BUSINESS AND MARKETING: Business and Marketing Forum Business and Marketing Articles

Undercutting as a business model

COW Forums : Business & Marketing

<< PREVIOUS   •   FAQ   •   VIEW ALL   •   PRINT   •   NEXT >>
Terence CurrenUndercutting as a business model
by on Nov 18, 2008 at 3:27:06 pm

Check out this part of a post on a Los Angeles producer's list:

"We are opening our doors on Dec 1st and we have edit stations and mixing rooms available for rent. We're located on Magnolia in Burbank. We'll beat anyone's written rate."

How's that for a business model? I have my ideas, but I would be curious to hear others.

Terence Curren
http://www.alphadogs.tv
http://www.digitalservicestation.com
Burbank,Ca


Return to posts index

Bill DewaldRe: Undercutting as a business model
by on Nov 18, 2008 at 4:43:08 pm

"Will beat anyone's written rates"

[searches for post-it note]


Return to posts index

Alan SmithRe: Undercutting as a business model
by on Nov 18, 2008 at 4:58:33 pm

Bad for long term business. Whenever undercutting the other guy becomes the mantra, you inevitably hurt yourself. It has a trickle down effect on the business in the area. If he is able to generate significant business by undercutting others, others will have to lower rates to compete. It perpetuates a ruthless cycle that is not good for business.

Alan

Alan Smith
Media317

Check out my blog - http://media317.com


Return to posts index


Mark SuszkoRe: Undercutting as a business model
by on Nov 18, 2008 at 8:41:07 pm

Let him. You can only compete so far on rates alone, and it is never a good idea to undercut another guy's rates unless you know to the penny what his true costs are and how much cushion he has in the bank. He could be living on cat food and ramen and sleeping in the back of his production van or his mom's basement (or the edit bays, pew) to cover his margin, that's not sustainable for long-term. At the low rate, he's not investing any money in the gear or softwaer, he won't be able to keep up with people that do. he also won't be able to hold onto any talented staff. I think that means little repeat business.


Return to posts index

Steve WargoRe: Undercutting as a business model
by on Nov 19, 2008 at 2:53:47 am

This is fantastic. Their facility will quickly fill with grinders, price shoppers and those who want something for nothing. That will leave the quality minded people for us.

How can you deliver quality product when you know that everybody else is getting more?

There's always somebody cheaper in the yellow pages.

If the general public bought solely on price, they would all be driving Neons and eating at McDonalds.




Steve Wargo
Tempe, Arizona
It's a dry heat!

Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD .


Return to posts index

Terence CurrenRe: Undercutting as a business model
by on Nov 19, 2008 at 5:24:20 pm

Sounds like you folks are in agreement with my opinion.



Terence Curren
http://www.alphadogs.tv
http://www.digitalservicestation.com
Burbank,Ca


Return to posts index


Arnie SchlisselRe: Undercutting as a business model
by on Nov 19, 2008 at 5:57:13 pm

Reading your original post literally, it looks like these guys are only renting rooms, not providing the services. If that's the case, well, there's certainly a market based on price. But all of the other arguments above still apply.

"We'll beat any price" doesn't suggest to me that they've outfitted each suite with reference grade audio & video production monitors. It suggests consumer TVs & computer speakers. It doesn't suggest large, fast, protected RAID storage, it suggests long daisy chains of firewire & USB drives.

And it definitely doesn't conjure up a vision of properly proportioned edit, color & mixing suites with recent hardware & software, Aeron chairs, Aurelex sound treatments and ergonomic furniture in a building with 24 hour security in a safe neighborhood. Nope, it suggests cramped rooms with leaking pipes & peeling paint, obsolete or consumer grade gear, folding chairs, "egg-crate" packing foam, doors for desks, no security in a dicey neighborhood.

Sign me up!

Arnie

Post production is not an afterthought!
http://www.arniepix.com/


Return to posts index

Mike CohenRe: Undercutting as a business model
by on Nov 19, 2008 at 6:19:08 pm

seems to me the LA market would have an abundance of edit rooms for rent as it is. Sounds like the snow plow operator who gives you a discount at the beginning of the season, but then when it snows you have to call him to remind him to plow your driveway. Then he complains he can't afford to upgrade his plow because of the great rate he gave you, so he'll get to you when he can.

That being said, most markets have different tiers of service. Look at the difference in packaged meat at Costco vs Safeway - there is a market for both.

Mike


Return to posts index

Arnie SchlisselRe: Undercutting as a business model
by on Nov 19, 2008 at 6:48:16 pm

[Mike Cohen] "Look at the difference in packaged meat at Costco vs Safeway - there is a market for both. "

We don't have Safeway here in NYC, but we do have Costco. And my personal experience is that Costco's meat department is pretty good, good enough for Marc Bittman's column in the NY Times to recommend them for some cuts.

