May 29, 2011

Pricing right

Some topics are more persistent than a swarm of mosquitos at swampside; translation rates is one of these. Many of these discussions become quite lively, and often points are made which are fully opposite to one another yet quite right in their respective contexts. The contexts to consider include, of course, the translation submarket served, the level of service offered and, inevitably, the chutzpah factor. Some of my best rates for translation derive from that last alone: call me at 5:30 pm on a Friday afternoon after a long, hard week with a 10,000 word rush job for Monday morning and ask for my 'best rate' and I'll promise you my very best :-)

Not long ago there were a few thoughtful and thought-provoking threads on Corinne McKay's Thoughts on Translation blog that explored the issues of earnings and setting rates for language services. It started off with a thread on how much freelancers earn (with more than 80 comments to date!), then after shots were traded between Chris Durban and others over the magic 40-cent-per-word milestone, a follow-up post carried the discussion further. Both of those and the discussion of volume discounts on the same blog are worth reading and considering for your situation.

Except for the laziness of most wannabe translators in matters of research, one might think that this discussion would have died out ages ago except perhaps for strategic exchanges of information on how one might quote more appropriately in a particular market segment or for discussions of new developments like a real or imagined economic crisis and the opportunities it provides. The routine answers are, after all, available for anyone wiling to wade through a swamp of dis- and misinformation.

There are basically three approaches to pricing levels: (1) determining sustenance levels by calculating expenses, available time and approximate productivity and hopefully not forgetting long-term needs like retirement savings and medical insurance where relevant, then setting rates accordingly; (2) herd pricing (charging what others charge more or less, or what you think they do); and (3) value pricing (what the market will bear).

The first approach is one often recommended to beginners or those who are struggling to pay bills, perhaps despite a heavy workload. It is indeed a useful exercise to do the math: add up all your expenses, your anticipated need to save for the (un)certain future, and divide it all up by how many hours you expect to work to get an hourly rate. Divide that by your output, and you'll have a target piece rate for your slave labor below which you should not go lest hunger take you in its greedy jaws. For those lacking an overview of such matters, there are any number of useful guidelines for this available on the Internet; even ProZ offers a somewhat reasonable "rate calculator" for determining this baseline. It's useful to do these calculations from time to time as one's life circumstances change to ensure that the rates charged are at least sustainable; in highly competitive situations with price pressure, this may be essential. But ultimately I consider this a foolish, limiting approach that may either ignore opportunity or be totally irrelevant given the realities of a particular market. If you calculate a required target rate of ten cents per source word with your output and your 'niche' will expect you to charge three cents, it's time to change your game.

Herd pricing seems to be the path most taken, possibly because it requires no math and often less thinking. "What do you charge?" is a frequent question among translation colleagues, and to the extent that it is honestly answered, it may provide some useful information. I prefer my answers of this sort pooled in some way, such as the BDÜ rate surveys, though with these I sorely miss information on standard deviations. How can I aspire to being a six-sigma translator when it comes to rates if I don't know what the standard deviation is? I like to know what my 'competitors' charge as much as the next guy or gal, but ultimately, this is really not what my pricing should be based on.

From a proper running dog capitalist perspective, a 'fair rate' is what the market will bear. If, for the instructions shipped with an electric toaster, the market will bear a piece rate that translates to three euros per hour net earnings for me, then dems da breakz, I accept it, let that work go to Calcutta with a smile and move on. Given a recent chat I had with an agency owner and friend, there seems to be more of this, so much so that he described anyone willing to pay my rates for ordinary technical translation as simply 'clueless'. Maybe. I like to think of my customers as 'lawsuit averse' or 'marketing savvy' rather than clueless, but then the national motto where I come from isn't Geiz ist geil.

'What the market will bear' is in reality quite variable, and fair is a subjective thing however objectively some attempt to define it, but I rather like the fact that this requires us as business people to stay awake and be sensitive to our needs and those of our customers as well as their perceptions. I live in Germany, the land of 'thought experiments', so I'll propose one to the cut-rate colleagues in various developing corners of the world:
Imagine that your client requires the translation of a project proposal overnight. The amount of work to be done is horrendous and requires a carefully coordinated, all-out, all-night effort by skilled specialists. Competitors in this RFP will most likely not be greatly differentiated in price or delivery times; in the end, if the decision doesn't rest on a bribe it may come down to naked persuasion, the psychology and semantics of the proposal itself. If successful, this bid will result in millions of euros in new business and strong, guaranteed growth for the next few years.
What is the fair price for that work? Or to consider a simpler example, one frequently encountered by translators, what is the fair price of 'translating' a culturally sensitive marketing slogan? Would you price it by the word? By the line? By the hour? Any of these would be wrong I think. And if the value to the customer is low, the price should be low. If the stakes are higher....


  1. Thanks for this great post. I tried to make a case for value pricing here recently, to deaf ears.

    Regardless of your specialization, taking the time to learn about the business objectives of your clients can help you identify those "pain points" where you can offer value-adding solutions. Once you get to that level, per-word pricing not only doesn't make sense, but it can actually damage your credibility.

  2. Thanks for the link Sara. That's the sort of discussion that makes me want to go punch the bricks in the old tower in my garden. You know what they say about pearls and piggies, and too many of those ProZ discussions remind me of a wallow.

    Aside from being potentially more lucrative, problem-solving with clients is simply more satisfying - to me at least. I've been a consultant since the mid-80s; I just happen to be one who translates now. But I do understand and appreciate that for some, the existence as a freelance translator is a necessary evil due to the shortage of work opportunities for bilingual receptionists. The receptionists-in-waiting will always have a different philosophy and approach to this business than the one you have and your clients need :-)

  3. I disagree with the assertion that value-based pricing is about "what the market will bear". Value based pricing is about offering a compelling return (value) on investment (price).

    I have noted that professional bodies in many 'trades' mandate the charging of a 'reasonable fee', and some go as far as to identify the variables that make up 'reasonable'. The trouble is that all but one are highly subjective. The only objective, measurable variable is the time taken, or in this case the number of words translated.

    Guess what. Lazy people take the easy way out and ignore all the subjective variables!

    If you are asked early in a sales conversation, "How much do you charge?" I'd suggest saying, "It's far too early for me to say yet. Can we get back to talking about your problem."

    Pricing is an art, not a science and so it is wrong to use equations or calculators to create prices. And it is also perfectly reasonable to charge different prices for different value, even if the effort needed is similar.

    David Winch

  4. David, we could split hairs over my comment about "what the market will bear" - which in my in certainly has little to do with "market rates" - but no need: you've stated the case for value-based pricing very well, though I think words other than "lazy" might apply in many cases (some more generous, some not).

    As for charging different prices for similar effort, well... if effort alone were the basis of billing, I should be working for my housekeeper.

  5. I think we can replace "lazy" with lack of confidence or ignorance...

    Pricing per per word "just because everyone else does" is short sighted and is definitely not the best way to increase your translation revenue.

    I like how Kevin has transferred his consulting approach from previous career experiences to translation. Would love to hear more about this in future posts!

  6. @David, I also think Kevin's "what the market will bear" is just a manner of speaking...I think you guys are on the same wavelength.


Notice to spammers: your locations are being traced and fed to the recreational target list for my new line of chemical weapon drones :-)