Giving away free work: a race to the bottom

...The first point is that as soon as capacity is uncovered in a market (i.e. a market is proven to exist), people compete very aggressively to fill it up. The only way companies generally end up competing is by cost and this is what is happening here. You see it starting with "Sales" being a year-round event and not just for Christmas...

But nor can this set of tactics last. You cannot sell pounds for ninety pence long term and believe you will survive. Year-round sales? Allied Carpets was put into Administration in December last year. "Pile it high and sell it cheap?" Of course Woolworths did this very well - except on the internet.

What we can say therefore is:

a) At worst it is a race to the bottom that nobody can win. At some point, in order to survive and thrive, you have to earn with costs-plus! But moreover:

b) It decays the brand reputation of the company doing it. You gain a reputation for just serving the "Rats and Mice". That type of business (maintaining the animal metaphor for a moment) is "for the birds". By giving away your services, you also maintain yourself, and your clients, at that low-level of interdependence and give neither of you the opportunity to break out of it. YOU, have earned no money: the CLIENT has "Got nothing" from their freebie.

c) It risks forcing compromising business decisions to win work at no matter what cost to the company. On a big company scale Look at Northern Rock. On a small company scale consider the implications of (for example) just serving the English market in France and not looking at the (comparatively healthy) French market.

d) Somebody else is still remaining competitive at otherwise "high" prices. When the upturn comes, it is they that will have worked out how to grow; will have maintained reputation and high quality business and be in a position to capitalise on the new market look and feel. They will not be locked-into offering yesterday's proposition to the rats and mice.

How do they do this? Look at this month's other article "If Content is King, Service is Queen" for my pitch on this.

About the Author: Richard Martin of Briquesetclics is a Certified Management Consultant and Accredited Internet Marketing Consultant of 20 years experience in IT. Briquesetclics offers exquisite eBusiness solutions, website design and Internet Marketing with English to French Translation to expat and French Comunities in Southwest France. He serves the Limousin, Poitou-Charentes and Aquitaine regions and the cities of Limoges, Poitiers, Bergerac, Perigueux, Angouleme, Cognac, Bordeaux, Niort.

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