But Costco has a different business model. They make most of their profit off of the annual membership fee, not on the markup on the goods they sell, so they can afford to sell meat (or flatscreen TVs) just above the net cost.

Arnie

Post production is not an afterthought!
http://www.arniepix.com/


Return to posts index


Terence CurrenRe: Undercutting as a business model
by on Nov 19, 2008 at 7:04:44 pm

Here is the original post:

We are opening our doors on Dec 1st and we have edit stations and mixing rooms available for rent. We're located on Magnolia in Burbank. We'll beat anyone's written rate.




1) Offline edit stations for rent

2) Non-linear editing (Online) in SD, HD, and 4:4:4

3) Color Correction on Avid Symphony or with Color

4) Full Television and Theatrical Mix, including Dolby 5.1
and 7.1

5) ADR Recording, dubbing, and looping

6) Tape duplication of D5, HDCAMSR, HDCAM, and Digital
Betacam.

7) File and Data compression, storage, and digital delivery

8) Visual FX via Motion/Shake/AE

9) Royalty free music and sound FX
Best,

Then signed by the post house.









Return to posts index

Terence CurrenRe: Undercutting as a business model
by on Nov 19, 2008 at 7:09:42 pm

My response last night was to offer any producer a "written" estimate of any amount they chose that they could then take to this guy who has publicly said he will beat it.

So I could give then a complete finish with audio on paper for $10.00, and he would have to do it for $9.00. Or else he is a liar. :-0

PS: Yeah I know I was being a dick, but sometimes I just can't be restrain myself...

Terence Curren
http://www.alphadogs.tv
http://www.digitalservicestation.com
Burbank,Ca


Return to posts index

Arnie SchlisselRe: Undercutting as a business model
by on Nov 19, 2008 at 7:13:57 pm

[Terence Curren] "My response last night was to offer any producer a "written" estimate of any amount they chose that they could then take to this guy who has publicly said he will beat it.

So I could give then a complete finish with audio on paper for $10.00, and he would have to do it for $9.00. Or else he is a liar. :-0 "


That'll teach him! Honestly, seeing now that they really are claiming to offer full services, I don't see how they can realistically expect to stay in business past their third or fourth rent payment.

Arnie

Post production is not an afterthought!
http://www.arniepix.com/


Return to posts index


Ron LindeboomRe: Undercutting as a business model
by on Nov 19, 2008 at 7:25:49 pm



[Terence Curren] "PS: Yeah I know I was being a dick, but sometimes I just can't be restrain myself..."


Know thyself. -- Socrates


Return to posts index

David Roth WeissOn a similar note
by on Nov 19, 2008 at 7:27:21 pm

[Terence Curren] "PS: Yeah I know I was being a dick, but sometimes I just can't be restrain myself..."

Only yesterday I received a call from a formerly very good client, whom I also consider to be a good friend, who told me that the twenty-something year old son of an exec. at his company had bid $5000 on a job I was going to bid on at between 15 and 20K. They pulled the project before I could even start on the budget and gave it to junior.

So Terence, using that devious mind of yours, what can we send over there to solve this one???

David Roth Weiss
Director/Editor
David Weiss Productions, Inc.
Los Angeles

POST-PRODUCTION WITHOUT THE USUAL INSANITY ™


A forum host of Creative COW's Apple Final Cut Pro, Business & Marketing, and Indie Film & Documentary forums.


Return to posts index

Mark SuszkoRe: On a similar note
by on Nov 19, 2008 at 11:49:10 pm

David said:

...son of an exec. at his company had bid $5000 on a job I was going to bid on at between 15 and 20K. They pulled the project before I could even start on the budget and gave it to junior.

The most popular old fashioned barber shop in town has a row of parked cars sometimes ringing the block, all loyal customers. Why? Major clue: a simple sign out front:

"We fix Seven-dollar haircuts"



If "junior" satisfies them, then forget it; you never had this business anyway. The sweet revenge will be on bidding to repair or re-do the botched job later.







Return to posts index


David Roth WeissRe: On a similar note
by on Nov 20, 2008 at 1:41:09 am

[Mark Suszko] ""We fix Seven-dollar haircuts""

Classic and so, so right. The best I can hope for I guess...

David Roth Weiss
Director/Editor
David Weiss Productions, Inc.
Los Angeles

POST-PRODUCTION WITHOUT THE USUAL INSANITY ™


A forum host of Creative COW's Apple Final Cut Pro, Business & Marketing, and Indie Film & Documentary forums.


Return to posts index

Steve WargoRe: On a similar note
by on Nov 20, 2008 at 7:06:09 am

[Mark Suszko] "The sweet revenge will be on bidding to repair or re-do the botched job later."

I have made quite the reputation doing just that.

