Fresh off the hugely successful launch of the iPhone 5, Apple is once again gearing up for another major product announcement. This time, it’s reportedly a smaller tablet, perhaps an iPad “Mini.” While there is some disagreement about the name, all signs point to an iPad with a smaller form factor.
But wait. A few astute commentators point out that the Mini-Me iPad will cost Apple sales of the iPad:
“We believe that the smaller iPad could cannibalize one million regular iPad units in December or a rate of cannibalization at 20 percent,” […] “[So] for every five million smaller iPads, you lose one million standard iPads.”
Now some old-school MBAs would be aghast at this. You don’t cut into your own sales, and kill (or maim) your golden goose. To which Apple replies:
Let’s do this before someone else does.
Now when we return to the corporate legal realm, pricing and product definitely combines art and science. Many savvy managing partners who hit their stride in the salad days of 1985-2005 are often adamant about one thing: we don’t leave money on the table.
This bromide is couched in many different forms: no discounts, no lower fees without true-ups, no fixed fees without completion bonuses, etc. They all boil down to a central precept of not cannibalizing the firm’s central product and pricing in the name of some alleged greater good.
And this makes business sense in the short run. And it would make strategic sense in the longer run if not for seven factors:
1. There are other large law firms out there.
2. They do identical work for many matters.
3. General Counsel know how to find them.
4. Some charge less.
5. Most General Counsel can do basic math.
6. This means more work will be done by efficient law firms.
7. Or by enterprises that aren’t law firms at all.
In other words, not “leaving money on the table” is fine, as long as you own the table.
So many large law firms are faced with the questions involved in “launching a Mini.” Do we offer some services for less? How do we balance that with what we see as our core services that (for now at least) garner premium prices? Who is brave enough to champion this without being voted off the equity island by skeptical colleagues?
(Note that I am not talking about the “Suicide Pricing” that Bruce MacEwen described on Bloomberg Law. Some of this is really low-balling responses to RFPs. That’s fine, but it is not “launching a Mini.”)
Apple never discounts current products; it offers different versions at distinct price points. In addition, some observers of Apple have said that the most daring strategic move by Steve Jobs was the iPhone itself. That product cannibalized the iPod to a huge extent (the music player was merely one app on the iPhone). And the iPod was the most popular consumer electronics product at the time.
So it’s not just that law firms don’t do this. Almost no other large company can do this, or will do it.
And that is why there is plenty of opportunity for new law firms, new legal service providers, or new-thinking partners with a book and a fresh mindset.
All because BigLaw won’t “launch a Mini.”