The other day, I attended a webinar focusing on pricing. While lots of amazing (not only pricing-related) insights came out of it, points were also made that I disagreed with. “It’s okay to charge a different amount for the same product. Look at all the big companies. They do it all the time.”
The speaker then illustrated her point by looking at a major US restaurant chain that charged different prices for what purportedly was the same product, making it cheaper in the afternoon and pricier in the evening.
The question that popped up in my mind was: are we really talking about the same product here?
Here is why I don’t think so.
They look the same. But are they really?
Although the food or drink you get at 2pm will probably (though not necessarily!) be identical to what you would get at 8pm, I argue we are talking about two different products. A piña colada or a pint of beer may be cheaper during a happy hour for a host of reasons, but whatever it is that kicks down the price, for most people, a happy hour means they need to clock off at work at around 1pm and only come back the next day. So, am I buying the same product or service if I need to rearrange my day? No way!
That said, there is nothing wrong about sipping a cocktail at 2pm. You might be an early bird that starts and finishes work very early. Indeed, there is nothing wrong about, say, spending your holiday in the Mediterranean in September either – as a matter of fact, that’s what I prefer to do to escape the crowds and the heat. But the point is clear:
what seems to be an identical product or service turns into a different thing if bought or provided at different times. Your pricing strategy should reflect this.
Pricing in a borderless world…
Never before in human history has the world and its economy boasted the degree of interconnectedness it does today. The rise of the online world due to the COVID-19 pandemic means a conference taking place in California might be translated by a conference interpreter working from their office or a hub in Europe (or indeed their summer home in the Canary Islands or ski property in Chamonix – provided they have all the necessary equipment and technical support there). Not only do independent professionals no longer need to travel across the globe and pay hefty hotel fees. They can do jobs they would not have even dreamt of before due to visa and work permit requirements!
…where borders still matter
While many freelancers and companies think of a virtually borderless world such as ours as a bonanza, new issues and questions have cropped up too. Some of these, I believe, are fundamental to how freelancers do business. The capricious whims of the internet and tech fails aside, a freelancer looking to expand their service area may find out they need to tinker with how they do business, including how they go about pricing.
Don’t get me wrong.
I subscribe to the tenet that identical products and services should be priced the same, no matter who buys them. Sticking to this pricing model obstinately may, however, prove to be a (costly) trap. Not because the model is faulty, but because what seems the same in actual fact is not.
Let me give you an example.
Originally hailing from the Czech Republic but based in the UK, I provide services to clients in both countries, as well as elsewhere, but the cost of some of my services (particularly certified and legal translations) varies depending on where I provide them.
Yes, you guessed it. I am more expensive in the UK. But the reasons go well beyond higher living costs and higher taxes I must pay as a sole trader in the UK. My pricing strategy reflects the fact that my qualifications are far rarer and far harder (and more expensive) to keep in the UK, resulting in services whose added value is higher than in the Czech Republic. Location, just like time, is of essence!
And there is more.
The more litigious a country, the higher the price?
Martina is an IT infrastructure engineer. She recently designed, built and deployed an IT infrastructure solution for a client in the United States. After a few weeks, an incident occurred. An employee downloaded an executable file attached to an unsolicited email. The result? You can figure out yourselves. Although Martina had instructed the client repeatedly about (not only email) security, including in her IT services agreement, she has just learnt the client believes the incident is partially due to an inherently faulty design and is suing her for damages.
Martina’s lawyer assures her that she has a big chance of winning the case. But even if he is proven right, she is in for a truly stressful experience and a lot of uncertainty, not to mention a potential stain on her job prospects and career. What if there is a kernel of truth in what the big respectable US company claimed, someone might wonder.
Here is what the story has to do with freelancer pricing.
Generally speaking, the more litigious a country/state/jurisdiction, the higher the risks. And with a higher risk comes a higher return (i.e. fee), or at least it should.
You might be thinking: I would never jeopardize my small business by providing services in the US. After all, everybody knows it is a country where a huge number of lawsuits crowd courts every year. Fair enough. But did you know Germany actually tops the list of the most litigious countries in the world, with Sweden, Israel and Austria following suit? The US comes in fifth, followed by the UK, Denmark, Hungary, Portugal and France. Turns out Europe is the lawsuit happy continent – according to Christian Wollschlager’s Exploring Global Landscapes of Litigation, anyway.
Make sure you understand what you are selling, to whom, and why
It is up to every freelancer to decide which countries they do their business in and indeed which places they avoid, such as due to problematic legislation regulating a specific sector. But legitimate reasons aside, ruling out a country just because it is litigious means a missed opportunity. And in a quickly changing world such as ours, it is missed opportunities themselves that can pose a risk to your business!
So what strategy should you follow?
Rule in rather than out, but do the math and take precautions. You might want to spice up your contract with do-not-put-a-cat-in-the-microwave provisions, increase your fee, set a minimum contract size, talk to a consultant or a legal adviser, ensure the law governing your contract is the law of, say, an EU country if you are based in the EU and supplying services elsewhere, etc.
Higher prices in a jurisdiction where it is more difficult to enforce payment?
Any client may default on their obligations. Still, in some jurisdictions it is much harder to enforce a claim than elsewhere. And where enforceability plummets, risks skyrocket – and so, too, should the return.
Surprisingly, while we tend to think of the jurisdiction we live in as being a safe haven of sorts, it may not always be that way.
One of my freelancer friends – let’s call him David – is a website and graphic designer based in the Czech Republic. While David had repeatedly supplied services to clients in a variety of countries including the US, Australia, Brazil and Singapore – and never had had a problem, he recently decided to write off an invoice issued to a Czech company with a registered office just across the street from his office. In his freelancing career spanning nearly two decades, this was his second uncollectible invoice, the first one also having been issued to a Czech client.
In any case,
the list of all the things and circumstances that can make seemingly identical services (including digital services) very different could go on. Successfully expanding abroad may supercharge your bottom line as well as boost your self-confidence, skills and work experience. These should not be taken for granted, though. Instead of rushing into some half-baked business, it is better to do your research, talk to colleagues, consult experts and perhaps start with small projects. Do this right and the big ones will come too.
Happy freelancing, folks!