May 4, 2009
Working for Free
By
Tom Ryan
With
the recession paralyzing corporate spending, some businesses are offering
their services for free. The main hope is that the goodwill engendered
will lead to paid work when the economy bounces back.
An
article in USA Today notes that other reasons some businesses
are offering free labor are to continue to market themselves and to keep
their employees busy. An altruistic reason cited was to help other struggling
businesses. But the main reason appears to be “to stay
in the good graces of key clients.”
Calling
such efforts “pragmatic idealism,”
Robert Ford, management professor at University of Central Florida, told USA
Today, “If your clients weather the storm, they’ll remember that
you were willing to give them a hand when they needed it most.”
For
instance, Watts Wacker, a futurist and management
consultant, said his annual revenue at his consulting firm, FirstMatter,
will likely be less than $200,000 this year, well down from an average
of $800,000. Inspired by President Obama’s inaugural address urging Americans to act with hope
and virtue in troubled times, Mr. Wacker e-mailed
his best clients and offered his services for free as the “nation’s
business model had changed.”
An
Austin-based landscape architectural firm TBG Partners took him up on
the offer and Mr. Wacker is giving an inspirational
talk to TBG’s employees next month
for free. Only travel expenses will be covered. In the past, Mr. Wacker earned up to $30,000 delivering keynote addressees
at conferences.
Following
Mr. Wacker’s lead, TBG’s president Earl Broussard wound up offering TBG’s services for free under the “pay it forward” caveat
that any firm accepting the offer would also look to offer free services
to others. TBG wound up developing plans for a potential themed residential
community with a major hotel for Johnson Development, an effort for which
it charged up to $40,000 in the past.
“Earl
knows if the project comes to fruition, he will in all probability be
involved with it,” said W. Douglas Goff, director of land development
at Johnson Development.
Mr. Wacker also
recently hosted a free webinar for the Outdoor
Advertising Association of America, which paid him around $60,000 in
2007 to moderate and organize its annual convention.
“He’s
not expecting quid pro quo,” said Stephen Freitas, marketing chief for OAAA. “But it’s a chance
for him to market the Watts Wacker brand.”
“This
is absolutely amazing,” remarked David Van Fleet, management professor
at Arizona State University, to USA Today of the free labor trend.
“It’s all about keeping personal relationships with clients. But you
have to be very, very cautious, because when things pick up – and you
start charging – you’ve got to open negotiations all over again.”
Discussion Question:
What are the pros and cons of offering services for free during tough
times? Under what circumstances should such free-labor offers be made?
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Interesting approach here, with some good and some dangerous elements. Of everything written about above, the ‘pay it forward’ approach has most merit. It’s less about giving away your services for free, and more about the ‘goodwill’ to others.
Here’s the danger from my experience: Anytime I’ve been asked to speak for free, it rarely results in future business. Somehow the ‘free’ speech lowers the value and desire for future services. If you’re prepared to drop your price that much, someone will surely ask if your original price was worth it. Credibility in pricing is essential for any business.
I’m not sure that offering a complete service for free is the best way to maintain and then build a business. At The Radical Clarity Group, we give away some of our knowledge regarding business acceleration for free in the form of seminars about how businesses can become more efficient during the recession and how to communicate with consumers in a consumer 2.0 world. By sharing some valuable information we can build relationships with companies that might need our services.
We have found that giving away our core services does not yield paying customers. It only brings other companies that want a handout and devalues what we have worked so hard to build.
As a consultant, I’m currently offering 15-20 minutes of free consulting in advance of the NACDS Marketplace trade show in June, to help companies strengthen their chances for having the type of success that will establish new momentum. I am doing this to help give the CPG industry a lift. Most often the client and I develop such a forward moving dialog that the client usually wants to continue on at a discounted rate for our services. I have encouraged other companies including consultants, resource providers, master brokers, advertising firms, etc. to offer the same, or something of similar nature.
Working “for free” doesn’t sound like a good idea though there are absolutely times where it is worthwhile. That said, it can be a slippery slope with clients who do not see value, bringing to mind the adage that “you get what you pay for.”
Here’s where it does make sense:
Paying it forward. Providing “work for free” could mean providing more value than is expected or simply working and not getting paid for it. In the case of the latter, it is something done as an investment in the relationship and the expectation that like any good investment, there will be payback. The risk here is that you have to weigh opportunity costs of free labor against fixed costs and expected future benefits (i.e., are you working for a client with a good sense of value or not? You don’t want to devalue your services).
In the case of providing more value than is expected, it is simply good business, regardless of whether the economy is weak or strong.
