If you're a fan of Marta's, you may see a similarity between this subject and the recurrent red-ocean-versus-blue-ocean dichotomy in her presentations, but we're going to look it from a different angle and focus more on something closer to NLP — or at least the way brains react to certain words and phrases and the way it can be used.
No matter which kind of freelancer you are, you probably have already at least a couple of times found yourself being expected to be competitive when in the light of the situation you don't or shouldn't really need to compete.
For example a translation agency may have told you that your rates were not competitive... when you were the sole 'vendor' actually capable of processing their request!
So why should you have to compete? Why should you compete?
But, naturally, it would be beneficial to their own financial interest if you did actually still try to be competitive even in that kind of situation, where you are essentially a monopolist. Bluff costs nothing — or perhaps they simply take it for granted that you should act in accordance with their financial interest.
It's a human weakness that we are prone to seeing ourselves as essentially free to look after our own interest only rather than other people's, while seeing others as somehow obligated to pay attention to our interest rather than only being guided by their own. Humans are not always particularly lucid or consistent, which means that, for example, a cheater in a game could still resent someone else's cheating.
It can be pretty much the same with a translation agency or client expecting itself to be the sole beneficiary of competition in the market — always having you compete, never having to compete for you.
But another human weakness is to just play along. That means, for example, doing what someone else tells you to do, without first checking if you really want to do that, or if the person telling you to do it has the authority to give you commands or if it is a justified request. Bluff costs nothing. The agency loses nothing if you just simply decline, and you are unlikely to quit on them, only to give them a slight rebuke if at all but probably not even that.
To sump, there is zero cost of trying a bluff or they may even genuinely be thinking that.
You don't want to play along. You want to identify that suggestion when it happens and oppose it. You re not doing anything wrong — they have no right to hold the reins of your business or to exploit you.
If you do want to put the agency's or the client's financial interest entirely above your own, that should be your own choice, your own sacrifice and service, not just allow yourself to be taken for a ride.
And, if I may say something, there are better, more qualified recipients of charitable donations of your time or money (which often ends up being the same thing) than for-profit enterprises. How about you donate your time to a homeless shelter instead? Or an orphanage? Or hospital? Or how about you look for civil-service employment for a modest salary if that's what you want rather than working entirely pro-bono, without pay?
Or at least make it clear that you're doing them a favour, but don't reinforce their belief in their own bluffing brilliance or privileged entitlement. (Or simple human error and lack of perspective, which it may very well be.)
Next, it's not like they're always going to directly tell you to be 'competitive' or make a 'competitive' offer; rather, it can take a more indirect form. Say, they might answer your quote saying that it is not competitive enough — if you don't stay sharp, you might even sometimes just go along with that kind of thing rather than shaking it off and realizing that, ugh, who says your quote needs to be 'competitive' in the first place? Or who are they (the agency or client) to authoritatively judge it as sufficiently competitive or not?
Again, chances are they'll just put 'competitive' in a sentence — as a begged question — and hope it works by setting the right mood, i.e. by sending your brain on the path they want it to take, which is similar to something like 'thank you for your co-operation' (which is presumed to follow and which does actually make the reader comply with the instruction if no contrary reflection intervenes).
Bottom line: Just because they want it that way doesn't meant it has to be that way. Make your own choice whether and what concessions you want to make.
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