Episode 4

Victor and Mark discuss whether people really do business with people they like, introduce the elephant in the room, Victor’s aftershave, Mark’s Rodney Dangerfield impression, Hershey’s Kisses and the power of FREE, Harley-Davidson motorcycles, Gibson guitars, and Judeo-Christian ethics.

Victor:

Let’s talk about the intangibles. For example, compare the experience of dealing with an attorney who was cold and worked at an arm’s distance to an attorney who actually seemed to be listening to what you had to say and counseled you along the way. The intangibles, such as customer service or client service, are very specific to each person. Do you think delivering the intangibles is a way to set yourself apart?

Mark:
Yes. It’s not directly related to fees and value. The fact is, all things being equal or even close to equal, people do business with people they like. Relating back to what I was talking about earlier. I don’t know how to judge if someone is good at their job, but I sure know how to judge who I like, who I trust, and who I’m comfortable with. I consider myself highly qualified to judge that. I don’t consider myself qualified to judge whether you can draft a good trust, but I consider myself very qualified to decide who I want to work with and who I don’t want to work with.

There’s the story about the prospective client who says he needs to go home and think about it. He’s just had an hour or so to squeeze the Charmin, so he’s probably already made up his mind if I’m the guy, or not the guy.

Victor:
That’s exactly right. And it brings up two important lessons. The first lesson is that if there’s an elephant in the room, introduce it. The elephant in the room is that I’m asking you to spend money with me, and you don’t want to tell me that you don’t want to spend money with me. For whatever reason, maybe it’s my aftershave. I want to let you know that I know that you might be thinking that, and that it’s okay to let me know about it.

The second lesson is that I don’t want to spend a lot of emotional capital and time worrying about whether or not a client is going to come back. I invest a lot of myself in the hour that I’m there. I don’t begrudge somebody who decides to walk away and not come back. That doesn’t bother me. But I don’t like if it’s left in limbo. I’d rather have it resolved than unresolved.

The best thing to do is just put it right on the table. Let people know that I’ve been through this a couple times. I get it. By now, you’ve got a pretty good sense about whether or not you want to do this. The idea that you might want to go back and think about it is really just a no. And it’s okay to say no. I’d rather you tell me now you don’t want to do it.

However, if there’s any chance you want to do it, and if thinking about it is really a factor, then allow me to propose that you’ve had any number of years to think about it. We’ve already discussed that you’ve been thinking about doing estate planning for as long as your children have been alive, which is usually the first thing that triggers people to think about starting some sort of plan. And you haven’t done it yet. Or you did it 15 years ago and you haven’t touched it in the last 15 years. There’s nothing to suggest that the next six months are going to be any different than the last six years. So with that said, if we’re going to do it, let’s do it. And if not, then that’s fine, too.

I really think that it’s my responsibility as a counselor to help people in need. I volunteer in a probate court and frequently watch guardianships go through. I feel that it’s my responsibility to get people to do something if I think it’s in their best interest. And I have to be honest and tell them it’s not appropriate, when it’s not appropriate. That way, I’m comfortable knowing that when I think it is appropriate, it is my true and honest opinion.

Mark:

I think you have to give clients permission to say no. You have to be willing to tell a prospective client, as I have many times, that you’re not appropriate for me. Or, you don’t need what it is that I offer. Or, you need something much different. Or, something much less. Or, you don’t need it at all. And if you have the intellectual honesty and courage to do that, then you’re going to be that much more convincing when you have to tell somebody, look you really need to do this.

When a prospective client of mine suddenly goes incommunicado … I’m not getting responses to e-mails or phone calls or a promised follow-up after they said they were going to think about, I’ll send them an e-mail saying, “I don’t want to be a nag and bug you, but I don’t want to drop the ball, either. Do you want me to keep trying to contact you, or do you want me to shut up and go away?” I’m giving them permission to just say no. And that’s fine.

Victor:

When I’ve personally been uncomfortable in situations with people, I sure would have appreciated the opportunity to say no, or go away, or whatever to them. It’s something I don’t feel comfortable saying.

