SuperPower: Pricing & Packaging Any Legal Software
Investment experts predict that companies with pricing power will thrive in this economy. And power is not just about raising prices.
TLDR: the venture funding festival looks like it’s grinding to a halt, so companies have to raise funds with customers. We have two tips on pricing and packaging. And stick around for a twist at the end.
Let’s talk about the most elusive element in legal: pricing. Overall, it’s very taboo to talk about how much you make. We know you’ll get sued if you reveal the rates lawyers charge on Yelp. We wonder if this is different for software targeting the legal industry. Since we’re getting a new legal technology directory almost every week, we started tracking to see if any of them had published prices of providers. We regret to inform you that the majority of directories can’t list pricing publicly. If the software is suitable for consumers or solo’s, we do get to see what it sells for. But if providers target companies or law firms, the curtain comes down. This has to do with unit economics.
The impact of unit economics on legal was the subject of Starting In Legal Tech. It illustrated the dynamics driving legal services. Usually, software providers in legal can only target large enterprises for it to make economic sense. For example, most services around contracts work best if there is significant volume. On the other end: if the provider relies on value, then targeting law firms makes sense. The perception of lawyers is that they can pull in very large sums in a single deal. Curious why we perceive this? See slides 15–16 of Term Sheet Demystified by Mountside Ventures or the final slide of ‘Starting In Legal Tech’.
The above effectively eliminates the small or mid-size business segment in the legal market. Especially when it comes to selling to lawyers. Better yet, boutique firms can make more money than even the biggest law firms. Therefore, no one gets to buy at bargain prices. This also accounts for the many directories ‘helping’ to sell to lawyers, or the lavish amounts of capital allocated to legal tech. Why many won’t reveal the costs of software that supports a legal process? If the value of that process isn’t predictable, then the pricing of software will remain flexible. This brings us full circle to the rates lawyers charge.
Did you catch the Easter egg in the Legalcomplex Original? Funding in legal dropped 14% this year-to-date compared to last year. Crunchbase also wrote about the end of good times in venture capital. While the US outlets mostly report US numbers, CB also noted a drop in EU funding announcements. Both are recommended reads, but the first story has one particularly gripping quote:
“There are two types of companies that need to be careful: ones that are all tech and no revenue, or all revenue but no tech,”
This looks eerily close to the current legal landscape i.e. legal tech and law firms. The former may be struggling because the latter doesn’t use it. Just to be clear, we aren’t cheering this on, and we’re happy reading the high-profile wins and partnerships. Boosted by the pandemic, the legal industry enjoyed an accelerated adoption of tech and growth. However, the recent drop in the value of so-called pandemic stocks was triggered by churn. Just like employees quit their jobs during the pandemic, customers are quitting products after the pandemic. This started happening before Russia entered Ukraine. As a matter of fact, we can trace this back to a specific date: December 3, 2021.
On that day, DocuSign shares plunged 43% triggering multiple class actions suits. The DocuSign story isn’t unique to the tech industry. Actually, it is part of a much larger wave that has been crashing on the economy. It’s why we noted Netflix raising prices as one of the surreal signals back in January. If companies can’t raise cash from capitalists, they will turn to customers. This brings us to our message: businesses will be forced to either raise prices and/or offer cheaper options. Yup, all businesses including legal.
Raising prices has been the go-to for legal services since the beginning of time. Legal professionals have legislated a legal monopoly, so they can set and raise prices unabated. Only the legal software providers that are essential will enjoy that luxury. Yet when big deals start disappearing and clients drown in debt, we might want to consider an alternative. The Recession guide has three practical tips to stabilize your business. Here are two more: pricing transparency and better packaging. We practice what we preach, so we’ll go first: here are the prices of two new services we’ll release globally (ex. VAT):
- €33,- is a monthly subscription for the legal tech enthusiast;
- €330,- is a single transaction for the legal tech entrepreneur.
The release dates are flexible, but the prices will remain fixed. Just like Ikea, we are designing our services to deliver as much value as possible at those price points. Not only the delivery but our entire supply chain including our operational expense structure is designed around a price scale. That’s why we can pack products with unique data that go deeper than we have ever gone before. What kind of unique metrics? Here’s a new one in the video below.
Now, since you stuck around for the end credits, here’s the twist we promised: March 18, 2022, DocuSign stock jumped 7% and may have reversed its steady decline from December 2021. Why did DocuSign Stock pop?
Shelter Ukraine 🇺🇦
Originally published at https://www.legalcomplex.com on March 22, 2022.