When you don't know how to sell yourself, freelancers (and businesses!) compete based on price. It's the "obvious" choice but it wrongly assumes that's how potential customers make their purchase decisions. EDIT (additional context):
When my wife quit her job at Intuit to start Copy Hackers, she also had to figure out how much to charge for her freelance copywriting work. After some investigation, she found that there are writers on eLance who charge $10 for an entire blog post and $20 for a press release. In addition, I make a very comfortable living working for a large software company -- enough that she could easily compete with the inexpensive off-shore writers because we have no real need for the extra money. However, none of that was factored into her decision, because she priced her services based on the value they would generate for her consulting clients -- and has moved her rates up twice in the past year from $50/hr to $150/hr. She has plenty of work at that rate, too...
"she found that there are writers on eLance who charge $10 for an entire blog post and $20 for a press release."
If you are selling something on a small scale (such as what your wife is doing) it's a wrong assumption to think that everyone knows the going rate for something in the marketplace. People overpay for products and services all the time because of convenience, FUD, or simply not knowing what a typical price in the marketplace is. Sometimes of course they also infer quality into pricing thinking that it is either inferior or that there must be some catch to low pricing as well. While at a certain point (large numbers) you can get hurt, at a smaller level it is not as much of an issue.
"based on the value they would generate for her consulting clients"
Agree. That is the key in many cases to the question of "what to charge" for something (once again it definitely depends on the scale of what you are doing obviously).
But did she get that business from elance or from other contacts?
I signed up for elance, looked at a few projects, and found myself seriously undercut (and I don't want to compromise on quality or bid on projects over my head).
If I do get some projects at what I believe is a correct market rate (and it's not very high), it probably won't be thanks to elance (which looks like a great website, don't get me wrong).
She got clients through other means... primarily by writing e-books that demonstrate her value and expertise. The e-books serve as a sales tool for her freelance services -- but they also generate a nice monthly income.
Joanna (my wife) stays far away from sites like eLance, because those tend to be the places where cost-conscious people go to find freelancers. The heavy focus on pricing (by both buyers and sellers) on eLance makes it challenging to sell yourself based on other benefits (like writing copy that actually converts).
When my wife quit her job at Intuit to start Copy Hackers, she also had to figure out how much to charge for her freelance copywriting work. After some investigation, she found that there are writers on eLance who charge $10 for an entire blog post and $20 for a press release. In addition, I make a very comfortable living working for a large software company -- enough that she could easily compete with the inexpensive off-shore writers because we have no real need for the extra money. However, none of that was factored into her decision, because she priced her services based on the value they would generate for her consulting clients -- and has moved her rates up twice in the past year from $50/hr to $150/hr. She has plenty of work at that rate, too...