Saturday, April 04, 2009

But the big companies are doing it...

I was somewhat horrified to read an article in the Wall Street Journal on Thursday about how firms are rethinking their rate structures in order to retain clients.

Unfortunately, the article is for subscribers only, but here is the link in case you are one:

Firms Try Alternative to Hourly Fees

In short, the article talks about how some companies are switching to performance-based fees to keep business flowing in the current economy. They offered two companies as examples: an advertising agency, and an online marketing firm. The reductions in rates were pretty steep, too: The advertising agency reported switching from a $15,000 monthly retainer, to a $10,000 fee for obtaining a specific booking, and the marketing firm reported dropping rates from around $135 per hour to $80 per hour with additional fees charged only if the client's goals were met.*

Lori Widmer has been blogging a lot lately about why we shouldn't lower our rates during tough times, one of the reasons being that it makes it more difficult to go back to our original rates as the economy improves. And sure enough, this article didn't address the future of these companies at all. I can't help but wonder whether they are planning on adopting the performance-based pay permanently, and if not, how they will convince clients down the road to pay a higher price whether they see results or not.

While most of us aren't charging $135 an hour or a $15,000 monthly retainer (or at least if you are, you probably aren't reading my blog), whether to lower prices is still an issue that's on our radar, whether or not we agree with it. I personally am not lowering my rates, but I'm not raising them either, which I usually do in the spring or summer.

I am curious to hear from my fellow freelancers. Are you lowering your rates, keeping them the same, or raising them despite the current economy? And does hearing that the big firms are lowering their rates change anything for you?

* Note: All of these numbers are drawn from memory, since I no longer have the print version, and don't have access to the online article. If you have either and find that I've reported the numbers wrong, please let me know.

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