The 1107 words here lead to and underline some questions you can ask yourself about how you bring value to your customers and what you are going to do to survive market changes… It is a long rant and potentially a little naive. I’m not a financial expert and maybe not the best strategist. But still…
It strikes me that we live more-and-more in a world obsessed by price. Or rather: “Cheap”. Given “the current economic situation”, credit-crunch, budget cuts, unemployment and austerity measures, I suppose this is natural. People want to get the best for their money. But that doesn’t make it good. Since when did “the best” equal “the most for the cheapest”?
In my recent visit to the UK, I was shocked by the apparent extent of this obsession. Everywhere I went, everyone was competing on price. Supermarkets that used to offer the best quality food ingredients now focus on “3 for 2” offers and “any 2 deserts for £2”. The motorway diners that used to boast “authentic fully-cooked English breakfasts all day” now have posters several miles before noting that “the whole family eats for £5”. And for some reason, my father has taken to supplementing a benefits-driven overview of his latest purchase with “…and it only cost me …”
But competing on price is not sustainable and doesn’t create a real value image in the long-term. Sometimes it can even destroy hope of having a long-term future, as is famously the case with HMV right now or, less in the public eye, the little DVD-hire-shop down the road from me.
Take the first example: HMV. The first HMV branded store was opened on Oxford Street, London, in 1921. Facing competition, it won the game by offering newer, bigger stores with the best most complete collection of music and film. When I was growing up in the 90s, if I wanted the latest number-1 CD I would pop into my local “Our Price”. But if I really wanted to shop for CDs, to find something a bit more obscure or to listen before I bought, I would happily wait for a trip to London to visit HMV.
In the example of my local DVD shop, it was all about getting the latest films first and the unprecedented offer of keeping them for 48 hours instead of the standard 24 rental hours. People who wanted to see something before anyone else would go there. And maybe even lend it to a friend before they took it back.
But markets change and in both cases these value-offerings came under attack from the competition. Facing the online offer of Amazon, iTunes, Napster and MegaUpload, HMV was no longer the only one to have everything in music and film. And the others were cheaper too. Instead of fighting back with any real innovation or added quality, prices were reduced. And as the bottom-line profits slipped away, gone as well were the listening-posts to “try before you buy”. The more expensive-to-run focus on specialist or obscure music was replaced by more of the latest number-1s at a cheaper price then anywhere else. My local DVD shop started to offer 3 films for the price of 2.
When competing on price alone, the cheapest wins and everyone else dies. Drug dealers know this and you don’t have to watch many mafia films to understand that the middle man always gets cut out. For HMV, consumers who could no longer see the added-value of a trip out to the shop (in the cold, using expensive petrol) would buy exclusively online. Everything being equal, price wins.
But everything doesn’t have to be equal and there are other ways to compete. In marketing terms, “price” is only one of the 6 “P”s and consumers might buy for any mix of reasons. HMV used to be about “products” and “people”. Another high-street shop in the UK claims to have the best KnowHow™ to help you install, maintain and use your product. * This is all about the “people” and “processes” they offer – a good reason to buy. In my own case, I currently focus on creating the minimum effective dose of training, along with authentic learning processes and improving formal learning with practical use of social media. Others focus on being the first to market, or the most deluxe product.
* Ironically, in my last trip to the UK, the window-sized poster- promoting this “people/process” offering was now obscured by 20 smaller shamefully off-brand posters shouting out the cheapest prices for X, Y and Z.
For the seasoned marketeer, I have said nothing new here. Its always been the same: Companies profit by offering value for money. Unfortunately, many companies seem to have forgotten all about the value, choosing instead to focus only on the money. They argue that its because of the tough economic situation and because no-one has any cash to spend. But even if the “boomerang generation” can’t afford to do live away from its parents, one look at the evolution of Apple’s share prices over the past 5 years will tell you that many people still have a lot of spare cash. Starbucks still makes £400 million in revenue selling coffee in the UK and Amazon has announced that its fourth-quarter revenues rose by 22 percent to reach US$21.3 billion. And despite training being the first thing to go when corporations aren’t making enough profit, many of my trainer colleagues are still fully-booked doing great business until the end of 2013.
People pay for quality. This doesn’t mean “top quality” or “deluxe” but simply “value” (or perceived value). And if you want them to pay you, then you need to offer value, whatever your price. The more value (and the more unique your value) the more likely people will buy from you. Despite the focus of so many on “price”, I believe that if you want to do well in bad economic times, you need to focus even more on the other side of the price/value equation.
So to close my little rant (“price competition” is after all one of my current pet-hates) I would like to ask you to take some time over the coming days to think about the following 5 questions:
- Everything being equal, price wins. But everything is not equal. What makes you special?
- What do you want your customers to say about your products, services and staff?
- What do you, your company, people, products and services stand for? What’s your “thing”?
- Assume money was not an issue for any of your customers. Why do they buy from you?
- Why do people come back for more of your stuff?
Thanks for reading.
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