Should I lower my per hour rate to be competitive with overseas firms?

Question

I was recently invited to bid on a mobile development contract for a company in South Africa. After doing my research of firms that are local to South Africa, I'm noticing that my hourly rate is about 30% higher than the locals.

My question is, should I reduce my hourly rate to be more competitive with the local firms or should I justify my hourly rate? I was invited to bid on this contract so I assume the company knows of my work and is considering me as a candidate due to the quality of said work. Also, I don't know if any local firms are even bidding against me on this contract so I might be screwing myself if I lower my rate.

In support of a simple yes or no answer, I'm looking for case studies on rate adjustment in foreign markets to justify that answer. I am based in the US and this is my first contract bid for a company outside the US.

Answer 1

If you were invited to bid on it that may have been for a reason. This may sound bad, but I find 'foreign' market developers to be very straight forward in how they work. And not in a good way.

If you ask for XYZ, you only get XYZ. The problem is XYZ may not be what the client needs. As a qualified and higher paid developer I may suggest a different path to solve your problem, where as a lot of overseas developers will literally build what you ask them to.

So to directly answer your question; No. I have never lowered my hourly based on a clients location and have worked with clients on every contient except South America. I have several clients in Cape Town that happily pay my hourly because they understand its for a reason.

Don't be afraid to explain why you charge what you do!

Answer 2

Ultimately it is your call, but it has been my experience that you largely get what you pay for and if your rates are reasonable for the work you do, then stick to them if you can afford to. That said, be sure you can justify why you ask for what you ask and be ready to explain what they get with you that they don't get with those groups that are under-bidding you.

If you have a particular reason you want or need the project, then it might be worth dropping price some, but ultimately, it's up to you to decide what your time is worth and whether the risk of not getting the project is worth sticking to your guns. It's really up to your risk assessment and what your time is worth to you.

Answer 3

• Are you in desperate need of a new contract?
• Is this a project you personally really want to do? (super interesting, possibility to learn new tech, includes traveling to exotic places, ...)

If the answer to either one is yes, go ahead and offer with a discounted rate. I'd make sure the client knows the actual rate ("My usual rate is 130, but due to my personal interest/as an introductory price/whatever other reason, I'm offering for 100") so that you don't get stuck with the lower price for possible future projects.

You could also offer your list price but with the incentive that your expertise lets you finish the project faster than the competitors (if it's reasonable that you can make that promise), thus saving the client money even if they pay a higher hourly rate.

Answer 4

In general, my answer is no.

However, there may be cases where you want to offer a discount in order to expand into new markets. For example, if you do freelance work on an open source project, you may decide to offer a discount on initial development work in a new country, to help you become more familiar with the local needs, etc. The idea here is to keep one customer from absorbing the entire cost of getting you up to speed, build contacts in a new market etc. For example, I would not expect a customer in, say, Colombia to fully bear the costs of getting me up to speed on Colombian local requirements if I wanted to expand and get more clients in Colombia.

This is ultimately a business decision which has to be made based on what you want out of this contract. If it is just a contract with no additional long-term goals, then stick to your rates. If you want to gain additional benefits from this contract, it may be worth offering a special deal, but you need a clear idea of what you want going in. And again you want to make sure they know "this is my rate. Here is the discount I am offering you."

Answer 5

You live in USA and your costs are in american dollars. While 30% is not a very big difference, the hourly rates in many countries are many times lower then yours. It's a fact that is good known to each existing company.

If the company was expecting the local rates, they would not contact the freelancer from the country that is considered expensive. They would probably look up in India, Turkey or Eastern Europe. If they contact you, that means that they expect the services on international level, and they are usually also charged with international rates.

For example, the Prime Teknoloji, authors of PrimeFaces, are company placed in Turkey, but they charge 200 USD for hour (according to official site) which is the rate that would you expect from Western European small or middle-size IT company.

So if you feel confident about your services quality, charge with international rates.