Presents

1. Presents Price as a Signature : The Art, Science and Commerce of Pricing

2. Discussion Schedule and Tone • Two modules will be covered in the duration of approximately an hour. • There will be Q/A sessions after Module II • Few e-books and short essays on this theme and related one at the end of the session under the head Further Reading • The general tone of the presentation will be anecdotal and semi-formal considering the background and exposure of all of you present here • Module I will be conceptual and identify the science (measurable), art (communicating the price) and commerce ( profit and wealth) part of pricing

3. Welcome to Module One Highlights : • Price as an encrypted signature of your business • Price as an indicator of your integrity and commitment • Price is the most transparent information about your investment – time, money and skill • Three components of Pricing Quote • The Arithmetic Entity • Terms of Payment • Mode of Payment (From price asked to realized cash) • Pricing as a marketing tool • Pricing as hedge for Payment Risk

4. Module 1 : Pricing as a Signature • The price of your products and services is an indicator of your self-esteem and self-valuation. • The world respects those who respect themselves. • Your pricing data tells more things about your and your business than you think you are disclosing • Pricing is NOT mere arithmetic nor some number manipulation • Pricing exposes your business secrets.

5. Pricing – Integrity and Commitment • There is NO ideal pricing • Pricing indicates your integrity – whether you are a professional or an amateur or inexperienced regarding market interactions. • Your commitment : Are you here to stay or are you here to work as a fly-by operator ? • Machine translation vis-à-vis Human translator [ the danger in perception in case of an unreasonably low pricing ]

6. Pricing as an indicator of your Investment • Your investment components are Time, Capital, Skill and Foregoing other Opportunities • This has got an tangible component [ Cost, Time ] as well as intangible [ skills, emotional engagement, stress ] components • A low price may indicate low investment and very high price may indicate your non-competitiveness / lack of market exposure • Pricing also indicates how optimized and market-benchmarked your operations are • It also indicates how astute business sense you have

7. How buyers de-encrypt the pricing data • Even though pricing data is an arithmetic entity - $X per word, buyers interpret it from various dimensions. • Clients who think bidding sites are places for Low Cost Factory and its suppliers • Clients who perceive that this is not their segment • Clients are interested to get the lowest price in case of reverse auction • Competition and unregulated marketplace provide buyers with considerably free access to pricing data. • Your pricing data immediately enables the buyer to fix you in one of the scales of the Price Scale : Very Low, Low, Medium, Upper Medium, High, Quite Higher, Too High. • Statistically, more favourable pricing data remains in the middle as per the Law of Averages • But that middle continuously gets pushed from both sides

8. The Background Processes of Pricing Arithmetic(The Science Part) • Unit Price X = your cost price (Your time and opportunity cost) + your margin + value added by you in monetary terms (your capital and operational expenditure in the form of investment) + your experience and expertise. • Unit Price X = Tangible and Measurable + Intangibles + Historic Cost • Cost Price is geography , time and foreign exchange dependent. • Foreign Exchange is a big factor (The currency in which paid and currency in which final realization is made) Signpost : More on this on Price to Realization of Cash.

9. Pricing – From Price to Realization(The science Part) • PO terms • Payment Cycle ( 30 days / 40 days) • Mode of Payment • Who bears the cost in each modes • Bank Transfer  who pays the transfer fee ? Client or translator ? • Foreign Exchange Risk  exchange ratio fluctuations • PayPal / Moneybookers transaction fee • Implications in case of a delay in payment cycle • Realization Mode : FX at the time of transfer or at the time of realization * As high as 10% of a payment can go as cost in actually realizing the cash. * Be very clear regarding the terms of payment and hence Pricing Mix

10. Highlights of Module I • Pricing is NOT simply an arithmetic entity • There are scientific considerations ( market research, FX ), artful adjustments (margin, intangible, anticipation), commercial sustainability ( premium clients, regular volumes, client requirements) • There are possibilities of cost incurred in the conversion of a payment (as per price) from actual realization of cash • Pricing exposes your business secrets • Pricing is a differentiator

11. Module II – Few Practical Guidelines and Tips • Going Deeper into the Basic Arithmetic of Pricing • Information Asymmetry : Using this nature of the market in your advantage • Artful Communication • Value based Pricing • Price as a Marketing Tool • Price as a too to evaluate and minimize risk • Some selected pricing examples

12. Going Deeper into Pricing Arithmetic • Every pricing can be summarized as Price = Cost + Margin (or Profit) • Cost = Capital Cost + Running Cost + Cost of Resources (Time, Opportunity and Skill acquisition) • For a fresh freelancer, pricing is decided solely by cost. • For an established freelancer, pricing is more margin driven • This freedom comes from scaling up  More project and client Mix • Pricing Mix • Acquisition Pricing [ Undercutting Competition ] • Scale Pricing [ Repeat Order / Volume – maintaining running cost ] • Retention Pricing [ Reaction to competition] • Premium Pricing [ Increased Margin]

13. Pricing - Information Asymmetry • In an ideal free market, all players have equal level of information – quality, quantity and their changes propagate simultaneously to all. • No Market is ideal and so is Language Business Market • There are information asymmetries between buyers / sellers, potential buyers and potential sellers, absent buyers and sellers • In such cases, pricing can be artfully used to generate high margin. • High information asymmetry cases • A start-up Language company • An established player from another sector entering the Language Market • A client quite new in Bidding Arena • One-off case of seeking some Language Service • Information asymmetry will decrease over time eroding the initial advantage

