S03E24: Translation Pricing and Pricing Models

Jessica Rathke

I’ve been pretty well. We had snow in London yesterday and that’s a big event, even a third of an inch. But I’m doing well. As many in the industry probably know, I’m in the process of moving back to the US. That’s kind of a big deal. But all in all, business is good. Nice time of year and yeah, just really doing well.

 

Sultan Ghaznawi

And since you’re going back to the US, tell us about that. What are the plans? What are you thinking?

 

Jessica Rathke

Well, my main impetus, everybody knows how much I love London, but it’s very difficult. The mortgage market in the UK is quite different from the United States. The lending criteria is much more strict. And because I’m self-employed and let’s just say over 55, that, you know, the kind of loan that they were prepared to give me is not the kind of loan I’m prepared to accept, especially given the interest rates right now and the price of housing in London. This has been an issue for a while, but I thought I could make it happen. And that’s one of the prompters for me to go back to the US, is I’d really like to have my own house. Renting in London is terribly expensive. And I just, and I want to see my stuff. I haven’t seen a lot of my things for about 12 years. So I think paying storage costs is a bit silly at this point as well. So that’s kind of prompting me. And I decided to move back to where my roots are in Southwest Ohio. I grew up in Dayton, but I’m moving to Cincinnati. I know a lot of people there. I have a lot of friends in the area. I know the city well. The airport’s really easy. It’s not JFK or Heathrow. You can pretty much park your car right by the terminal and walk in and not have crowds and crowds of people. And there are other factors in there too. It’s a very nice city. And I’m looking forward to just kind of settling in and creating my own little corner of the universe in my own place.

 

Sultan Ghaznawi

Tell me, what have you been up to? How is business going? I know we had a very busy year this year. How are you wrapping things up?

 

Jessica Rathke

This year was really, really busy. You may remember that Thomas Edwards and I have been partnering. I know you interviewed him on the program a while ago. We’ve been collaborating on a number of kind of short and long-term engagements with clients to help them kind of reinvent their sales strategy, to help them hire salespeople, to train their salespeople, account managers, project managers. So a lot of training happening, but also quite a lot of consulting. We’ve done a little bit of consulting on the tools side too, which was kind of interesting. And all of these clients are pretty much all over the world. Europe, America, Asia, you name it. They’re everywhere. So yeah, I think on the new side of things, new-ish, is I’m also partnering with some companies to provide cross-cultural awareness, especially for marketing communications, and also a bit on the e-learning side to help make both of these aspects of kind of translation or localization or trans-creation even more relevant to the target audiences. So that’s probably the newest and latest and greatest.

 

Sultan Ghaznawi

Let’s look at our industry and see how does translation, localization, language industry in general looks like today in the context of everything that is going on. I mean, you’ve seen it from your angle.

 

Jessica Rathke

Yeah. Well, I mean, we’re in very interesting times, aren’t we? The inflation, the war in Ukraine, interest rates, you name it. It’s impacting everybody. I think we’re not unique in that respect. If we go to the grocery store, we notice it. I’m sure purchasing managers in any kind of company are noticing those kinds of changes. In terms of our industry, so far what I’m seeing is if I can base it on my own business and the amount of business that’s coming in for me, things are still pretty good. I think our industry tends to be more resilient than others because we are so global. There are trends always happening that create demand no matter what. So whether it’s the war in Ukraine, which created a different kind of demand, or refugees going to the States or coming to the UK or France, that creates a whole different need. So trends like that can still happen and create demand for language services.

 

In terms of the business side of things, I think maybe we’ll see some downward trend in certain industries, but I think companies are still going to do business, maybe a bit more careful about their spend, but they’re still going to have to translate for their international customers. Again, they may have to modify that a bit, but I don’t see that not happening. I think also some trends that still seem to be valid is the upswing in need for languages from Africa, for instance. The economies there, at least some economies in Africa, are doing quite well or have been. And again, there’s the need to have translation services if they want to do business outside their country or companies want to do business inside those. So yeah, for me, I’m kind of waiting and seeing, but if I can base it on the demand for my own business, I think things are okay.

 

Sultan Ghaznawi

Let’s start focusing on what we have for our agenda today. Jessica, the topic we agreed upon is translation pricing and pricing models, something that’s very dear to you, and you’ve been talking a lot about it in industry events lately. Give me a high-level view of what is happening with pricing in our industry.