Steve Wargo
Tempe, Arizona
It's a dry heat!

Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD .


Return to posts index

John BaumchenRe: Undercutting as a business model
by on Nov 19, 2008 at 9:32:06 pm

If the general public bought solely on price, they would all be driving Neons and eating at McDonalds.

The problem is that most Americans do buy on price. Why do you think WalMart has been such a huge success. As for Neons, if the economy doesn't get better, that could become the new reality.

Yeah baby, keep that cheap Chineese stuff coming!




Return to posts index

Randy LeeRe: Undercutting as a business model
by on Nov 20, 2008 at 3:26:27 pm

Most Americans buy their generic, everyday things solely on price. When you start looking at a commodity, especially say... a commercial to make your business look good, or a corporate piece to get your employees pumped up, though, it's a different market with different expectations of both quality and price.

Most Americans aren't buying post-house time. The ones with the money to spend are, and I think that most of those realize that if they spend their money appropriately, they'll get more bang for the buck than if they have their nephew do the project. The problem comes in when there is a squeeze, and the company has to look for any way possible to cut back. That extra $15K looks like an awful lot of money in the short term.

In the long term, though, they'll soon see the error of what they're doing and come back. They need a good quality product, and that is something that the nephew being paid $5,000 to do the work on his pirated version of Final Cut can't give.

Unless the client is trying to compete based on price, too, in which case we get a bad case of catch-22. They can't get quality without spending the money, they don't have the money to spend because they're not making anything quality. Soon they're out of business, and we move on to people that come to us because we do better work.


Return to posts index

David Roth WeissRe: Undercutting as a business model
by on Nov 20, 2008 at 6:09:21 pm

[Randy Lee] "In the long term, though, they'll soon see the error of what they're doing and come back. They need a good quality product, and that is something that the nephew being paid $5,000 to do the work on his pirated version of Final Cut can't give."

I hope you're right! However, I have to admit, I'm scared now. This really worries me. Combined with the economic news we're seeing on TV these days, I'm concerned we're all in for a world of hurt, and suddenly that hurt has landed on my doorstep.

I've been warning people here to keep their jobs for a reason. Now, I'm beginning to feel the kind of pain I was warning about...

David Roth Weiss
Director/Editor
David Weiss Productions, Inc.
Los Angeles

POST-PRODUCTION WITHOUT THE USUAL INSANITY ™


A forum host of Creative COW's Apple Final Cut Pro, Business & Marketing, and Indie Film & Documentary forums.


Return to posts index

Michael HancockRe: Undercutting as a business model
by on Nov 20, 2008 at 6:44:58 pm

In your case David, I don't know that I'd be so surprised at their decision, considering who they awarded the job to.

If Junior is the son of a high-level exec, he only needed to underbid you by $1, if at all, and he would have likely gotten the job. If you're competing against a decision maker's family (particularly their kid), good luck. After all, they're not going to tell their genius child no! Especially when they're trying to get their awesome new production business started!

Does that make it right? No. Will this kid do as good a job as you would have? No. Their best chance now is that this kid really is a natural talent with skills beyond his years. Otherwise, definitely stay in contact for the clean up.

Best of luck on it.

Michael.



Return to posts index

John DavidsonRe: Undercutting as a business model
by on Nov 20, 2008 at 7:23:48 pm

Yeah, you can't fight nepotism. Don't worry though, when the entire project is delivered 'mtv style' and mixed with a track from the kid's best friend's ska band, then delivered with inverted field issues at offline quality, they'll probably be calling you.

I really really hate MTV style. It's neither music television or style. Discuss.

John
Magic Feather Inc.


Return to posts index

Nick GriffinRe: Undercutting as a business model
by on Nov 20, 2008 at 7:35:38 pm

This whole thing brings to mind a few of the most important rules of this and most other businesses. Stay engaged with many, many different prospects because only a percentage of them are going to turn into clients. Plan on there always being some attrition in one's client base -- it happens so be prepared to deal with it. And when times are good, save for a rainy day because, like now, there will be rough patches.

Good luck, David. We've seen downturns before and you just have to still be sure to be there for the upturn.


Return to posts index


cowcowcowcowcow
Bill DavisRe: Undercutting as a business model
by on Nov 21, 2008 at 8:07:00 pm

If you guys all want to feel a LOT better - run out and buy yourself a copy of Malcolm Gladwell's new book "Outliers".

He's the guy who wrote Tipping Point and Blink - and is a leading business writer and social commentator.

Outliers is, among other things, about research into what it takes to actually achieve MASTERY at any subject. The contention is that it takes roughly 10 years of work to achieve a level of true professionalism in any area - video creation would be included.

The "take away" for me was to stop even TRYING to compete on price. It's never going to be my strength. I'll instead compete on my experience and judgement. The trick is to CONTROL the discussion so that you relentlessly bring ALL discussions relating to your work around to this point.