14. Next Strategy • Very Low Information asymmetry market  commoditization • Scale and Retention Pricing • Proposition for Value based Pricing • Communicating Pricing • Manipulating Perception Case Study • ‘Budget this time is really tight and there are other offers…’ – in client’s email • Your cost has no change • Your pricing’s objective is now to retain – You lower the price [option I ] • You don’t lower the price but create a perception that more is added now at the same price. [ Option II]

15. Actually Telling the Price • Communicating the Price is an Art • The most crucial aspect of this Art is to generate a perception in buyers mind that he is on the winning side. • This cannot be done simply being on the arithmetic part of the pricing. • The Price quote should suggest hidden value you are offering • These are all intangibles • Being intangible, perception is everything • Pricing is a psychological distance creator – understand the distance • Add value data in your pricing

16. Value Based Pricing • Your price needs to stress and reflect Value as much as possible • In profit based pricing, its transactional whereas value based pricing is long term and more engaged • In value based pricing, you don’t focus on your margin alone but focus on value you will deliver for your client. Value may be quality based, credit based, making a phone call, anticipating client’s value chain… • In Value based pricing, you don’t behave as a cut-throat negotiator but as a friend of client’s business • Premium Buyers are biased towards Value based Pricing rather than Profit based pricing.

17. Example of Value based Pricing The total price for the project will be $ Y. This includes • Translation and Review with TRACK change • Independent Proofing, if needed by a native linguist with 5 years of experience • A glossary and Notes to make sure of consistency • Ready to do any amend/ change or to take care of any post-delivery issues in next 5 hours from delivery • I can share the TM if you need. • A 5% good-will discount, anticipating future collaboration (situational / case by case basis) Terms and Conditions of Payment

18. Pricing as a Marketing Tool • Pricing is a Sales and Marketing Tool since time immemorial • In services industry, price as a marketing tool to generate volume may make the services commoditized, eating the margin. Think of mobile phone pricing • Pricing differentiates your services • Pricing – artfully spoken becomes one of the strongest marketing messages for your services • By articulating the price, you are exposing your business secrets • Many service solutions company don’t provide any pricing data in their websites • Many industries protect the pricing data as a top secret

19. Pricing as a Risk-Assessment Tool • There is high credit risk involved in working with a new client. • Pricing can assess the Risk here • For a potentially fraudulent buyer, a price on the higher side with an advance is a reasonable deterrent • For a buyer with longer credit cycle, a price on higher side with a mark-up is a better option • Different prices, all other things being equal, creates psychological walls and these walls can help minimize risk

20. Select Pricing Examples and Issues • Make a Pricing Policy and be bold enough to overrule it for business needs • You are a CEO as well as a Business Owner • You enjoy supreme autonomy as a Business Owner to make that decision on behalf of the business. • Choose with caution whether to have a rate sheet or to have a project by project pricing. • Your marketing messages on Prices should tell more about the intangibles you are delivering rather than only the price advantage • Your pricing is not the fee for services only but for the experience. • Choose the metric of pricing – No of words, No of hours, No of Research hours. • Try to choose the metric of pricing that is most advantageous for you

21. Assorted Real Life Examples -I Case I : After all the pricing input, the marketing mail ends – ‘Of Course, rates are negotiable and I am open to negotiate….’ >> Instead, rates above are indicative and will vary from project to project. Case II : ‘Best quality with most affordable price.’ >>It’s a highly abused marketing pitch and common sense defying in a sense. We always identify best quality with a premium price. Instead – We claim to provide best cost/quality ratio for our language pair in the marketplace Case III: ‘Enclosed please find my rate sheet for the languages – translation, proofing, review’ >> More information provided than necessary Exposing business data [ price is an encrypted signature ] May be gathering market intelligence

22. Assorted Real Life Examples –II Case IV : An unusual and edifying Terms of Pricing • Terms and Conditions • Late accounts will be subject to a 20% fee with a minimum of €50 and may be turned over to a collection agency. • No claims will be considered after 10 days from delivery. • Any liability will be limited to the value of the translation concerned as shown on my invoice. • If necessary, corrections of errors or omissions will be carried out at no charge. The same applies to any minor modifications or additions made by the client following delivery. • Although the invoiced price of a translation may be reduced due to late delivery, errors or omissions, clients may not apply reductions or non-payment policies unilaterally.  Any reduction or waiver of the invoiced price must be negotiated between myself and the client. • All project documents and all information learned will remain confidential. Credit : From the Invoices of Olivier De Vriese and Sebastien Burnevich, www.dutch-translator.co.uk

23. Assorted Real Life Examples –III Case V : Pricing Terms - Elance Model in case of Large Project and/or Long Time Engagement • For a Large Project, Payment in part instead of at the end. • A token advance [ in elance.com this goes to escrow from the buyer ] • Don’t put more good money to recoup bad money • Part delivery of a large translation and payment does not come. Client says that another 10,000 words and payment will be released by their client. The payment never comes. The client cooks up some non-sense quality issues and you don’t get paid. The last 10,000 words done with a hope to recoup the fee for previous 10,000 words for a 50,000 word project goes waste. Credit : Mr. Gobinda Roy, CEO – Ennovative Consulting

24. Review • Pricing is a subtle as well as complex issue and in a sense your business signature • Be careful in communicating, sharing and presenting your pricing data • As a Business Owner and CEO, be ready to set/overrule any pricing policy depending on future value and future risks • Pricing means the arithmetic of price, the terms of realizing it into cash and the risk of not realizing it at all. • Experiment with different pricing strategies to have an optimized pricing mix. • Research and look out for new entrants / start-ups who are not fully aware of the pricing situation • There is NO ideal or ‘fits-all’ pricing policy . • Communicate the Price artfully and develop an impression that the buyer is winning !