 

Jessica Rathke

Well, the bottom line for me is not a lot. Some of my posts on social media and presentations I’ve done at some conferences recently kind of highlights the fact that at least for human translation, per word rates have not really changed very much in the last 30 years. The example I’ve used is the rate for basic French translation. When I started in the industry, it was about 21, 22 cents a word back in 1992. And in 2022, it’s kind of 20, 21 cents a word still. Yes, there are higher prices and lower prices, but in the main, those prices have remained the same, and I think that for many languages. I would say one big exception might be Spanish. There have been a lot of pricing pressures on Spanish, and we’ll kind of get into some of the reasons that I think that’s the case.

 

We are migrating as an industry into at least investigating pricing and questioning why we price the way we price, and are there other ways to price our services. And some of that is because of the demand, A, for either faster, better delivered translations. We’re in these cycles where it isn’t just back in 92, it was a long-term project. We’ll wait three months for you to translate our user interface help and documentation, and can you get that back to us in four months’ time. Now it’s just streaming, streaming, streaming, and do word rates really apply to that? And I think some companies out there, some LSPs out there are investigating other pricing models for situations like that. I think per word doesn’t necessarily make sense in many cases, especially for smaller chunks of text, but we still have to, at least in some cases if it’s a more manual process, we still have to set a project up and send it out, get it translated and get it back. If it’s automated, well that removes some of the overheads there.

 

But speaking of the overheads, the other change that’s happened, and this has been sort of a gradual one over time, is that we have these disappearing services. So back in the good old days, we used to charge for project setup, setting up the translation memory, for project management, in many cases project management doesn’t really exist anymore. Okay for automated projects, maybe there isn’t so much project management, but many, many, many LSPs are not charging for that now. Post-processing, that’s not really being charged for now. Glossary creation, maybe, maybe not. So I think we’ve had some of the disappearing charges, and yet the word rates haven’t gone up to compensate for that. I think there are some reasons for that, which if you don’t mind, I might kind of get into what I would anticipate your next question to be. That is the pricing models that we’re using. And that would be, again, for translation, would be either cost plus, so whatever it costs us to buy translation, say from a freelancer, plus some of our overheads, I think more of our overheads should be included. And then whatever margin that we would like to make is added on top of that. And that’s one model.

 

I think some of those pricing pressures come from that because of the way we sell, but we’ll get into that in a minute. I think the other aspect of our pricing is competitive pricing. And I think the per word rates enabled us to, not enabled, facilitated the competitive pricing model, because we know what everybody charges basically. There are standard rates out there that customers will compare us to other vendors. So competitive pricing is, it’s great, straightforward and simple, but it also, it really focuses on our competitors rather than what does the client need. And in many cases, it’s sort of a combination of the two. It’s cost plus, and then we look and see what our competitors are doing and kind of adjust the plus or some of our costs or negotiate some of our pricing with our vendors.

 

So I think that’s where some of that’s coming from. In a way, a per word rate kind of commoditizes us. You know, it kind of makes it sound like a product, like, I don’t know, as Thomas would say, peanuts, as opposed to a service. And if we’re selling peanuts, it becomes very easy for clients to, in my opinion, negotiate with us. Well, their peanuts were a penny less. Why don’t you, you know, a penny less? What’s a penny? You know, well, pennies a lot on, you know, 30,000, 40,000, a million words. So in that sense, I think it makes it, you know, it makes it easy for clients to understand, you know, that I think that’s how that model came about. And I’d still like to know who invented it, the per word rate. I’d love to know who came up with that, because everybody else copied it, whoever came up with it. So it makes it easy for clients, but it also, again, it’s too general of a term.

 

I think we serve too many different people and produce projects that are quite different. But that number or that method of measurement or method of pricing kind of gets in the way of us differentiating among different kinds of projects. For health care and certain, you know, very specialized translations, of course, we can charge a premium and those clients are quite prepared to pay it. But I also think that we have different conversations because of that. And they force us to focus on their needs as opposed to us actually understanding them.

 

Sultan Ghaznawi

I think you answered my next question where I was going to ask you about what is wrong with the price per word model. And you described what is wrong. And there’s quite a few things. Let’s look at why did the per word rate not change or evolve over the years, despite the fact that hourly pricing became the de facto model for professional services, such as legal or accounting and so forth? Why our industry is still stuck in that mindset of, you know, every word cost represents the effort involved?

 

Jessica Rathke

I started, yeah, I kind of started down that path a little bit when I was saying the focus is on competition and us, you know, what’s our what’s our cost and what kind of money do we want to make on top of that? That could pricing usually more commodity type pricing. So, you know, in a sense, we’ve kind of commoditized ourselves and it’s really difficult to get out of once the I mean, the precedent has been set and it’s been there for 40 years, more or less. But I think, you know, again, it’s there. There are a couple of different aspects to that. I think one is customers don’t always understand what they’re buying. They can’t read what what we produce, most of them, or at least they can’t read many of them. We have you know, we’ve we’ve got this established pricing system that’s very hard to get out of. You know, who’s going to do it first? You know, and who’s going to change it?

