USING PRICE DISCRIMINATION TO LAND A HIGH PAYING FREELANCING PROJECT

I’m here to talk about what may be the most controversial topic in the freelance industry. My aim for this article is to give light to the possibilities of the amounts that one freelancer can charge without being unethical and without being underpaid.

Are you being underpaid?
In my opinion, there is no concrete answer to this question. The rate that you will be paid by any client depends on a lot of factors, but it will mainly depend on your bid.

Even if the client is willing to pay $15 per hour for his job post and then you placed a bid of $3.75 per hour while being equipped with all the skills and experience that the client needs. Do you think he will tell you? Of course not.

The client won’t tell you that he will pay you $15 because you have all the skills he needs. The most that he will do is hire you for your bid ($3.75), try you for a couple of weeks or months, and then give you an increase along the way.

While this increase may motivate you more, it still does not make the client pay out of his budget. And let’s face it, it’s still a reason to be happy because you placed the bid for $3.75. That means you are contented with that price, and you got an increase!

This scenario may seem like the client won, right? By understanding the concept of price discrimination, towards the end of this article, you’ll be able to secure projects where you and the client have a win-win situation.

Our discriminating and opinionated world.
Let’s take this for example. Freelancer A and Freelancer B are both hired by the same client for the same job. However, Freelancer A is being paid $10, while Freelancer B is paid only $3.75.

Is Freelancer B being underpaid? While most people will probably tell you that Freelancer B is being low balled and underpaid, I don’t think so. I think they are both rightly paid.

The right mindset
Instead of listening to those people. Why don’t we take a look deeper? Surely, you may feel robbed when you find out that another freelancer with the same skill set and job description as you are is being paid almost 3x more than you.

Before you get angry or get swayed with what other people are saying, let me ask you this, isn’t that rate what you proposed? I thought so.

What’s done is done. It won’t do anybody any good if you dwell on what happened. Just focus on having the right mindset. For sure, this will not happen to you again.

There you have it. I’m not going to blame you for that though. What I’m going to do instead is to make you understand what price discrimination is to prevent this from happening again.

But first, let’s discuss the factors that you have to consider when placing your bid. It’s not just about “How much are the other freelancers in your field being paid”, you know?

Factors in pricing
There are several factors in pricing that you should consider before placing your bid for a job. These are often

The norm and why it should stop

The biggest mistake that I see freelancers make, especially newbies, is to ask other freelancers how much they are being paid. When they get an answer, they bid the same price. This usually ends in four ways:

You don’t land a job.
This is the most common scenario I see, especially for those who took up paid courses. While some of these courses are able to help some freelancers, they do paint an unrealistic expectation for other newbie freelancers.

My problem with this is that newbie freelancers are aiming for big rates even if they don’t have any experience and skills yet. What happens if you do that? You end up applying for jobs and getting rejected most of the time.

You become unethical.
In the event that you do land a job, chances are you might still be learning about the skills that you need to do for the client. There are some clients who are ok with that, but it would be better for them to get a freelancer with the same rate but is already equipped with skills, right?

My take on this is that you also have to care about your client. We can’t succeed by just thinking about ourselves.

You won’t last.
Your client may end your contract prematurely when he finds out that you just made yourself look like an expert, but in reality, you aren’t really ready for the tasks at hand.

Like what I have mentioned above, some clients are willing to train their freelancers. But as it is, they will be spending time away from their business when they do. If they are to pay a high rate, then don’t you think it will be wiser for them to hire someone who they won’t have to train anymore? If they need to train the freelancer, then a lower rate is understandable.

It will work.
Of course, there will be times that it will work and you will find a job that pays you high, and right on your first try. But it does not always happen.

What should be considered instead
Now that that’s out of the way, I want to talk about the factors that you should be considering when you place a bid in your application.

For the sake of this article, I’ll divide it into three; Freelancer, Client, and Project aspects. I’ll also throw in a bonus one, which is sort of a taboo that no one wants to talk about.

Freelancer
As a freelancer, the factors to look at before placing you bid are:

Skills – Of course, you have to know how to do the job that you are applying for. If you do, how good are you at it? Did you invest in studying that skill or are you just starting to learn it and are hoping to learn it on the job?

Experience – What previous jobs have you had that are relevant to the job you are applying for?

Portfolio – Do you have a portfolio that can show the client what you can do?

Online footprint – Do you have an online footprint that can prove what kind of freelancer you are? Just an added tip, be careful what you post on your social media accounts. This may seem personal to you, but having a lot of negative posts can show on your online footprint and may give the client second thoughts about hiring you.

Review and testimonials – If you use a freelancing platform like Upwork or Golance, the reviews of your client from your past jobs can be a factor when bidding. If you go for direct clients, a website with testimonials may be a good idea.

Expenses – What are your monthly expenses, your rate should cover these.

Fees – The bid that you place will not be the amount that you can take home. There will be platform, bank, and payment fees. Put these into consideration before placing your bid.

Client
When placing a bid, you don’t only think about yourself and how you will be able to pay your bills, how you will be able to give value to yourself, etc. What you should remember is that not all clients are rich. Most of the clients who are looking for freelancers are just starting up their business and are looking to get help for their business, but are on a budget. You can’t expect them to hire someone with a high rate that can risk bankruptcy without having a clear guarantee that the business will benefit from the hire.

