I previously blogged about the results one lawyer obtained when he promoted his law practice using Groupon. That post generated a number of informative comments which I recommend reading. Before rushing off to get an advisory opinion on the permissibility of daily deal advertising in your state, however, make sure you understand how the process works. A daily deal is essentially “loss leader” advertising, the success of which depends on selling additional services at full price at some point.
What Services Fit a Daily Deal?
It appears that low cost daily deals sell better than high priced deals, so look for something you can price below $150. As discussed in my previous post, Craig Redler offered a will and power of attorney at a deep discount in a Groupon advertisement. If you have services that can be “unbundled,” a daily deal might work for one of the elements. See the ABA Resource Center for thoughts on unbundling. Stephanie Kimbro gives an informative talk in a webinar in which she describes some different kinds of services that attorneys are currently unbundling.
You might agree to review a simple contract at a low rate. For example, most people don’t hire a lawyer to review common contracts like a residential lease or a contract to sell their home, when they have a real estate agent involved. They don’t usually get a lawyer to review a DIY document they created on LegalZoom or a non-competition agreement their employer asks them to sign. They might be willing to pay $25 to $50 on a Groupon for peace of mind, however. You could gain the opportunity to develop a positive relationship that results in the client contacting you for more significant legal services in the future.
New lawyers that have a lot of unfilled hours might benefit from offering a certain number of them at a deep discount through a daily deal. Yes, there is a risk of attracting bargain basement clients, but the work can give you the experience that will allow you to confidently charge full fee to subsequent clients. Even an experienced lawyer may benefit from that kind of advertising, however. When I was a solo, I gained a great new client that I represented for years by donating 4 hours of small business legal work to a charity silent auction.
What to Watch Out For
If a daily deal seems to be a good fit for some element of your practice, review the promoter’s contract carefully. You can begin by reviewing the Groupon Merchant Account Terms and Conditions last updated December 28, 2011, or whatever information is available on the website of the daily deal advertiser of your choice. Make sure you understand and make appropriate provision for the following concepts.
- Don’t expect to make a profit on the advertised item. You are already offering it at a deep discount. Ethical rules in every state prohibit misleading behavior, so your advertised price must be a true discount from your regular fees. Additionally, you will pay 40% to 50% of the proceeds to the daily deal promoter in advertising fees.
- Make sure your “loss leader” can lead to something. In traditional retail, a vendor sells something at a loss to attract customers into the store or website. Although the vendor loses money on the sale item, it makes additional sales on other full price items to some of the customers they attract. If you don’t have additional services that your client will want, however, you get the “loss” without the “leader.” To illustrate the concept: if you represent startup businesses, you might offer a discount on a basic incorporation. In the course of your initial appointment with the client, you may discover other documents the business needs, such as a shareholder agreement, employment agreement, non-competition agreement, confidentiality and non-solicitation agreement, sales contract, social media policy or other documents customary to the particular industry. To keep the deal to a price under $150, perhaps your daily deal offer could be for paying half the state filing fee for an incorporation, as long as you’re engaged to prepare the incorporation documents.
- Limit the number of units to be sold. If too many units are sold, you will have to hire help to fulfill your obligation, increasing your costs even more. When Craig Redler offered a will and power of attorney package for $99 on Groupon, he received something over 50 purchases according to the Groupon website. Even though 50 can be a small number of purchasers by Groupon standards, it is a huge number of new clients for one lawyer to assimilate in a short period of time.
- Manage the offering date and expiration date. Many companies that participate in daily discount offers experience a rush of customers the first week and another rush right before the coupon expires. Schedule your offer so that the start date and the expiration date fall during your business slow periods. Beware that some daily discount sites do not give the merchant any control over when they run the offer. That can be disastrous if it runs at a time when you usually have a high volume of work from existing clients.
- Think twice about permitting purchasers to buy more than one coupon. Small businesses have complained that when the offer allows customers to buy additional coupons as gifts, some of them load up on the discount coupons for their own use. They then get irate if not permitted to use multiple deep discount coupons. They also vent their anger publicly by giving out poor ratings on sites like Yelp. The advertising promoter may pressure you to permit gift purchases, because they make more money on the additional sales. You won’t make more money from any double dippers, however, because you’re selling at a loss and not gaining an additional new client. When clients double dip, you wind up paying a higher advertising cost per client gained, or you get an angry client if you do not honor the “gift” coupon.
- Try to offer the discount on something that can be easily mass produced or delegated. If you discount a flat fee on something that requires your customization, you not only lose money on that discounted project, you also lose the opportunity cost on the full fee projects you won’t have time to work on for other clients. However, lawyers who can systematize the document production process and delegate most of the work to a lower cost employee can make money on low fee projects. They just need sufficient volume. By way of example, residential loan documents in Texas run about $350-$500 for a stack of documents two inches thick, because the forms are standardized and production can be automated.
Now that I’ve primed the pump for your brainstorming, what kind of legal services do you think could fit a daily deal advertising campaign?
All opinions, advice, and experiences of guest bloggers/columnists are those of the author and do not necessarily reflect the opinions, practices or experiences of Solo Practice University®.