 

And I believe the third and the this what I just mentioned in the third to me are related, which is we really need better selling skills in our industry. And the reason I say I mean, I’ve said that before anyway. But the reason I say that is that, you know, if we put the focus on the client and what the client needs, you know what they value in our services, what they don’t value in our services, you know what they’re willing to pay, you know, and then kind of us taking a look at, you know, the needs of the different people in those companies. I’m going to use a company for an example. You know, and this is I think what’s unique about our industry is we serve everybody. You know, there are anybody could be a buyer of translation services, but the needs of those buyers can be quite different. So we have commodity buyers for sure. They don’t care, they just have to do it. They want the cheapest price because it meets some sort of compliance that nobody cares about. And that nobody monitors, for example, or it’s something that’s just, you know, not so important, but they feel kind of like, well, if it’s good enough, it’s good enough and it doesn’t impact their client’s usage.

 

But then there are other companies where buyers do care. I think they care more if we could actually distinguish from another as a salesperson, which clients we really want. Well, we want the people who value translation, who are willing to pay for it. But the ones who are willing to pay for it are the ones who get the most value out of it. So the best examples I can give you off the top of my head and that I know best would be transcreation, for instance, or marketing translation. It’s got to be good. You look like an idiot if you’re, you know, those are all the funny stories we hear, you know, from the past of all the mistakes in translations of taglines, for instance. I would say, you know, e-learning, I’ve taken some e-learning that was translated into English and it was very distracting for me that the English was bad and the grammar was wrong. Right? Just like if, you know, that’s no better than if the navigation is wrong and you go to the wrong, I don’t know, test for different material or something.

 

So I think, you know, we need to be able to understand why, you know, what is it our customers get from translation and really focus on, you know, what clients actually are willing to pay and build our business around those people and not necessarily bother with the people who have treated as peanuts. And, you know, unfortunately, all those people are in the same company, you know, and we may have to deal with procurement and try to help them understand, you know, the value that trans creation or marketing translation has and why that’s at a higher price than translating, you know, some, I don’t know, I can’t even think of something that’s not valuable because I think it’s all valuable, but, you know, just some, you know, little document that nobody reads. So I think that’s part of the, those three things combined make it kind of difficult for us to escape of the per word rate.

 

But I think by focusing on client value and the people who do pay for translation and want to pay for it and derive value out of it, they’re going to be the people to focus on. So like, how do we do that? Well, we have to ask them, we have to talk to them about it. We have to understand, you know, what does translation do for you? Does it get you clients? Does it get you hits on your website? Does it help people learn? Do they test better? Do they, do they perform better after taking an e-learning that’s perfectly localized versus one that isn’t? I think we need to ask those kinds of questions and we need to be very specific. That’s not easy because again, we’ve got technical documentation, we have, you know, regulatory compliance, we have marketing, and then we have all the different industries in which these people are working. So it is to me a really complex problem.

 

The different roles that people have, have a lot of similarities. The industries and the subject matter may be different, but the goals are going to be fairly similar. A marketing person, what is their job? To generate leads, get visibility, all those things. What’s an e-learning manager’s job? Well, to help people understand how to do things. So you know, the terminology may be different, but the goal is the same. And find out how they measure it. How do you measure success, Mr. Client?

 

Sultan Ghaznawi

Is price still the biggest priority for translation services buyers? Because from what I’m hearing from you, they focus on solving a problem which is outcomes-based. And I had a conversation with Nick McMahon, as well as several other colleagues who have, you know, told me that if we can demonstrate to the client that we are solving a problem of yours related to your customers or employees, and language or translation can help you do that better or faster or cheaper, then we have solved the problem. We are able to sell whatever service we are trying to sell. But most translation companies, as you mentioned, are focused on just telling the people how cheap their services are, how affordable they are, in other words. Is that still the case? Do customers really care about that?

 

Jessica Rathke

Customers want to pay a fair price. I won’t deny that price isn’t important, but usually, I mean, I think most people in, you know, all the gurus of our industry would say price is probably about number three on the list, maybe even number four. So you know, quality, and again, it depends on the buyer. But most people are willing to pay if we can put it in terms that they understand. You know, and this is this, I feel like I’m doing sales training here a little bit because, you know, it’s like, develop the persona of the people you’re selling to. And this isn’t just, you know, Peter Perfect, who works at, you know, some company, it’s Mr. Peter, the marketing manager, or Peter, the e-learning manager, or Peter, the technical publications manager or product manager, for that matter. Figure out what kind of metrics, or even what I would call proxy metrics, are important to them.

