By Mike Betzer, president, relationship technology management, Convergys

It’s always been a given that companies win based on quality, service, and price. But what do you do when competitors offer products and services free-of-charge?

That day has arrived. Google fired the opening shot in 1999 by debuting its world-leading search engine and ancillary products for free. In the decade since, zero-priced Web mail, maps, Web hosting, directory assistance, streaming video, and a host of other services followed. The depth and breadth of Google’s portfolio soon become the industry standard for others to follow.

And yet Google hasn’t seen a single dime of direct profit from its ancillary products such as email, maps, and YouTube. And it matters not at all. Billions of dollars of revenue cascade into Google’s coffers thanks to the deluge of intimate knowledge of millions of nonpaying customers. Reading a Gmail message about a trip to Tuscany? You’ll likely see in the right-hand column a targeted (and, more important, paid) ad on Tuscany hotels.

In this new “free-conomic” marketplace it helped create, Google profits by leveraging priceless information gleaned from (or about) its all-too-willing customers, and using software algorithms that apply this knowledge to selling precisely targeted advertising.

As described in Wired editor-in-chief Chris Anderson’s new book, Free: The Future of a Radical Price, “free-conomics” is not about selling what you do, but rather, profiting from what you continuously learn from your customers.

Companies across multiple industries — airline, retail, automotive, financial services, healthcare, and many others — are catching on to “the value of nothing.” They intentionally give away their products and services, profiting instead in creative ways from the customer relationship itself. Think of Hewlett-Packard selling printers at or below cost in the hopes that the quality of those printers will satisfy customers to the extent that they’ll continue buying its ink cartridges in the future.

One of the simplest yet most-effective strategies is what we call “intelligent self-service”: using automation to channel customers toward high-margin offerings they’re predisposed to purchase. As Google has proved, whatever’s lost to zero pricing is more than offset by the eventual gain. As with any information-based capability, intelligent self-service accelerates performance while cutting costs — and the cost gets lower over time.

I’m not advocating that every company give away its lifeblood by switching to free pricing — far from it in this recovering economy. “Free-conomics” is young, and, other than Google, most of its purveyors are young startups with a long road ahead. But the concept — and value — of customer-driven business intelligence integrated with service channels is proven — and universal. In fact, the best form of intelligent self-service takes root when the customer isn’t even aware of it. For example, a qualified customer calling her bank or logging in to its Web site to change her mailing address should be presented with an offer for a new line of credit. The new address means she’s moved — and therefore likely in need of a few extra dollars to cover moving expenses.

Service has always been a key differentiator. It may soon be the only one. Today, when products can be cloned and commoditized nearly as quickly as they’re launched, and product differences must be measured in nano-increments, innovation and quality alone do not ensure market leadership. Relying on price competition can drive margins a little too close to zero. In this marketplace, customer service remains every company’s most vital edge in winning and keeping customers. The next logical step — integrating service with an intelligent architecture that delivers personalized treatment and provides tailored offers — will separate winners from losers in the world that awaits us all.

Using business intelligence, intelligent self-service integrates vital customer information into whatever channel the customer chooses — Web, email, mobile — delivering a personalized experience so the customer always receives a consistent message tailored (and automatically pushing the right product) to them.

Everywhere we turn, business is increasingly knowledge-based. The question is: Are you using everything you know about your customers to drive a better bottom line for your organization?

Here’s my challenge to you: The next time you’re surfing the Web for free, consider how your business could apply automated intelligence across all channels — and to each interaction — to unleash the value of your customers’ information. Intelligent self-service enables care that is proactive and outbound to boost satisfaction and loyalty, and customer-savvy to create new revenue streams via real-time cross-selling and upselling.

Mike Betzer is president of the relationship technology management group at Convergys. Mike is responsible for the development and application of new technology-based solutions to support agent-assisted customer care and self-service. He can be reached at mike.betzer@convergys.com.