Price transparency and consumer choice in the legal services market

Early last year, we outlined how our research team had introduced a new behavioural insights workstream that would focus on conducting behaviourally-informed experimental research. Our report Price transparency in the legal services market, is the first piece of behavioural work we have published, and the first of its kind in the legal services market.

This research was sparked by a report by the Competition and Markets Authority (CMA) in December 2016 which found competition in legal services for individual consumers and small businesses was not working well. It found that there was not enough information available on price, quality and service to help those who need legal support to choose the best option. The study found that this lack of transparency was weakening competition between providers, and meant that some consumers, in particular vulnerable consumers, did not obtain the legal advice they needed. 

One of the key recommendations of the CMA's report was for regulators to use consumer testing and behavioural research methods to assess the impact of policies aimed at increasing transparency in the market. These methods allow policy makers to more accurately identify the effect of policies before their widespread implementation, and make sure that actual behaviour is measured within policy evaluation. As outlined in our original behavioural insights blog, possibly the best method for doing so is through randomised controlled trials, which is exactly what we have done.

What did we do?

In collaboration with an independent research agency, we conducted a trial with 4,001 participants who were presented with a situation where they needed to instruct a solicitor to sell a house. Participants were presented with a number of different provider websites, created to look like websites used in the market. They were asked to pick the provider that would best suit their need.

The websites were kept the same, but we varied how the price was presented in terms of pricing model (fixed fee, hourly rate, process fee) and presentation of price (easy to find, harder to find, online calculator) to test how these differences affected participants’ ability to make good choices.

We presented participants with low and high cost versions of each pricing factor, which allowed us to see whether participants were selecting the most cost-effective option. This design allows us to accurately identify how the pricing model and presentation of price affects consumer choice whilst keeping other factors (such as branding, quality, recommendation) constant.

Using a variety of methods makes sure that researchers gain a better understanding of an issue. In line with this, we surveyed a further 1,001 recent users of legal services to understand the current levels of price transparency in the market. We also conducted an online survey of 1,146 regulated firms which explored their attitudes towards publishing price information, including whether they currently publish prices and what they see as the main benefits and barriers to price transparency.

What did we find?

Individual preferences

We saw no strong preference for a particular pricing model in the online trial. Consumers were equally likely to choose a provider that offered fixed fees, hourly rates, or an estimate of costs. However, regardless of the way that price was presented, participants found it difficult to choose the most cost-effective option. Only 58 percent of participants chose one of the three better-value options when presented with six providers.

Effect of pricing model

On the whole, participants were no better or worse at making good decisions depending on the pricing model that they were presented with. However, the longer that participants spent completing the task, the more likely they were to be influenced by the pricing model. In this case, we found that participants were more likely to select one of the better-value options when presented with fixed fees as opposed to hourly rates.

Effect of price presentation

The way that price was presented on the website significantly affected participants’ ability to make good decisions. For example, 62 percent of participants chose the most cost-effective option when prices were easy to find on the homepage of the website, compared to 57 percent of participants when prices were obtained by filling out an online form (a 9 percent improvement).

These are just the headline findings of our report, to find out more read the full publication - Price transparency in the legal services market.

What's next?

This year, we are going to be expanding this research (and our behavioural team!) to explore other factors that affect consumer choice in the legal services market. In particular, we will be looking at how consumers interact with information about complaints, service information, and regulatory protections. We are also going to be completing research with small businesses to explore the effect on increasing information on this key group.

If you would like to find out more about this research, or learn more about how the SRA are applying ideas from behavioural science, please contact our team.

Infographic - Research findings January 2018

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