 

So, you know, if you localize a website, you can’t quantify necessarily all the quality of it. You can’t tie all sales back to a good website or a nice form on a website or a blog post or whatever, but you can measure engagement, you can measure leads generated, you can measure, I’ll stick with those two things, move on if it’s a product manager. Some of the product managers I’ve worked with told me one of the great things that quality translation does is it reduces their customer service expenses, because people understand how to use a product, and they don’t need to call. Whereas if it’s wrong, and they’ve actually measured this, mainly because we, I have to admit, we screwed up really badly and put the wrong content in a user guide, and people were calling the customer service center left, right, and center for about a week, asking why they couldn’t do this with this particular piece of equipment. You know, we want to say what it was, but, you know, there was functionality they were trying to use that didn’t exist in the camera, because we put the wrong content in there. And I’ll tell you what, they measured that cost and sent us an invoice for it, you know. So that taught me a huge lesson that, oh my gosh, yeah, they meant, you know, this is something that it’s tertiary, but a bad translation or bad DTP or whatever can create. So you know, these are quantifiable things.

 

We just need to ask clients how they quantify it. You know, how do they measure the success? Or we help them co-create the measurement of success if language, if translation and localization is sort of new to them, and they’re not really sure about it. That’s how we can help them value our services. And I’ll tell you, even helping that, I think of great value and probably command a better price because of that, because we’re kind of being consultants along with it.

 

Sultan Ghaznawi

Given everything that’s going around us with interest rates, with inflation, with the supply chain issues and so forth, the prices of everything, commodities and services are going up around us. You’re in England. You’ve noticed that. Is it time to raise prices in our industry? I mean, it’s expected given the inflation and so on. What is your take on this? How should this raise in prices be approached? And are customers willing to pay more for a service like translation? What do they want in return? What are your thoughts?

 

Jessica Rathke

I think one is I do think we need to raise rates. I mean, you know, some of the services that I use in my personal life and my business life, I’ve experienced an increase in rates. Apologetically, they’ve been but, you know, their costs are going up just as ours are. I think it’s fair. The peanut buyers aren’t going to pay more. They’ll find it. They’ll find another peanut supplier. You know, if they’re if they’re a price buyer and that’s all they care about, I mean, you really want them as a customer. You know, I wouldn’t personally I wouldn’t waste my time with the peanut buyer unless they were extremely associated with value buyers. And we take a little bit of a loss and put up with them just because they’re associated with a value buyer. But I would say we have to kind of go through the same process. We can’t just say, yeah, we’re going to raise our I don’t believe we can just say, yeah, we’re going to raise our rates two cents a word across the board because our costs have gone up. We can do that. I think that’s undiplomatic and probably not very reasonable.

 

I think we have to have conversations with clients, particularly those clients who may or may not get how we get all the things that go into the work we do. And I think we have to maybe sit down with them and explain where some of the price increases on our side are coming up. I mean, you know, we want to stay in business to serve their needs. And I think it’s fair. It’s fair. But I think we need to do it in such a way that the client really understands that in order for us to keep delivering the great quality, the great service that they’re used to receiving, we’re going to have to go with the market because we have in order for us to keep the resource that we need in order to do the work. And that could be a project manager, a salesperson. Sales jobs are pretty tight right now as are project management jobs. You know, linguists. I mean, how much can we negotiate down with linguists and feel good about it? You know, their effective rate of earning hasn’t really changed much in the last 30 years.

 

So in my opinion, I think we have to work with our clients to do that. I think it’s just a fair thing to do. But it has to be presented in such a way that customers understand the why. Not in some crazy amount of detail, but I think they need to understand the why just beyond our costs have gone up. All that does is say we give you cost-based pricing instead of value-based pricing. So I’d really focus on the value. Value discussions. And one thing I did want to say, I read a metric that states, and this was an article about just general pricing models and what have you. But one of the things they said is that if we can convey really good value to our clients, so in other words, quantify the benefits that they get from our services or the problems that we solve based on our services, those clients can be willing to spend up to 20% more on your services. Conversely, if we commoditize ourselves and talk about price with them and keep up with our competitors, it can go the other way and we could lose 20%. So it’s a really interesting metric that if we have value-based discussions with our clients, to Nick’s point, I think, we can get additional revenue from them.

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Sultan Ghaznawi

Back to the models or pricing models. Now besides the per word rate, which is the dominant model here, what other models are accepted and have become the norm in our industry? I think people have some degree of respect for those models because there’s the per hour model, which is not practiced as much unless you’re looking at interpreting or some service that’s not text-related. What else do you see, have observed, and do you think will come our way?

