Michael Feit | Feit Consulting
Recovery rates continue to decline.
However, when we drilled down into our 2019 Legal Information Market Survey results we noticed a trend, with recovery rates holding steady at firms that continue to try. This made us ask the question; should the trend to move online legal research costs to overhead be reconsidered?
Clearly the heyday of recovery is over. Prior to the 2008 Recession a law firm could expect to ‘recover’ (bill clients for) 85% or more of their online research costs for Westlaw and Lexis. For a large firm, recovery at those rates meant hundreds of thousands (often millions) of dollars in cost reduction. Often wiping out the vast majority of the cost of online legal research. A firm with good recovery could effectively purchase and use Westlaw and Lexis as if it were free. Clients were footing the bill, and there was little pressure on the firm side to analyze ROI or make strategic and optimal choices between offerings available on competing platforms.
After the Great Recession, everything changed. Recovery rates nosedived as client’s began to scrutinize their billing and often removed Wexis charges as a matter of course.
Our survey results indicate that nationally all firm recovery is averaging 28%. However, for Firms that actively try to recover (backing out the firms that have already moved to overhead) the true recovery rate has been holding at 38%. Firms have discovered that there is a ‘bottom’ on the deterioration of pass-through costs and it looks like recovery has somewhat stabilized.
The overhead trend is clearly entrenched now, but it makes you wonder if it makes economic sense for anyone to move recovery to overhead. You can learn more about the overhead trend, and see specific data and charts in our book Optimizing Legal Information Pricing. This is particularly true in a market where vendors are aggressively increasing their prices and firms are looking for ways to reduce costs.
Obviously, there are cultural and qualitative reasons to move away from recovery. Attorneys don’t like to pass through one-off research costs to clients or risk irritating them. Many lawyers and firms believe there is a hidden marketing benefit to clients when the firm does not charge for online research costs. We hear this often, but the true benefits are difficult to quantify.
On the other hand, if you are recovering our market average of 38 cents on the dollar, and your firm’s spend with Wexis is $1 million a year, your return on your recovery efforts is $380,000. Obviously, there is a diminishing return the smaller the firm size (and the research cost). In most cases, however, successful recovery provides some wiggle room in your budget to offset costs.
This made us re-think the idea that recovery should be a dying trend. We now see an important upside in maintaining and enhancing recovery.