Mark:

In relation to fees, one of the things I use and recommend to my clients is saying, “If you’re waiting for it to feel good to write a check to an attorney for an estate plan, you should go home now and accept the fact that you’re never going to do an estate plan. Because it’s never going to feel good. You are writing a check for something that you personally are not going to experience the benefit of, and it’s one of those things that is important, but not urgent. It’s never going to feel good to write that check, so you might as well decide to do it or not.”

Victor:

Does that work?

Mark:

Yes, by using your theory of introducing the elephant in the room. If the elephant in the room is: I don’t want to pay $4,000, let’s just get it out there. I don’t want to pay for this. Okay, that’s fine. I understand. It’s painful. Who wants to write a check that size? If you’re never going to want to write that check, then just go home and die intestate. That’s okay.

Victor:
How does it differ for attorneys practicing in areas that are crisis-driven? Like divorce or bankruptcy, etc.

Mark:

For those of us who deal in professional services that are elective, in some ways we’re jealous of those guys. They don’t have to motivate people or get them to see why they should do XYZ. They’re already in crisis. They know they have to do it. If they’re going to get a divorce or file bankruptcy, they have to get a lawyer. There’s hardly any exception to that. Then it becomes a choice of which lawyer do you hire? And that’s where pricing becomes important in competitive terms.

Let’s talk about a prospective bankruptcy candidate. A bankruptcy candidate is by definition broke. So why wouldn’t they simply hire the cheapest bankruptcy attorney they could find? Well, there’s several ways to present that. I have some friends who are bankruptcy attorneys out in San Diego, and we were talking about this the other day.

What those bankruptcy attorneys say is this: “If you want to pay somebody $499 to fill out your bankruptcy forms, I urge you to save your money. Here’s where you can get the forms, and then you can fill them out and file them yourself. However, if you want counseling on what you should do to see you through this awful thing, then you need to pay me $1,800.” I think the personal service aspect becomes key in crisis situations.

That’s what people really want. When attorneys are talking about elder law and Medicaid planning, they’re talking about asset transfers, preserving this and that, and this amount of money and the other. But what they are really talking about is a very emotional family issue.

My buddy’s mom is 90 years old. In the last couple of months, she side-swiped a couple parked cars. The police came along and took away her license. Mom is slipping and the possibilities now include a live-in companion, assisted living, or a nursing home. Of course, everybody is quite emotional about it, including Mom. And an attorney who recognizes that is going to do a lot better than an attorney who says, “I can do it for $500 cheaper than the other guy.”

Victor:

This is an area that you and I have never explored, in terms of my practice, in Podcasts or otherwise. I tell folks that this is a journey. Where we meet you along the path from start to finish just depends on when we happen to come across you. But make no mistake about it … it’s a journey. From healthy, happy and well, until you pass away.

Mark:

Rodney Dangerfield used to say, “Hey I’m 65 years old, and if things go well, I’m going to get sick and die.”

Victor:

What we try to convey in those circumstances is, “We’ll be here for you. We’ll be your companion along the way.” We’re not going to say, “You came to us for one thing, so that’s one transaction. Then you came to us for the next thing, so that’s another transaction. We’re really happy you came to see us twice, and we hope you come back for a third time.”

In my practice, not only do we help clients prepare for the next transition, we counsel them and offer our services. That’s part of the difference in choosing to go with us versus somebody else.

Mark:

I think that’s a very valid concept. It speaks to emotional concerns as well as financial ones … the psychological power of money, of fees and prices.

Let me go back to the laboratory and pull out another really interesting experiment for you. I think you read Predictably Irrational, did you not?

Victor:
I did, on your recommendation.

Mark:

Terrific book. There’s an experiment in there that’s very interesting in regard to price and the concept of free. It was an experiment with chocolates. The experiment was conducted at MIT. They put out a table in the hallway and offered two kinds of chocolate for sale. One kind was the expensive imported Swiss Lindt chocolate, and the other kind was Hershey’s Kisses.