 

Jessica Rathke

Well, as far as translation goes, I have seen rates and throughput rates. Throughput, a certain dollar amount for throughput, let’s say, for a certain number of words through MT, for example. Hourly rates, I would say, are pretty common with things like transcreation. Just a little historical context here. My first transcreation, it was kind of a cool project, two of them. One was for a vodka product. That was interesting. An American vodka coming into Europe, and they wanted taglines for three or four different languages, and we charged by the word, and some crazy thing like a dollar a word. Well, I think five dollars, I’ll put it in US dollars, five dollars for three or four different versions of a strapline or tagline is probably way too little money. Because we hadn’t done, I mean, transcreation wasn’t even invented then.

 

And for another product, we came up with, the translators were really creative and they came up with a funny one. It was for an incontinence product, believe it or not. So they had a funny one, a normal one, and more of a scientific one, all three of the different translators. And again, we didn’t know how to charge this, and they were quite happy for something interesting, but they didn’t make a lot of money at it. And I think this is the difference today, is it takes time and effort to come up with something that is attention grabbing and also consistent with the brand and that it’s consistent across all languages. That’s quite a tricky thing. So I’m seeing a lot of hourly rates for that. In some cases, I’ve seen a couple of project rates for that, but probably estimated on hours. The value though, how do you quantify that? It’s really hard to do that. It’s sort of after the fact, right? How much interest did those taglines generate?

 

Yeah, I think where I’m seeing the biggest difference is just in new services that aren’t tied to word rates. Cross-cultural evaluation, that’s kind of done. It reminds me of the old software localization projects where we have to collaborate with the client a bit, get information, assess the different languages, and then provide some cultural understanding way before they even do the creative process so that they can not make mistakes and have to start over again. Services are priced more on different components of a project generally by hourly rates.

 

Sultan Ghaznawi

Is there an industry where pricing models have evolved in such a way that we could be inspired from and do the same without compromising much so it’s comfortable with our clients and it’s also more meaningful for us?

 

Jessica Rathke

Yeah, I guess going back to your previous question and then combining it a little bit with this one, I think we need to spend time, who are the potential buyers of these different services? Again, I go straight back to what does it do for the client? What does it do for a specific type of client? What benefit do they derive from that? It seems silly in a way, although I’m no MT or AI expert and certainly not a voice-to-text expert, but does charging per word really make sense? There are a lot of other things that go into it that I have no doubt charge on an hourly basis in addition to whatever other rates we charge, but I would like to understand what the value is to the client before I apply some sort of pricing model. That’s an interesting question and I really do want to think about this because some of these, not all of these, but like voice-to-text for instance, is a really interesting example of how do you introduce this to the market and to whom? What kind of savings or benefit or problem does it solve? Is there a way? I’m going to give you a quick example. It’s not exactly related, but it occurs to me and this is something that Thomas, it’s actually a situation Thomas was in and this is what I mean about finding out.

 

So, Thomas was reading, I can’t remember all the detail, but he was reading an article written by a Japanese, like an executive vice president of a big corporation in Japan and this guy was doing his own translations and this guy’s salary is probably around $110,000, probably $210,000 a year and this guy is spending hours translating a document that somebody could do for, I don’t know what that cost would be, but it would be pretty expensive per word rate for somebody who makes $200,000 a year. So he went to this person and said, you know, it’s costing your company a lot of money. Wouldn’t it be better to have somebody, a professional translator do this rather than a senior executive in your company where he’s making big decisions about the company strategy in Japan.

 

It’s not the same, but it is. It’s kind of like, we need to be exploring where this can be applied. Who is it going to benefit? Can we talk to people about it and find out and refine the strategy based on that? And that will help us assess by coming up with, I’m going back to this, the value metric and maybe even some of the tangential benefits that they’re going to derive and that might help us price it differently. It could be value-based pricing. We might want to, if it’s a technology that we want to own the market in, then we might do penetration pricing and then raise the price later once we’ve gotten our foothold in the segments that are interested in it. But that would be kind of my take on that.

 

Sultan Ghaznawi

To add to that, from my side, we’ve recently launched an AI product that takes a speech or audio and creates a transcript for it. And this speech could be in English or foreign languages and it could create it in foreign languages or translate the speech to English transcript. So we approached it, we were running, actually even today, we are dealing with that dilemma of how we are going to price this out. At this point, we are offering it to translation companies that want to use it more like a machine translation foundation for transcribing audio.

 

And without getting into too much of details, instead of charging on a permanent basis or per word, which was traditionally how transcription was done, we have now gone into a per hour basis. So if you, for example, as a transcription company upload, let’s say 700 hours of speech every month, right? You will pay on a per hour basis, I don’t know, under $10 an hour to get it transcribed. But now how are you going to package that and sell it to your customers? Because at the end of the day, the customer probably doesn’t know or doesn’t even care what technology you’re using at the back end because at the end, they just want a subtitle or a transcript that they could integrate into their video or into their e-learning program or something like that, right? So I think it all comes down to who the buyer is, as you mentioned.

