Tiffany Prices in a Walmart World

“Fee fungibility” is a term I’ve used quite often to describe how management consultants approach pricing. Yes, all firms have rate cards that show hourly/daily rates by various staff levels. Those rate sheets hark back to a simpler time, when consulting’s time-and-materials approach resembled genteel country lawyers or green-shaded accountants.

But just like knee socks and pocket watches, rate cards have become fashion accessories that seem rather quaint these days. And people who believe a firm’s rate card is definitive pricing probably use pocket watches and knee socks as more than accouterments.

Pricing is being driven largely by global firms’ move to products and success-based billing. With their ability to move pieces and parts, and increasingly deploy tools over people, individual billing rates become almost abstract.

The global firms’ drive to maintain margins through creative packaging is rippling across the industry. Boutiques used to be able to maintain premiums against the larger firms, particularly at the higher staffing levels. But that’s not the case anymore. Now I’m increasingly hearing concern from these specialists that maintaining premiums will be challenging when globals can drop blended rates 30% or more.

The fallback for smaller firms would be to match such discounts. In this environment, that’s a race to the bottom.

 

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Tom Rodenhauser