Pro-Bono: When you have capacity for additional work and are interested in doing it “for free” it is wise to consider doing that work for organizations that don’t have the resources regardless of the economy but have merits beyond business. During times like these non-profit organizations are stretched beyond normal and are experiencing reduced funding levels from donors.
There is tremendous value, intrinsic and extrinsic, in helping society and the world become a better place and this is work we should all do, regardless of money.
Today’s economy is all about re-inventing and looking for opportunities. Don’t sit back and whine, make things happen, which is one of the pros to offering services for free. Many companies have done this or a version of this in a good economy, i.e., operational audit is free, evaluations are free or heavily discounted with hopes of the next level business.
The con is to be very careful on how you structure the offer. I recently spoke for an organization “free” because the advertisement in the 50,000 plus mailers and their media marketing was of tremendous value to me as far as exposure. Identify clients that will add value to your customer list–for instance, Wal-Mart. One of the conditions may be permission to use their name on your customer list. Getting creative and making things happen in today’s time, to me, is a great idea. Be leery of the perceived value of FREE. Many times FREE is not usually value. So structure your arrangement to show value.
A critical element here is to distinguish between “marketing investment” and “working for free.” As Kevin aptly points out, people believe something is worth what they paid for it–unless that product or service has a previously well-established value. And “well-established value” is often an ephemeral thing–especially when it comes to pet rocks and personal services.
Making speeches and presentations, publishing white papers and hosting webinars are an established part of many companies’ marketing investment, including ours. They work primarily to build awareness and credibility and certainly have value in and of themselves. But we do not view these as “free work.”
Most consultants and companies won’t work for free!…but it might be a good idea for talented people who have been out of work for a while. It’s important to keep skills fresh and to be engaged.
There is a major difference between working for free and doing something that can be written off as a marketing expense.
Even when the economy is booming, I think many of us do things for our clients or potential clients and write the activity off as a marketing expense.
I just see this as another marketing expense.
Obviously, during a down cycle like this, taking a close look at the way you charge for services is a good/necessary idea. But if you have to work for free, you might as well start to look for a new business because, as any retailer knows, once you go down in price, it’s just about impossible to reverse that (just ask Macy’s).
Having said that, Business Development is completely another story. I believe that during times like these, you’ve really got to invest fully in biz dev efforts. The battle for getting work is so intense now, that a “combat” mentality has to be installed in everyone involved, including the thought of doing something completely unusual, and perhaps free.
I agree with many statements above on the value of free services. However, those services can come in a variety of of delivery styles.
A free presentation to an audience will have follow-up results that are hard to measure. A one-on-one discussion for an hour with a CEO on how, tactically, to extract costs with specific actions, may lead to a follow-up discussion with other people in the company and the opportunity to implement your ideas. If these ideas prove ROI in 3-6 months, you will be self-funding future projects that you will charge for, and at the same time will have built credibility for your services.
I agree that truly working for free usually has the effect of diminishing future perceived value; however, if done strategically (vs. randomly), it can also be considered the cost of client acquisition. We are big believers in “the more you tell, the more you sell” and we see plenty of consultants shoot themselves in the foot by being too withholding and over-valuing basic knowledge. If people like what they hear, they tend to want more and, if everything you know can be given away and transferred to another in a one-hour session, you’re in the wrong business.
I completely agree that customers value what they pay for, particularly when it comes to consultancy. We do, however, offer some research and papers for ‘free’ i.e. we pay it forward in the expectation of greater future returns.
On a cynical note, should the dollar devalue anymore, we will all be working for free or bartering!
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Interesting approach here, with some good and some dangerous elements. Of everything written about above, the ‘pay it forward’ approach has most merit. It’s less about giving away your services for free, and more about the ‘goodwill’ to others.
Here’s the danger from my experience: Anytime I’ve been asked to speak for free, it rarely results in future business. Somehow the ‘free’ speech lowers the value and desire for future services. If you’re prepared to drop your price that much, someone will surely ask if your original price was worth it. Credibility in pricing is essential for any business.
I’m not sure that offering a complete service for free is the best way to maintain and then build a business. At The Radical Clarity Group, we give away some of our knowledge regarding business acceleration for free in the form of seminars about how businesses can become more efficient during the recession and how to communicate with consumers in a consumer 2.0 world. By sharing some valuable information we can build relationships with companies that might need our services.
We have found that giving away our core services does not yield paying customers. It only brings other companies that want a handout and devalues what we have worked so hard to build.
