What started as a lighthearted look at currency exchange rates in 1986, The Economist magazine has become one of the more notable features of the publication’s illustrious history: the Big Mac Index. The theory is that a Big Mac, being essentially identical worldwide, should sell for roughly the same price around the world. Big Macs ‘exchange rate differs from the official exchange rate. The Big Mac index concludes that the current price is over or undervalued.
Price is one of the critical fundamentals of operating a business but is often the topic freelancers are most nervous about engaging. The complications inherent in pricing are magnified many times when trying to come up with prices that will work for customers worldwide! I’m sure anyone who does business in multiple countries can think of a half dozen reasons the methodology is flawed, which is part of the point. With differences in exchange rates, local incomes, and other factors, it may seem inevitable that your pricing structure will need to vary locally. This leads to complications and sometimes creates more problems than it solves. There is no one-size-all approach, but several important considerations to bear in mind when setting up a price structure.
If possible, try to get an idea of what local competitors are charging. Social media can allow you to do this more easily. Joining local groups can be incredibly enlightening about what prices attract attention (and what fees might attract derision!) A price that attracts plenty of bids in one market may not work in another. Your pricing structure may have to reflect that to compete in both markets.
Your Target Market
One of the incredible things about the Big Mac index is how little it varies, even when different countries have markedly different incomes. In some countries, a Big Mac is a cheap bite on the go, while in others, it’s an upscale treat. Keep this in mind for your service - your pricing strategy may target different clients in different markets, allowing you to use more uniform prices globally.
Avoiding Direct Comparison
If you publish prices publicly, maintaining different pricing structures for other geographic regions can create challenges — no one wants to feel targeted because they live in a higher-income country. One workaround is to determine ad hoc or keep your price formula private. Another option is to offer service levels and then guide clients to possibilities that might be more appropriate for their budget.
Consider Opportunity Costs and Benefits
One of the most difficult parts of setting prices as a freelancer is that you’re not just marking up a cost of goods to cover your expenses, like a store would do - you are also setting, effectively, your income. Be sure the balance the time spent working on a project with the other options you have for that time, and price your time accordingly. But consider the long-term benefits: sometimes, offering a lower rate for one project may be worthwhile if it opens up new opportunities in a particular geographic niche.