 

Jessica Rathke

I agree. Sorry, I didn’t mean to interrupt, but that’s really, you know, I sound like, I feel very repetitious here, but it really does kind of come down to the buyer.

 

Sultan Ghaznawi

Absolutely. Yeah. So again, I just wanted, that was a relevant example, a bit of a shameless plug, but I just wanted to say it anyway.

 

Jessica Rathke

Well, you know, the other thing that could be, I mean, maybe there are, one thing that comes to mind is, I don’t know if it would apply to this or not, so I’m just thinking off the top of my head here, but, you know, like bigger companies with bigger budgets, you know, you might be able to, you know, give them a different pricing, you know, sort of like different category pricing, sort of like volume discounts that we do. You know, it’s one thing to translate 20 words, you know, because you still have some overheads that are going to be similar to even a hundred thousand words, but you get a bit of a discount for a hundred thousand words. So, you know, maybe there’s a way to price it that way by, you know, the different requirements, you know, huge requirements versus very small requirements.

 

But you know, my mind is kind of settling like yours, at least for now, the hourly rate sounds kind of, it makes sense to me in my head. I don’t know how well, right now I can’t think of how else you would be able to do it because it really, on the voice side, it’s time, like interpreters, we pay by the hour, you know, it’s time, we pay for their time as opposed to, we don’t count how many words an interpreter says and charged by the word. I mean, that sounds just utterly silly, right?

 

Sultan Ghaznawi

The way I see it, it’s if we are using a computer processor to do something, then we have to go at what the going rate is. For example, internet used to be built on a per megabyte bandwidth basis. Now it’s on a per gigabyte bandwidth basis and soon it will be per terabyte. So in the past, we were probably charging by the minute. Now we can charge by the hour and soon we’ll probably be charging by some other bulk quantity at some point.

 

But let’s shift gears and while we’re talking about human capacity, which is finite, almost always without technology, do we see any changes in expectation or concerns regarding pricing models from the supply side of our community? I mean, translators also depend on the per word model, as you know.

 

Jessica Rathke

Oh, they do. Yes. And yeah, I mean, if I were a translator, now some translators command pretty good prices. I mean, there are some that I’m astounded at what some translators actually make. They must be the best at what they do. Absolutely. I think translators probably need to, well, first of all, they have to learn how to negotiate better, first of all. Second of all, you know, I’m sure they must want a price increase. I mean, you know, they have groceries to buy and heating bills to pay just like the rest of us. And, you know, their skills didn’t come cheaply. I mean, they invested in an education that enables them to make a living, yet the per word rates haven’t really changed. Yeah, there’s some benefit and throughput by using tools and what have you, for sure. It enables them to translate more. So we could use that argument to a certain extent.

 

But I also think that, you know, again, they have to be able to demonstrate their own value to an LSP, you know. And those who I think provide the most value are in the best position to ask for a raise, so to speak. There are translators out there. There’s a translator I know. It’s very interesting. She makes a ton of money. Now, granted, she works for one of the largest software companies in the world. I’m not saying which one and it isn’t the largest, but it’s a very large software company and they don’t even translate. They hire linguists who are translators, but basically they’re becoming copywriters in the native language. They learn the technology three years ahead of time, way before product release, and they write all about it. And this lady works six months a year and makes more than I do. She’s doing well. Now, whether she’s still doing that or not, I don’t know. But this was someone I met about five years ago in an office share, and she just happened to be in the office share.

 

So I think that’s a very interesting… It’s a different service from translation, but I also think maybe translators could think outside the box a little bit in terms of modifying the services that they offer. I had never heard of anybody doing anything like this. And when she told me about it, I thought, wow, that’s pretty awesome. And I know some very highly specialized translators who do very, very well, but they are so specialized and probably, if not the best, certainly in the top five in their sector and language. But I do think that the conversation needs to be had. And I think translators, you know, most didn’t go to business school. And that’s kind of a hard thing to try to negotiate and ask for a higher pay when that’s something you’re probably not really comfortable with. I’m imagining, I mean, I’m sure many translators are comfortable with it, but I think many are not. Yeah. And that’s a really difficult thing to do. And you know, most LSPs, I think, want to pay people fairly, but also need to brave up with their own clients as well. And then the benefit might come down the food chain. But yeah, I mean, if I were a translator in their shoes, I would definitely be asking for a bit more money, without a doubt.

