Why Can’t I Raise My Rates? Variables Affecting Demand

As with supply, at the most rudimentary level, demand for translation services varies with the market price. If translations are relatively inexpensive, demand will tend to grow. If the cost of services goes up, demand will typically fall.

This is a simplification, but it provides a starting point for understanding the other side of the equation.

I mentioned in my previous posts that the demand for translations comes from multiple sources, such as businesses, governments, universities, hospitals, law firms, and even private citizens. Their behavior is governed by numerous factors that will sound familiar, since we are all consumers of one product or another.

These variables include the price of alternative services, consumers’ disposable income, tastes and preferences, and the total number of consumers in the market, among other factors.

First up is the price of alternative services, which economists often refer to as “substitutes”.

What qualifies as a substitute for a translator’s service? On the individual level, it’s the service being offered by other similarly skilled translators.

Can another translator do the same job more quickly? Can another translator do more work in the same amount of time? Can another translator provide a better quality translation on a specific topic? All of these might be examples of substitutes for an individual’s translation services, and the prices being charged for these alternatives will affect overall demand.

More broadly, an alternative service might be machine translation (although many professional translators would likely disagree that this is a true alternative). In any case, if machine translation exists, and if there is demand for it that takes away from the demand for translation done by humans, then the price of that machine translation will also have an impact on the rates that translators can charge for their services.

As the market price of translation rises, other alternatives become more attractive. This happens with all kinds of products. The more expensive that they become, the more likely consumers are to try to find a cheaper alternative. This factor is one of the brakes limiting higher translations rates.

Apart from the price of translation, another significant variable is income. We don’t tend to think of businesses or nonprofit organizations or the government as having “disposable income” in the same way that we envision our own earnings, but they do. We often refer to it as a budget; as in an advertising budget or an insurance budget.

For our purposes, we are interested in the “translation budget”. That is, how much money our consumers have at their disposal to pay for our services. When these budgets grow, the demand for translation services increases. When budgets get slashed, demand obviously falls off commensurately.

Consumer budgets play a very important role in determining translation rates. If budgets get squeezed far enough, consumers will begin to look for cheaper alternatives, thereby impacting the market as a whole. This factor goes hand-in-hand with the discussion above about market prices.

One of the few variables where translators can have a direct influence on their clients is tastes and preferences. This is the realm of advertising and marketing. The idea is simple enough: convince consumers to buy your product instead of something else. When preferences can be swayed to an individual translator or type of translation, demand will increase. I’ll talk more about this specific issue in another post about differentiation.

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The final item that we’ll review here is the number of translation consumers. All indications in recent years suggest that this is one variable consistently trending upward, as more and more organizations realize that they need translation services. The relationship here to price is the exact opposite of the situation in terms of supply, where more translators on the market mean lower rates. In this case, more consumers mean higher rates, as each individual translator is unable to satisfy the demand and thus rates end up rising in response to this relative scarcity.

I’ll ask for forgiveness in advance, as I once again present these ideas in notation form:

If Pm ↑, then ↓ Qdtr

But if I, Ps, TP, or N ↑, then ↑ Qtr


Qdtr = Quantity of translations demanded
Pm = Market price of a translation
I = Disposable income of consumers
Ps = Price of related goods (substitutes)
TP = Tastes and preferences of consumers
Nc = Number of consumers
Understanding the relationship among these variables is the second step in understanding how the market works. But to get a full picture, we have to combine the market supply with the market supply, which I’ll do in the next post.