For the first week, they offered the Lindt chocolates for 15 cents each, and the Hershey’s Kisses for 3 cents each – a price differential of 12 cents. The result was that 75% of the people chose the Lindt chocolate, which was the higher priced, and presumably, higher quality chocolate.

During the second week, the prices changed to 12 cents for the Lindt chocolate, and the Hershey’s Kisses were free. So it was the same price differential – 12 cents difference between the two. However, this time 75% of the people took the Hershey’s Kisses. That made no sense at all. But as they delved into it, they speculated on the different reasons for that kind of behavior.

We can talk about the power of free in another session. But for right now, I want to say that price has a huge emotional/irrational content to it. It makes people behave in strange ways, and to make assumptions about things that you wouldn’t expect. If your price says you’re a $50,000 attorney, then that’s what you are.

Victor:
Per month or per transaction?

Mark:

Per year. If your price says you’re a discount dealer, people will assume, right or wrong, that you’re not that good. The price conveys the value to people.

Marketing literature is full of examples. I’ll give you two in manufactured goods. Gibson guitars and Harley-Davidson motorcycles. Both of which are American products. In the late 1970s and early 1980s, both companies were being killed by low-price Japanese competitors. Suzuki and Kawasaki-built motorcycles, and I can’t remember the names of the guitars, but likewise. Both companies tried to compete on price, and got killed some more. It was only when Harley-Davidson and Gibson raised their prices that their sales went back up, and they started killing the Japanese competitors. Because the price was telling people, this is a better product. And nothing conveys it more powerfully than that.

When I first started working with some of my clients, they had artificially low prices for their estate planning, ridiculously low prices in my view. Usually, the reason was a mix of those traumas that we’ve already discussed. They don’t think what they do is worth it. They want to compete against low-price providers. And some guy on the radio says a trust should cost $1,200. None of these are good reasons. So they priced theirs at $1,200.

Through various methods of cajoling or bullying, I would finally get them to raise their prices to something like $4,000 for an estate plan. So, of course, their next prospective client comes in and agrees to pay $4,000. And my client smacks himself in the forehead and says, “Oh my God, what have I been doing? How much money have I left on the table in the last couple of years?”

It’s just simple math. Assume 10 perspective clients would say yes at a price point of $1,500. But at a price point of $3,000, only half of them would say yes, and other half would walk. What’s the result? It’s the same money, $15,000, and only half the work. Now you have that time available to do other things, either money-making or not.

Victor:

When I first went into practice, I met this guy who was an operating officer/common sense officer for a decent-sized law firm, not a lawyer. To make a long story short, he asked me what my yield was. He was thinking in hourly billings. I told him, probably 100%. He told me I charged too little, and to increase my prices by 20%. He told me that if I keep 85%, my yield only drops to 85%. I’m making 5% more with less time invested.

Mark:

There’s another reason, too. It’s the adage that if you’re closing 100% of your prospects, your prices aren’t high enough because you’re not meeting any price resistance. You ought to be meeting price resistance from somewhere around 20% to 25% of your prospective clients. If you’re not, that’s a good indicator that your prices are too low. It’s all part of a very complicated psychological ball of wax.

Victor:

Have your clients experimented with moving those numbers up or down? Do they just keep increasing their prices until they get price resistance?

Mark:

I have long-term clients that have been with me as long as 9 years. We’ve definitely done that over the years. I have to admit, though, I have no experience with moving prices down. So I don’t know what happens in those circumstances.

When lawyers price their services, I think sometimes they’re being humble, or modest, or don’t value their knowledge and experience, or undervalue things that don’t require physical labor. 95% of the attorneys I deal with subscribe to some version of the Judeo-Christian ethic, which delivers very mixed messages about the pursuit of wealth.

A lot of attorneys are motivated, and went to law school, by a desire to serve. But when you talk to them about making money, they start to shift uncomfortably in their chair. They want to make money, but they don’t want to admit they want to make money. Or, be seen making money.

They’re all afraid of what other lawyers will think of them if they charge too much. That’s a favorite of mine. There’s this primordial soup of subconscious stuff that makes fees a very uncomfortable subject for attorneys and something they’re very uncomfortable with.

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