 

Sultan Ghaznawi

Let’s just focus and talk about the parameters of our per word pricing model. We give discounts to clients based on translation memory matches, volumes, and so on. Those listeners who don’t know what a translation memory match is, basically, we give clients a discount for repeat text, because our technology remembers the old translation. And if there is some sort of a match between an old sentence and a new one, to some degree, we also give discount to clients. We call them fuzzy matches and so on, where a word here and there is missing, but still there is a degree of matching. And the technology suggests what the translation was from the previous sentence. What else is making an impact on pricing models? Is that discount scenario sustainable in the context of rapidly falling prices, or that needs to change, in your opinion?

 

Jessica Rathke

Well, yeah, that’s an interesting question. I’m going to answer, I’m going to start with a question like, who came up with the fuzzy matching pricing and who decided it was 60%? I want to know where that came from. Who decided that? I get the 100% match, you know, that makes sense to me, because it’s 100%. But how do you tell if it’s 60 or 50 or 72%? You know, I find that really interesting. But yeah, to answer your question, you know, I’m not sure you can compare, you know, comparing apples to apples. I mean, on the one hand, yes, you know, the discounts are part of a pricing model, which is a discount model. And you know, it was a way, you know, an improvement in technology was a differentiator at one time. And actually, there was value to that. I remember, I mean, I was there when, you know, translation memory actually really started to work. Boy, if you could master that in those days, that was a big deal. And it was a huge differentiator. There was tons of, well, I mean, it was price, it was a price thing. But there was a lot of value in that, because we could turn things around faster than our competitors, you know.

 

I mean, that enabled us, I worked for a large LSP at the time, you know, that enabled us to be very, very competitive, because we were ahead of the game against some of the smaller vendors in particular. But you know, over time, everybody adopted the technology, so it ceased to be a differentiator. And therefore, we’re back to sort of commodity pricing, in a way. So I don’t think we’re going to get away from that. You know, I think the way from that is MT and some of the other products you were talking about, like voice to text and things, that’s kind of, they’re different, but related products. And for those, I think, you know, again, is per word really the right way to price a machine translation? I think it’s something to think about. I think we just stick to the word rate, because that’s the easy, it’s sort of the path of least resistance. And again, it’s something everybody understands.

 

But again, you know, again, what’s the value of MT? Well, certainly time is a big one. What does saving time mean for one client versus another client? Some might not care, others, oh my gosh, it means they sell, you know, 100 million more widgets, you know. And again, I would love for us to, and I wish I could say that I had done this as much in my past, but I would love to go back and really think about the quantifying of, you know, if we solve that problem, what does it mean to you? So in the case of, you know, the Japanese scenario I just gave you from my business partner Thomas, I mean, that saved a ton of money, a ton of money. You know, there was high value to even something as simple as the wrong person doing the translation, you know, and it got him a lot of visibility and he was able to get more business out of them just simply because of that one project. And only because he happened to be reading the newspaper about this guy translating his own stuff.

 

So, you know, I wish I had all the answers, you know, on the way, you know, where things are going, but, you know, maybe we can step back and really start thinking about this issue and thinking about things more in terms of clients as opposed to ourselves or what our competitors are doing. And what is it that some of the, especially some of these new services that we’re talking about, you know, what, they solve a ton of problems. So the voice to text, you know, I want to know, you know, more about those problems. What does it cost you if, you know, you don’t have this tool, you know, what would that differential be? And what is saving time? It certainly saves time.

 

Sultan Ghaznawi

That’s a subject that’s important to me because there’s a lot of people who depend on things of that nature. For example, doctors have been using that for years using a transcription system because they have so much documentation to do, right? But nowadays we can apply that into immigration settings where there are tons of immigrants coming in and we don’t have enough time to process them or to interview them or to create intelligence from their conversations. And a speech to text is something that could address that at a very low cost. So that’s definitely important. We can have a separate conversation on that. And, you know, there’s a lot that needs to happen. We’re developing a lot of that in-house in our company. But Jessica, let me ask you in conclusion, as we are looking at the new year coming up, what do you predict in the next 24 months? With economy going where it is and so forth, how do you see pricing and pricing models in the localization industry evolving or changing?

 

Jessica Rathke

Well, I don’t see per word rates changing. I see rates maybe going up. I hope they go up. I hope people start asking. I think that that can only happen. I don’t think, you know, inflation is still going to be around next year, unfortunately, if what I read in the in the media is true. We’re going to be facing this, you know, for some time now, hopefully not at quite as an accelerated rate as we’ve we’ve seen it in the past couple of months. So maybe this is just wishful thinking, but I think prices will have to go up. I think all the people that you’ve spoken to who’ve mentioned that they need to go up, I think they will go up. I think you had mentioned Renato saying that, you know, we need to be brave enough to ask this and we need to do it. And I agree with that. I think, you know, as the services change and the technology keeps progressing in our industry, I think that may be may enable us to maybe change the pricing conversation away from competitive, you know, matching whatever our competitors are doing and and rethinking, you know, the cost plus model, because I think we’re leaving a lot of costs out of the cost plus model.