It's no different from recent politics. STAY ON MESSAGE. PRACTICE THE MESSAGE. DEVELOP SURROGATES TO DELIVER THAT MESSAGE. BE CONSISTENT. Your message is NOT ever price.

IT's EXPERIENCE. Period.

We can win the business worth winning on that - and when we lose, we're losing work that won't ever actually help us grow.

FWIW.






Return to posts index

David Roth WeissRe: Undercutting as a business model
by on Nov 21, 2008 at 9:00:04 pm

[Bill Davis] "stop even TRYING to compete on price. It's never going to be my strength. I'll instead compete on my experience and judgement."

Great point, and a superior post... I'm giving you 5 Cows and a Kudos light bulb for that one.

David Roth Weiss
Director/Editor
David Weiss Productions, Inc.
Los Angeles

POST-PRODUCTION WITHOUT THE USUAL INSANITY ™


A forum host of Creative COW's Apple Final Cut Pro, Business & Marketing, and Indie Film & Documentary forums.


Return to posts index

Terence CurrenRe: Undercutting as a business model
by on Nov 21, 2008 at 9:18:37 pm

10,000 hours baby!

Terence Curren
http://www.alphadogs.tv
http://www.digitalservicestation.com
Burbank,Ca


Return to posts index

Timothy J. AllenRe: 10 years
by on Nov 24, 2008 at 3:57:35 am

When I started taking karate back in eighth grade, the sensei told me that anyone teaching martial arts who had less than ten years experience was probably not worth the tuition.

Now that I've been in the video business more than a decade, I can see how that rule of thumb applies to our industry. Even though the equipment is completely different than what I was using back in 1998, that background I got from arguing whether non-linear editing was ever going to take the place of tape-to-tape does make me appreciate the changes that happen over a longer "season".

After a decade, you learn that things are never as bad - or as good - as they might first seem, you don't get ruffled quite so fast, and you learn that while it's noble to take a position on a particular technology, you reserve the right to be proven wrong.

I've gone through several separate "learning curves" during the last decade. The "technical knowledge" learning curve eased up after about three years - now it's rare that I get stumped on a particular technical issue for too long. At least I've learned where to look for help. (... and Creative Cow is still the first place for that!)

The "artistic" learning curve arced longer. Once I gained some technical skills, it took longer to learn the discipline of when not to pull out the magic bag of flashy tricks.

Learning how to manage people has been the longest curve so far. I feel more comfortable in management roles than I used to be, but I realize that leading people is an area with distinctive and unique long range challenges. With technical questions, you usually find out if you were "right" within minutes. With management challenges, it might be months or even years before you know if you made a good decision.

Even ten years sometimes seems like the first phase.



Return to posts index

Patrick OrtmanRe: Undercutting as a business model
by on Dec 4, 2008 at 3:55:09 am

Oh, sweet! Thank you- just got my Christmas reading.

As for the Burbank post services company... wow. Well, we'll see if they're still around in 2 years with that business model.

---------------------
http://www.geniusmonkeys.com
(818) 653-9144


Return to posts index

grinner hesterRe: Undercutting as a business model
by on Nov 27, 2008 at 7:51:41 pm

When setting out to be known as the cleapest place in town... what usually becomes known as such.




Return to posts index

David FortinRe: Undercutting as a business model
by on Nov 28, 2008 at 1:27:21 am

I think I'll have to read that book.
10 Years! Piece of cake.
I'm on year 24 of my own business. Fortunately, economy hasn't been a problem yet. Most of my clients are long-term repeat ones. Right now I have more work than I need. Let's hope that keeps up for the new year.

I'm in a small market. Price is always a problem. New people with no experience and no or little "overhead" will always be around. I've learned to try and ignore them. Wish them well. I find business people appreciate this attitude. And, what does it matter, you can't control it anyway, so take the high road. My line is "the more people using video, the better for me in the long run!"

Won't kid you though. Lost lots of sleep in my early years worrying about anyone and everyone. Maybe getting older has helped. Started my own business at 25 and am now 49.

Nothing beats working for yourself and setting your own hours. Have never missed one of my 4 kids sporting events. This year will be a grandfather and hope to never miss any of the next generations either.

But I'm off topic now.

Hope everyone had a Happy Thanksgiving!

David



Return to posts index

grinner hesterRe: Undercutting as a business model
by on Nov 28, 2008 at 3:46:40 am

hats off to you, sir.
...for missing no kiddoe sporting events. Thats too dadgum rare today. I've had fussy clients because of my kids before.
But I'll never have a fussy family because of clients.



Return to posts index

<< PREVIOUS   •   VIEW ALL   •   PRINT   •   NEXT >>
© 2017 CreativeCOW.net All Rights Reserved
[TOP]