Tuesday, 27 August 2019

Price vs Value

“Price is what you pay, value is what you get” says Warren Buffet. As our world finds it increasingly easier to copy and “commoditise” products and services, the emphasis tends to be on price only.  

The great thing about this is that consumers are finding there’s more competition for their money and that process are falling in many areas.  The bad thing is that, if you make something cheaper, something’s “gotta give” and usually it’s either service or quality of product or service.

The expectation is that the more you pay, the better product or service you get.  A simple illustration is between flying on a Low-Cost Carrier (LCC) vs First Class on (say) Singapore Airlines.  The experience for travellers will be completely different. Complaints about LCC service (or lack of) on LCCs abound, but we don’t hear many about the service or experience on Singapore Airlines First Class.  

Price also sets expectations.  If someone is paying (what they consider) a higher price, they expect more value in terms of the product or service they receive.  If Singapore Airlines First Class did not deliver the experience its passengers wanted for the price they were paying (a lot), the airline would find travellers shifting to the competition (and there’s plenty out in Singapore). 

I’ve recently read several comments on the quality of the product of a certain well-known, high-end audio equipment manufacturer.   The problem here is expectationsengendered by price as well as (in this case) the vendor’s prior history of quality results.  This illustrates well the trap that many fall into (both buyer and supplier).

Having been lucky enough to experience Business and First Class travel (not with Singapore Airlines)., I can safely say that the experience to what I am accustomed to in Economy is truly different. Apart from the wider seats and increased leg room, the food, service and amenities are totally different.  The traveller also gets the benefit of using a Business Class Lounge in which to relax before the flight as well as priority boarding at the departure gate.  So, I got “value”.  

The problem comes with the conflicting agenda of price vs value.  People seem to want low prices, but high value.  Given the training and investment needed to provide a superior product or service, this generally isn’t possible.  However, we still see negotiators pressing for a lower price, and then expressing surprise at the result.  

How to make sure we, as providers, don’t fall into the price/value/expectations trap?  We need to know:
  • What our customers want and expect
  • What they’re willing to pay for it
  • Whether we’re still delivering what they expect

Reaction time to correcting any perceived problems thrown up by the above issues and our success in doing so is what will differentiate us from the competition.  If we're getting it right, our customers won't want to change us.

I have spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management.  I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610

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