Just Do It: Price Discrimination

Yes, we collect bills from around the world. Photo by Judy.
It was a tough winter here in the US, and some companies made a handsome profit because of it. The revolutionary car-on-demand service Uber is one of them. In the middle of the Washington  and New York winter, Uber decided to charge customers three and four times the regular rate. This earned the company a lot of bad press, but the company’s CEO defended his pricing policies saying that he needed to use this pricing model to entice more drivers to come out and work, which was a good point. While we don’t agree with Uber’s decision to essentially price-gouge their customers, we do think all of us, as small business owners, should take advantage of price discrimination strategies. Essentially, price discrimination is a strategy that charges customers different prices for a product or service – and even though we love talking about economics, we promise we won’t get into the hard-core economics of it.

When we tell friends and colleagues that all our rates are public on our website, many are surprised. We go on to explain that we think price transparency is a good thing and that we want to save ourselves and our potential customers some time by telling them what to expect. Many colleagues do agree that having rates publically available is a good idea, but they are worried about having different price points for say, translation agencies and direct clients, but it’s perfectly fine to have different rates. In fact, almost every business has them. Let’s look at some other businesses to see how they handle price discrimination. Remember that we are not lawyers (although Judy is married to one), and that this is not legal advice, but rather our experienced-based opinion. Now, let's finally have a look at some examples:

  • ·   Lawyers oftentimes offer lower rates for non-profits, local resident discounts, firefighters (or whichever group they support), etc. We recently hired a lawyer who told us he had a regular rate, a rate for people he considers “total jerks” (he used another term that’s not fit for this blog) and a rate for people he likes. He charged us the latter – at least as far as we know.
  • ·   Restaurants charge you half the price for a glass of Sauvignon Blanc if you drink it at the bar during happy hour. However, if you order the same glass of wine a few feet away at an actual table, it will cost twice as much. Is it fair? Probably not. Is it legal? Absolutely. One of our favorite high-end Vegas steakhouses now offers a Sunday special, which gets you $60 steak for $30 on Sundays. We are happy to report that the steak is exactly the same and just as tasty!
  •     Travel-related expenses can vary depending on age and even nationality. When we take a train from Salzburg to Vienna with our dad, his fare is half of ours. When Dagy enter Argentina on her Austrian passport, she doen't have to pay for a “visa.” However, if Judy uses her American passport, it’s $150. Flights to Europe are cheaper in March (low season) than July (high season). 
  •     The price of recreational activities can vary widely. Judy recently wanted to play the same round of golf that she played with our dad in February for $65, but the rate had increased to $110 because the weather was nicer. Skiing is always cheaper on Wednesday than on Saturday. These businesses engage in price discrimination to stimulate demand during slower periods.
  •      Many businesses offer a certain discount to customers who saw their ad on say, a billboard, a magazine or a flyer. They will tell you to bring in the flyer to get 10% off the final bill.  Others, such as gyms, have lower prices for women, although they have gotten into some legal trouble because of this practice, as it can be construed as gender discrimination. Our take: men should be happy to have more women at the gym (they usually do put the weights away), but we digress.
So, dear friends and colleagues: while we know this can be a controversial topic, we think you shouldn't be afraid of price discrimination. You get to set your own prices and you can offer different price points for different clients. You wouldn’t be the first business to do so. We would love to hear your thoughts on this!


8 comments:

Britta Weber on March 18, 2014 at 11:57 PM said...

I totally agree with you on price discrimination. I use it myself in my daily business as well.

However, I'm still not sure about publishing my prices. Would customers not insist on the price I publish and would it not be hard to offer different prices? Or would you suggest to publish a price range stating that the actual price depends on the quality of the text?

Sara Freitas on March 19, 2014 at 1:08 AM said...

Still not sure how I feel about this! I am currently moving those last few clients away from a per-word rate to a per-deliverable flat fee as I feel it is more consistent with the "translation as a non-commodity" view and aligns more closely with the level of service I provide. I try to boil things down to the number of days I'll spend on a project and make sure the income billed equals at least my target income per day. So I guess the differentiated pricing is built in because each project is inherently different! But how to publish those rates? For now, I don't. I have toyed with the idea of giving several "typical" project descriptions and the budget, but have never made the leap.

Judy Jenner and Dagmar Jenner on March 20, 2014 at 9:16 AM said...

@Britta: Thanks for your insightful comment. Personally, we publish a range of prices, which has served us well. In all these years, no one has actually ever come back to complain that he/she did not get the lower rate (of the range), as we usually detail exactly why we are charging the particular rate (complexity of document, etc.) We consider publishing our rate a service to our clients, as it will save them time and give them a ballpark idea of how much the project will cost, which we think is comforting. We are consumers, too, and nothing ticks us off more than going on a website looking for a rate for say, lawn services, and under "quotes" it will say --> please call. We never call. :)

Judy Jenner and Dagmar Jenner on March 20, 2014 at 9:18 AM said...

@Sara: Thanks so much for your comment, Sara. We completely agree with you that moving to an hourly rate is the way to go, and we have several clients on an hourly rate as well. The only challenge with that pricing model is that you have to be quite good at forecasting how long a certain project will take you (which most of us are). We are huge proponents of publishing our rates, as they aren't a secret, and price transparency is a good thing, but of course it's a very personal decision. Great discussion topic, isn't it?

Britta Weber on April 3, 2014 at 2:20 AM said...

@Judy: That makes perfect sense. I once had a category on my website called prices and I said something like "contact me". Recently I took that off my website completely because I find it confusing too.

Britta Weber on April 3, 2014 at 2:22 AM said...

Judy: That makes perfect sense. That's why I took of the category off my website recently as I would find it confusing too to be told to contact the service provider.

Łukasz Gos-Furmankiewicz on April 4, 2014 at 11:49 PM said...

Hi! I charge agencies less, I charge clients from poorer countries less, I charge more for rush and for jobs that need a lot of editing. I consider churches, schools, hospitals, uniformed services and even public authorities more eligible for lower prices than for-profit companies, especially wealthy corporations with limited translation budgets (hire a better CFO).

As for the hourly rate, you probably don't want to use it with clients whose staff have higher hourly rates than yours despite having comparable or lower qualifications in their respective fields. That could get them some wrong ideas. Here, text units are convenient because only writers and similar professions use them.

Judy Jenner and Dagmar Jenner on April 6, 2014 at 8:38 PM said...

@Britta: We competely agree. While it's nice to have some contact information, I think making the client contact the services provider to get a quote is a step that can be saved. It makes for better customer service and a smoother experience for the client, in our humble opinion.

@Lukasz: Thanks for reading and for commenting. We like the way you think -- good stuff. We also give discounts to non-profits and even to small start-ups because many of them have something very valuable to contribute to society. And yes, you are spot on with the text unit: it's not used very frequently, and it makes it harder to compare to others' salaries than when you use the hourly rate. We sometimes have to explain that this is an hourly rate on which we have to pay taxes, that we get no paid holidays and benefits, etc. and that we need to provide our own benefits (if that comes up). Most of the time, our clients are fine with our rate. Again, thanks for sharing your thoughts!

Join the conversation! Commenting is a great way to become part of the translation and interpretation community. Your comments don’t have to be overly academic to get published. We usually publish all comments that aren't spam, self-promotional or offensive to others. Agreeing or not agreeing with the issue at hand and stating why is a good way to start. Social media is all about interaction, so don’t limit yourself to reading and start commenting! We very much look forward to your comments and insight. Let's learn from each other and continue these important conversations.

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The entrepreneurial linguists and translating twins blog about the business of translation from Las Vegas and Vienna.

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