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Bar Association of San Francisco Member Benefits: Publications

Marketing Alternative Fee Arrangements

 

By Michael Bond, Blattel Communications

 

The Legal Marketing Association – Bay Area Chapter examined alternative fee arrangements or “AFAs” at a recent educational program “Marketing the AFA.”

Panelists included Jann Dudley, Marketing Director, Archer Norris; Ken Callander, Head of Business Development, Davis Wright Tremaine; and Michael Kovalich, Business Director, Greenberg Traurig. Moderating the session was Brad Byrum, Business Development Manager, Schiff Hardin.

Byrum noted that, personally, he was unsure that the AFA was the “way of the future.” He went on to frame the issue by sharing a viewpoint he’d heard repeatedly expressed: clients feel there is a “virtually limitless supply of law firms and good lawyers.” This, he added, defines both the challenge and opportunity of today’s marketplace.

The panel opened the discussion by trying to pinpoint the definition of an AFA. Kovalich described them as, “a mechanism by marketing departments to use pricing as a marketing strategy to penetrate segments and build market share.” Kovalich’s definition, along with similar comments from the other panelists, suggests that AFAs are endeavors to provide clients with both increased transparency and cost certainty.

Demand for AFAs has become prevalent today since, as Callander noted, companies will not simply accept law firm rate increases year-after-year as they did before the Great Recession. Dudley suggests that AFAs are a “compliment” to clients. They show that a firm understands their business and is looking for a truly synergistic relationship.

The audience was cautioned, however, that AFAs are not always the right arrangement for a client or for a law firm. Byrum pointed out that the billable hour still has many benefits, and Callander addressed the possible downsides of fixed fee arrangements, such as clients questioning quality and judgment as the firm reaches a defined cap. Consideration of if and when staffing should be reduced was noted as a potential ethics issue. Kovalich added that, from a billing standpoint, AFAs can be complex – especially when both the firm and the client are employing e-billing systems. He stressed the need for clear communication between marketers, financial departments and lawyers in profitably employing these vehicles.

The general consensus of the panel was that AFAs are an important tool that should be used with caution and an abundance of communication. All agreed that AFAs are the most valuable when they align all interests and facilitate the deepening of the attorney-client relationship.

 

Michael Bond, an account executive at Blattel Communications, is a member of the LMA- Bay Area Chapter’s program committee. He can be reached at michael@blattel.com.

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