How relevant is price if you don’t get value?


The following question was raised by Gordon Mowat BA CA, Managing Director at Aspire Management Services Ltd, in a LinkedIn discussion forum:

"Are we recognising the need for change?"

Gordon drew it to my attention as he knows that the need for and nature of business change is a subject dear to my heart.

One of the usual obstacles to meaningful discussion on the subject is the belief that price is still king even though there is mounting evidence that, AT LAST, the difference between price and value is being recognised.

It sounds to me like every discussion along these lines comes back to the threat of losing out to competitors on price. In which case the "answer" is not so much about "sharpening the axe" and more about reinventing the wheel.

No-one can deny that price will always figure, prominently, in the decision-making process but the argument can’t stop there. If it did some of the best known global brands (Rolex) would not exist.

Rampant consumerism + credit = growth (unsustainable growth)
Ever more sophisticated marketing fuelled our demand for goods and services that was funded by increased wealth &/or freely available credit. As a result we became a greedy, wasteful, "disposable" society.

The values and wisdom that was passed to "Baby Boomers" by their parents was corrupted.

Replacements or alternatives were keenly priced and freely available.

Television and advertising gave us new "values" e.g. "greed is good" (more than just a line from a movie)

But technology has advanced apace, the cost of manufacturing has fallen and customer appetite insatiable so why has reliability not improved?

Much has happened in recent times to illustrate the folly of this course.

Customers could/should have obtained value but highly geared models (financiers & shareholders) were more demanding than customers.

The business models of the last 20 years required quantity. Quality became an unnecessary expense. Supply chain, product and service integrity were compromised to satisfy individual and corporate greed. Profit, return and bonus came first…well ahead of customer needs. Advertising myths have been exposed.

Customers need to be more discerning because of the economy. We all need to ensure we obtain value. We can no longer be so wasteful because of the economic, environmental, social & cultural impact.

Here’s the anomaly: Apparently customers can’t afford and don’t want to pay more. In truth many need to pay less but if businesses can’t afford to charge less how do we secure the new income we need and retain existing customers!? By ensuring that businesses, whose first responsibility is and always has been to their customers, demonstrate that to their customers by increasing the value that they receive.

Competitors who continue with the old model will resist the changes that are required to restore customer trust. They need to continue as they have. Their reliance upon excessive and unsustainable earning levels, that have enabled them to grow, consolidate, dominate and have been their great "strength" is now their biggest weakness.

They are exposed and cannot afford to embrace the transparency that their customers require of them. This presents an insurmountable problem for those involved, in particular, in regulated industries.

Sent from my HTC

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s