I guess we exist on the fact that there are enough people waking up to the realities of “you get what you pay for” to keep us in business.

BTW, the “in trouble” was a general statement … not saying that your business specifically is in trouble :)

I don’t sweat the freelance cost strata at all either. I know there are people who charge 1/3 of what I do, but I’m confident that what I deliver is > 3x what they can deliver in the same amount of time.

However, I still say that we’re both victim of the perceived value problem. The quality (and cost) of a Herman Miller far surpasses that of the Home Depot special, but it took me a long line of broken Home Depot chairs to realize that. And actually, I had to use a Herman Miller (that I didn’t pay for) for a few years, then go back to the Home Depot chair for me to *really* realize it.

I think in the same way, a lot of inexperienced would-be clients look at our prices and think, “people are crazy for using them … I can find someone for 1/3rd of that on eLance and they’ll still get the job done”. I’ve been victim to that thinking as well, having paid for crappy logo and business cards through online services. But it really takes someone going through the failures of using cheap, inexperienced labor to realize that it’s not worth it.

As you know, most of my projects are billed at an hourly rate rather than fixed bid. However, I think there a quite a number of differences between what we do that lends it to make sense for me to do it that way, and for you not to.

I gotta say, I don’t sweat the freelance cost strata. What I offer for $1000 can *never* be had for $100. If the client doesn’t need the difference in quality, then I’m not “in trouble” at all- one thing I have learned is to stay true to the value of the work. If another designer wants to undercut me to get a project, then I’m fine with that – Ten years of experience tells me that there’s some serious holes in the low bid, and they’ll get what they pay for. This is why I believe the freelance stratosphere is accurate. It’s basic capitalism. The market adjusts the costs.

It’s not good business practice to “nickel and dime” anyone, so I tend to lump things together when possible. This is one of the reasons why I try not to ever set up projects to charge by the hour. If I must, I usually cap it and eat the difference if necessary. Clients want to know how much they are going to spend – this helps them budget and plan. When going hourly, there’s always the nagging fear of runaway billing. I know that when purchasing a service, I want to know how much it is up front. Do unto others…

Also key is what you spend to create the product/service. The anecdotes all cite instances where something was created in a short amount of time. But would Abdul still only charge $800 for the same answer if it took him 8 hours to find it?

Then there’s also the big question of the what the market will bear. If something’s inherently worth $1K to your client, but it can be found elsewhere for $100, then you’re in trouble. Whether it’s of the same quality is in a lot of ways irrelevant — if the client perceives it so, and you can’t make a clear case otherwise, then you’re stuck.

Picasso can get away with what he charged because you couldn’t get “a Picasso” anywhere else — his brand was what drove the value. And the engineer could charge that much because all the other employees couldn’t figure out the problem. So in each case there was no market equivalent. If what you’re producing is more of a commodity (design, development), then you’re going to have a hard time finding & keeping clients if you don’t a) show why you’re a Picasso and/or b) charge close to market rates.

I’d love to hear what Abdul’s client did next. I’m not willing to risk a client being that upset or get into a situation where every question is preceded by “how much will that cost?”

Again, I agree with looking at inherent value when figuring out pricing, but there’s a lot more to think about :)