Many freelancers make the mistake of choosing a rate they believe the market will bear and then figure out the number of hours required for a project. This approach may pay the bills and win projects based on price, but to build a strong business, rates must refelect the total package.

Design studios or larger web businesses will typically have a higher overhead (office space, furniture, health benefits, etc.), and their rates will need to be higher in order to make a profit.

A freelancer, on the other hand may have a home office, no health benefits and can charge a lot less for a project.

Is the customer getting a better value going with one or the other? I think it depends on the project and what the freelancer can provide. Though a freelancer may can charge a lot less for a project, he or she may not be able to provide a client a wide range of skills, therefore, the value they offer is less. But on the other hand, clients seek the course of least resistance sometimes and go with who they know.

I think it’s tough for clients to compare different vendors because they tend to focus on price and not on who is the best vendor for the project.

Hope this sheds some light.