As a consultant, I’m currently offering 15-20 minutes of free consulting in advance of the NACDS Marketplace trade show in June, to help companies strengthen their chances for having the type of success that will establish new momentum. I am doing this to help give the CPG industry a lift. Most often the client and I develop such a forward moving dialog that the client usually wants to continue on at a discounted rate for our services. I have encouraged other companies including consultants, resource providers, master brokers, advertising firms, etc. to offer the same, or something of similar nature.
Working “for free” doesn’t sound like a good idea though there are absolutely times where it is worthwhile. That said, it can be a slippery slope with clients who do not see value, bringing to mind the adage that “you get what you pay for.”
Here’s where it does make sense:
Paying it forward. Providing “work for free” could mean providing more value than is expected or simply working and not getting paid for it. In the case of the latter, it is something done as an investment in the relationship and the expectation that like any good investment, there will be payback. The risk here is that you have to weigh opportunity costs of free labor against fixed costs and expected future benefits (i.e., are you working for a client with a good sense of value or not? You don’t want to devalue your services).
In the case of providing more value than is expected, it is simply good business, regardless of whether the economy is weak or strong.
Pro-Bono: When you have capacity for additional work and are interested in doing it “for free” it is wise to consider doing that work for organizations that don’t have the resources regardless of the economy but have merits beyond business. During times like these non-profit organizations are stretched beyond normal and are experiencing reduced funding levels from donors.
There is tremendous value, intrinsic and extrinsic, in helping society and the world become a better place and this is work we should all do, regardless of money.
Today’s economy is all about re-inventing and looking for opportunities. Don’t sit back and whine, make things happen, which is one of the pros to offering services for free. Many companies have done this or a version of this in a good economy, i.e., operational audit is free, evaluations are free or heavily discounted with hopes of the next level business.
The con is to be very careful on how you structure the offer. I recently spoke for an organization “free” because the advertisement in the 50,000 plus mailers and their media marketing was of tremendous value to me as far as exposure. Identify clients that will add value to your customer list–for instance, Wal-Mart. One of the conditions may be permission to use their name on your customer list. Getting creative and making things happen in today’s time, to me, is a great idea. Be leery of the perceived value of FREE. Many times FREE is not usually value. So structure your arrangement to show value.
A critical element here is to distinguish between “marketing investment” and “working for free.” As Kevin aptly points out, people believe something is worth what they paid for it–unless that product or service has a previously well-established value. And “well-established value” is often an ephemeral thing–especially when it comes to pet rocks and personal services.
Making speeches and presentations, publishing white papers and hosting webinars are an established part of many companies’ marketing investment, including ours. They work primarily to build awareness and credibility and certainly have value in and of themselves. But we do not view these as “free work.”
Most consultants and companies won’t work for free!…but it might be a good idea for talented people who have been out of work for a while. It’s important to keep skills fresh and to be engaged.
There is a major difference between working for free and doing something that can be written off as a marketing expense.
Even when the economy is booming, I think many of us do things for our clients or potential clients and write the activity off as a marketing expense.
I just see this as another marketing expense.
Obviously, during a down cycle like this, taking a close look at the way you charge for services is a good/necessary idea. But if you have to work for free, you might as well start to look for a new business because, as any retailer knows, once you go down in price, it’s just about impossible to reverse that (just ask Macy’s).
Having said that, Business Development is completely another story. I believe that during times like these, you’ve really got to invest fully in biz dev efforts. The battle for getting work is so intense now, that a “combat” mentality has to be installed in everyone involved, including the thought of doing something completely unusual, and perhaps free.
I agree with many statements above on the value of free services. However, those services can come in a variety of of delivery styles.
A free presentation to an audience will have follow-up results that are hard to measure. A one-on-one discussion for an hour with a CEO on how, tactically, to extract costs with specific actions, may lead to a follow-up discussion with other people in the company and the opportunity to implement your ideas. If these ideas prove ROI in 3-6 months, you will be self-funding future projects that you will charge for, and at the same time will have built credibility for your services.
I agree that truly working for free usually has the effect of diminishing future perceived value; however, if done strategically (vs. randomly), it can also be considered the cost of client acquisition. We are big believers in “the more you tell, the more you sell” and we see plenty of consultants shoot themselves in the foot by being too withholding and over-valuing basic knowledge. If people like what they hear, they tend to want more and, if everything you know can be given away and transferred to another in a one-hour session, you’re in the wrong business.
I completely agree that customers value what they pay for, particularly when it comes to consultancy. We do, however, offer some research and papers for ‘free’ i.e. we pay it forward in the expectation of greater future returns.
On a cynical note, should the dollar devalue anymore, we will all be working for free or bartering!