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The Race to the Bottom You Don't Want to Win

Jim Correll, director Fab Lab ICC at Independence Community College, Independence Kansas 

In our area, outside the city limits where cable won’t go, many of us live in a television “no-mans-land.” At my house, we have satellite TV and the Tulsa channels are where we get our news. We see a lot of car dealer commercials. Big city car dealers—local small-town dealers, not so much--are the best example of trying to win a race to the bottom. This is the race to have the lowest (apparent) price on new cars. They each want you to think they’ll give you the most personalized service yet offer the lowest price of all the competition. Cars have definitely become a commodity, even available from vending machines. In the case of big-city car dealers, many have developed this irritating practice of unexpected fees showing up on the closing documents to make up for the low price they advertised to get you in the door. 

Some small businesses try a mix of commodity products with higher end products on which the margins are better. An example of this is the convenience store. They don’t make much money on fuel, the commodity, so they hope you’ll come inside and buy drinks or snacks which are much more lucrative. Sometimes I think some of them leave their fuel receipt printers broken to try to “trick” me to come inside, but that’s another article. 

I’ve mentioned previously that I was a professional photographer in Garden City, Kansas from 1976 to 1987 BD (before digital.) I learned, the hard way, in the first few years that I did not want to be viewed as a commodity, at the bottom of the competition in price. Nothing is worse than photographing a wedding when you were chosen because you were cheapest. I ended up settling to have about the third highest prices in this market of 30,000 people. That took me out of the commodity category. People hired me because they liked my work and they liked how I worked with the people involved. When you’re hired to photograph a wedding because of your work, not because of your low price, things at the wedding go smoothly. The customer figures if they are paying you all that money, you must know what you’re doing. 

I had not totally learned my lesson to stay out of the commodity business, however. Somewhere along the line I decided I wanted to bid on the school pictures for the entire district. In those days, school picture day for underclassmen (not seniors) was where the photographer came to school for a whole day at a time and photographed everyone in front of the same background. Then, packages were made and sent home on speculation so the parents could buy copies. The margins were awful, and the school board was bound by law to accept the lowest bidder, a perfect example of a commodity. I was young, stubborn and I resented the big national company coming into our town taking all that money. One year, I lowered the price so much that the board actually deliberated whether to accept my proposal or the national guys. Ultimately, they chose the national guys. I was mad at the time but looking back I’m very glad I didn’t win that race to the bottom. Fulfilling that contract would have been all-consuming. It might have even ruined the rest of my business. It was a race to the bottom I didn’t want to win although I didn’t know it at the time. 

Most small businesses are best off to offer great customer service for a fair price, staying away from the commodity pricing and a race to the bottom they don’t want to win.  

Jim Correll is the director of Fab Lab ICC at the Center for Innovation and Entrepreneurship on the campus of Independence Community College. He can be reached at (620) 252-5349, by email at jcorrell@indycc.edu or Twitter @jimcorrellks. 


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