In my experience you bill what you can get away with billing while making the client happy. That may mean billing when you're not working, but it can also mean working without billing at all. The idea of time-based billing is pretty fuzzy when you get into the details, so it's better when nobody on either side tries to figure it out, and you just ship something that makes them happy.
In terms of negotiating a rate that makes you competitive, your idea could work, yes. The danger is that (IME) clients who were that budget conscious were also generally worse clients in general: less organized, less of a vision, less willing to do things like pay for user testing and support, generally more stressful to work with. Often their projects were less interesting, too.
At a certain point, my company just raised everybody's rates significantly, across the board, and rather than going out of business, we ended up getting better projects as a result. In that case, I was shocked to realize that software contracting can act like a Veblen good, though in an economic climate like this one, I'm not sure it would work that way.
In terms of negotiating a rate that makes you competitive, your idea could work, yes. The danger is that (IME) clients who were that budget conscious were also generally worse clients in general: less organized, less of a vision, less willing to do things like pay for user testing and support, generally more stressful to work with. Often their projects were less interesting, too.
At a certain point, my company just raised everybody's rates significantly, across the board, and rather than going out of business, we ended up getting better projects as a result. In that case, I was shocked to realize that software contracting can act like a Veblen good, though in an economic climate like this one, I'm not sure it would work that way.