 

And I’m not sure that the profitability is what everybody thinks it is. Yeah. So I think and I think people are reevaluating. At least many of the LSP’s I’m speaking with are wrestling with this issue. Are we going to get rid of forward rates next year? No, I wish we could. But I would like to see them go up. I would like to see if I have anything to do with it and some of the other, you know, sales professionals out there can have more insightful, in-depth conversations with their customers. I see that happening a lot more as well. And maybe maybe also at least with a few of my clients, again, I’m basing this on a lot on the people I work with, but I’m seeing, you know, quite a few clients really reevaluating their customer base and figuring out what business they really want and what is going to sustain their company in the future and what isn’t, you know, and and build the business around those areas and maybe letting some of the less profitable clients go elsewhere or apply different technology to those so that they can make a decent profit on those.

 

Sultan Ghaznawi

As we conclude this interview, what is your message to LSP executives and particularly those on the sales side of the business? What advice would you give to them in terms of pricing and pricing models?

 

Jessica Rathke

Well, I would say, you know, upskill your sales team to be far more customer focused. And it’s not even necessarily salespeople. I would say CEOs need to be less competitive and cost plus focused and much more focused on what is it we do for our clients and what do our clients actually value in that. And in their shoes, you know, especially for maybe your larger accounts, I’d have your account managers, you know, have those QBRs, the quarterly business reviews or annual business review and include these kinds of discussions in those meetings so that you can get a good feel for, you know, what the client does value. And you can throw that into the managerial hopper, so to speak, and really, you know, discuss it among the executive team and the sales team and maybe, you know, come up with a better strategy for, you know, your pricing and rethink, you know, how you’re charging your clients. Is there room for, you know, something new or different?

 

Just to end, a couple of my clients have, this is actually a couple of years ago now that I think about it, a couple of my clients absolutely changed their pricing model away from per word rates. And it was based on more like throughput and time than it was on per word rates because of the streaming nature of the work. So, you know, I think we need to be open minded about that and not, you know, so set on a particular, you know, just because it’s been done this way for 35 years doesn’t mean it has to be done that way for the next 35 years. You know, think about it. Read up on pricing models. There are a lot of, actually, I’m finding it, I’m getting really into this topic now and I’m reading a lot about this. I wish there were more specific articles for our industry, but I hope to write a few more. But, you know, learning about how other industries are approaching pricing, particularly for services, I think could be an interesting way to add to our knowledge and maybe make some changes.

 

Sultan Ghaznawi

And that brings us to the end of this interview. I am so happy, Jessica, we were able to do this. And I’m sure there was a lot for our industry to learn and think about. So I certainly learned quite a few things and can’t wait to speak with you again in a future episode. And with that, I want to thank you for your time and for sharing your perspective and experience with us.

 

Jessica Rathke

Well, thank you very much. I really appreciate the opportunity to be here with you again, Sultan. It’s always a pleasure. And I’ll be in touch when I’ve got more to say.

 

Sultan Ghaznawi

Absolutely. You’re always welcome. And the industry would love to hear from you.

 

Jessica Rathke

All right. Thank you again. Thank you so much.

 

Sultan Ghaznawi

Okay. It’s time for my roundup of the interview and my analysis as to what has been discussed. The translation industry has been talking about downward pricing trends for a long time. But the issue is that in a world where prices of commodities and everyday consumption items are rising at a rapid rate, translators and language companies are at a disadvantage where everyone is trying to push prices down to gain a competitive advantage. There has also been lots of debates about the inadequacy of the per word rating model. It doesn’t seem to change anytime soon.

 

However, innovation and technology process in new areas of languages should present new opportunities for different billing models. I personally believe that it is the right time to revisit our contribution to the world and how we can compensate it better. That can only happen if we all think in terms of the value that we deliver, quantify that value and get our clients to appreciate the effort that goes into creating that value.

 

That is a wrap for today. I hope you enjoyed this episode. It is a very hot topic and we tried our best to cover as many angles as possible.

 

Don’t forget to subscribe to the Translation Company Talk Podcast on Apple Podcasts, iTunes, Google Podcasts, Spotify or your platform of choice. Give us a five star rating for this episode and feel free to suggest any topics or ideas you would like to hear from this podcast.

 

Merry Christmas, Happy New Year and until next time!

 

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