Client’s capacity to pay – Is the client just starting out? Or is his company already established?

Past reviews – If the clients usually spend time choosing their freelancer, as a freelancer, you can also choose your client. Take a look at the past reviews and past jobs that the client posted. How much did they pay their last freelancers? That may be used as a factor for your bid. Also look at the past reviews that freelancers left for the client, find out why their contracts ended if you can. These can help you have a clearer view of how the client is as a client.

Project
Another important thing to consider is the project. Here are some questions to ask yourself.

Skill required – What does the client need? Does the job require you to work with a routine, copy paste, enter data, maybe? Or does it constantly need you to be creative, like writing or design jobs.

Effort and commitment required – Does the client need you full time or just a few hours? Will you be paid? Is it hourly basis or is it a one-time-project?

There you have it, these are the factors that you need to consider when you bid.

Oh and the fourth one that I promised you? The race and country where the freelancer lives is sometimes becoming a factor for some clients. While it is not right, it is useless to say that it is not happening. So, you just better be prepared and know how to avoid that.

Glad you are still here and reading this blog, now let’s talk about price discrimination (finally!) I know, right? That’s a hell lot of an intro!

Price Discrimination
Sorry about that, but I do believe everything that was written before this is equally important before we discuss price discrimination.

So what is it exactly?
Price discrimination can widely be heard in the economy industry, it often depicts the way a product or service is priced depending on what kind of business and who it targets.

In the simplest explanation, depending on your product or service, the client or customer, the place where your business is, and who your target customers are, the price will vary for each of your service or project.

Let’s try to define it more. Price discrimination is when the same product is sold in different places and people at a different price depending on several factors like place, demand, race, etc.

To connect it to freelancing, let’s say the products are the services that are being offered by freelancers. Depending on a lot of factors, the freelancers are charging different rates for a service that is somehow the same. The clients are also hiring freelancers based on several factors even for a service that is somewhat the same.

Why is there Price Discrimination?
In a perfect world, where only one person offers a certain service, and only one group of clients are acquiring it, there is no need for price discrimination.

This comes in when there is a change in supply and demand. Once there are multiple kinds of clients that are willing to pay different rates, as well as freelancers who are willing to charge differently, then the discrimination begins.

How can you use it to your advantage?
While talking about how you can put price discrimination to your advantage as a freelancer, I will focus on the degrees of price discrimination.

First degree
The first degree is also known as the perfect discrimination. This is where a freelancer is able to charge a high rate from a client based on how much the client is willing to pay. However, to do this, you should be equipped with a skill or trait that only you or a few can give.

In knowing what the client specifically needs and where he is in his business currently, a freelancer is able to charge the highest possible price that a client is willing to pay while giving both of them a win-win situation.

To reach this stage, you have to have a specialty. Somebody who offers General Virtual Assistance will have a hard time charging a high rate from a client because there are literally millions of other freelancers who offer the same service. Niche up and learn more specific skills to target higher paying clients.

Second degree
The second degree of price discrimination is when you charge a different rate for each set of service that you offer with a gradual increase.

For example, a freelancer who undergoes a gradual increase in his rate may charge his first client with $3 per hour, his next $4, and his next $5. But in making sure you are skilled and ready to serve the client, you can already charge $5. And then instead of passing by $6, $7, $8, you can jump up straight to $10. This is a good practice if your supply to the clients’ demand is high and varying.

You cannot do this if you get stuck in giving just a virtual assistance service package. Learn a thing or two. You’ll thank yourself later.

To reach this stage, you have to have a good understanding of what each of your client needs. You should be past the stage where you only do what your client wants. You need to pinpoint each client’s need so you can manage the prices that you charge.

Third
This is, in my opinion, where most freelancers start. This is when demands are matched with supply.

This is commonly happenning in freelancing groups. Where a newbie will ask how much he or she should charge for this service and that. Members will give a range. For example, VA services and Data Entry would probably get an answer of more or less $3-$5, while a graphic designer will get an answer of more than $10.

You’ll probably start in this stage, but make sure you don’t get stuck here. Or better yet, make sure you don’t.

Last words
Note that this is not the exact and accurate meaning price discrimination. As I have mentioned, it is commonly used in economics with products in mind.

I just used the degrees to explain the pricing options as a freelancer.

As a newbie freelancer, you will most likely start off in the third degree, asking people how much you should charge and following what they tell you.

However, I don’t encourage you to do that. This is the main reason why I explained the factors in pricing in the beginning of thise blog.

So my point is…
Knowing these factors, aim to start of in the second degree and have the first degree as your goal.

I have seen too much failed attempts of freelancers who definitely had the potential to succeed but were faced with wrong expectations when they jumped into the third degree.

The most common scenario is that they asked the wrong people. The people who do not understand the pricing and are just looking at the amounts can tell them that they should not start low, they should instead start at $18 or $20+. But, as they aim to get that rate, they face difficulties and soon give up.

Do not make that mistake. There is more to “knowing your worth” than just asking for a high rate.

Start with yourself. Build your foundation. There’s no concrete answer to how much you should charge, but there are factors to consider instead.

Hope this blog did not bore you to death and may it serve as an eye opener to the new ones.

Xoxo,

This is originally posted on my blog: www.nizzagueco.com