Last month, Apple unveiled its new iPhone X to much fanfare. Perhaps what created the most fanfare was its price. It starts at $999; hundreds more than the older iPhone 7 and the brand-new iPhone 8.
You don’t need a Ph.D. in Economics to understand the logic behind Apple’s pricing strategy. It’s simple. Apple hopes that a high-priced phone will become a status symbol, much like luxury cars do. In short, having an iPhone X broadcasts prestige, prominence and stature.
Can a lawyer’s hourly rate broadcast prestige, prominence and stature? As the residents of my home state of Minnesota like to say, “Yah, you betcha!”
In the coaching and consulting work that I do, I hear about hourly rates all the time. In my humble opinion, way too many attorneys want to compete on price. Myriad lawyers believe charging below-market hourly rates provides a competitive advantage. What they fail to remember—and what Apple never forgets—is that price signals quality. A below-market rate can signal lack of quality.
Back in the day when I was an in-house lawyer and regularly hiring outside counsel, my response to a low-hourly-rate quote was never, “Wow! This guy’s really cheap. I gotta hire him.” Rather, it was, “Geez, this guy must not think much of his abilities if he’s charging so little. I’m going to pass on him.”
During lunches with other in-house counsel, we frequently would talk about the outside lawyers we worked with. Most of the bitching and moaning were about the poor client service we oftentimes received, not high hourly rates. Indeed, some of my colleagues back then would even brag about the high hourly rates their company was paying some of its lawyers. In other words, “My company hires the best and we prove it by the rates we pay.”
High Rates in this Environment?
By the way, I don’t live in a bubble. I am well aware that outside legal budgets are being slashed and discounts offered more than ever. However, all clients still want “value.” The best lawyers still provide excellent value even with above market rates. Just ask any company hiring Wall Street lawyers at rates well above $1,000 per hour.
Full disclosure: I own an iPhone 7. Like many iPhone owners, I am trying to decide whether to upgrade. If I do, it will likely be for the iPhone X. Why? I want the best Apple has to offer; its high price will hardly be a deterrent. In fact, the high price is attractive and psychologically convinces me it’s not only significantly better than previous iPhones, but better than any cell phone on the market.
The lesson lawyers can learn from the iPhone X? Don’t be afraid to charge an hourly rate that’s above market. It subtly (and not so subtly) tells the world you think you’re pretty darned good at what you do. It also exudes confidence. After all, who doesn’t want to hire a confident lawyer?