Product vs Service

11 09 2009

Completing Tesco Law week here on Jobsworth, I  thought I would comment on a very interesting post that I read on the “DirectLawUK” blog a couple fo days ago.  The central point of the piece was that solicitors have to recognise the difference between a “product” and a “service”.  On this thesis, clients want a product whereas solicitors provide a service.  With appropriate use of technology solicitors can work more  efficiently and thus provide a cheaper service and the firm that can do both will be successful.  I think this is too simplistic.

The problem is that the cost of the service is open-ended, whereas a cost of a product is fixed and what clients want is certainty over how much they are going to pay.  It is a dichotomy that goes right to the heart of the relationship between solicitors and their clients and is at the heart of the debate over Tesco law. 

In terms of commoditised products (such as wills and conveyancing) solicitors are providing a product and that is why so many practitioners are concerned at being wiped out by the introduction of ABSs.  The only way that the High Street firms can compete is on quality, especially where the client’s requirements are non-standard (i.e. with high value estates or non-registered property).  Where the analysis becomes very challenging though is in respect of litigation where it is very difficult to give a fixed price estimate at the outset of the matter.  Can a piece of litigation be defined as a “product”?  With the exception of low-value RTA work and, maybe, some employment law cases, litigation can’t really be commoditised. Each case rests on its own facts and the best way to pursue it is with people who know what they are doing.  Human beings cost money, especially if they are experienced.

Can Tesco law change that? Potentially by outsourcing the fee-earners to South Africa or India, but is it feasible to have your County Court divorce handled by someone based in Cape Town or Mumbai?  What might alter the terms of the debate is if Lord Justice Jackson’s Report on Civil Litigation costs recommends an end to the cost-shifting rule whereby the winner gets his/her costs paid by the losing party.  At the moment the only reason I can see Tesco law wanting to get involved in litigious work is if they can do it more cheaply using economies of scale and make a greater profit on the amount recoverable from the loser.  If the paying party becomes the client in all cases will that business model be quite so attractive?

I’ll be writing further pieces on Tesco Law over the coming weeks, so please do link to the blog or opt into the RSS feed for updates.  Next week I’ll be back on employment law.

 

 

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2 responses

14 09 2009
Rupert White

I don’t think some litigation can ever be a ‘product’ in the understood sense, but it’s interesting how different sectors have all, as they’ve grown up in the information age (ie since 1994) had to address this ‘product/service’ dichotomy.

Software went from being a product (for most consumers) to being a service – even at the most basic level. You can see the consumer-level end points of this in the guises of ‘extra level download’ games, constantly updated/incrementally sold operating systems/office applications, and in iPhone applications leveraged through customer lock-in.

Banking, however, became a product-centred sector for consumers and a service-centred sector for businesses and rich people, when it had always been a service for anyone. A standard short-term loan is and has always been a product, in the sense that you sell it once, but mortgaging was a service industry that’s now purely a product industry because people routinely (well, until recently) remortgage. So you only really have the bank’s mortgage ‘service’ as long as the bank’s rate is competitive. But almost everything banks sell to consumers now is a product – all have been commoditised as all are similar and can be broken down into comparable component parts. But things like investments, fund management and all other things that fall into the ‘wealth management’ box are services – because there’s no money in selling services to most of us, just to the moneyed few.

Those are just two examples, but they highlight to me that a) each sector has to work out its own ‘answer’ to the product/service problem and that is most likely to be an approach differentiated by value of customer over time.

Do you want the customer to be valuable over time? If yes, you can still sell product but you need to build in good customer relationship management to make sure that your customer returns, stays loyal. Or you can ‘force’ loyalty through lock-in. Or you can encourage loyalty through packaging other products in with the one you’re selling (commoditising some more and leveraging the near-zero cost of information products (c.f. Susskind)) while selling this approach as a ‘service’.

Or, you can really sell a service. I say litigation, private client work and many other things are inherently ‘services’ because the longevity of the relationship between client and provider is a powerful tool. In commoditisable legal ‘products’, there is only the transaction.

But if all the ‘things’ you actually ‘sell’ a customer are really ‘products’ because of their similarity and inherent one-off natures (a conveyancing transaction; a will; a divorce) then you’re going to have to learn some tricks for other sectors on how to make product sales look and feel like a service.

Either way if ‘tesco law’ is anything like changes in other sectors (and this is something once again you can find in Susskind – but many people wrote about it for other sectors before he did) it will represent an enormous shift in behaviour when it comes to law business that can be turned into product, and not so much in service; however, the service side will be hugely affected while the competition kills off the weaklings. Imho.

PS – re “is it feasible to have your County Court divorce handled by someone based in Cape Town or Mumbai” – yes, I think it is. And it may, even, be inevitable.

15 09 2009
Nick

Apropos doing work at a distance – I did do a race discrimination case for two clients who were in the Asian subcontinent (with the help of e-mail, cybercafes, etc) but that is a rarity. For lawyers in the voluntary sector – advice centres, law centres and CABx, etc – that places clients on lower incomes or subject to disability or language barriers at a disadvantage when cases such as employment, housing, social security are ‘commoditised’.

‘Feasible to have your county court divorce handled by someone based in Cape Town or Mumbai’?? – reminds me of the occasion of a cousin calling me out of the blue trying to get me to ‘do’ her divorce [and ‘do’ her then husband] from Hong Kong! Thanks – but no thanks!

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