Value can be viewed through a set of lenses that include your customers, internal business processes, and traditional financial perspectives. This article looks at value through the customer lens.
The Customer Perspective of Value Influenced by Value Related Qualities (VRQs) –
As stated in the first article, Conversations About Value, I put forward the hypothesis that value is in eyes of the beholder. When customers use phrases like “I really enjoy” or “It’s our favorite place,” it’s difficult know exactly what customers mean. Steven Lauer and I co-authored a book, The Value-Able Law Firm. We developed Steve’s Value Related Qualities (VRQs) concept to help law firms better manage the creation of value by better understanding client expectations.
VRQs can help define value and can be applied to many consumer service or product relationships. For example, when a customer indicates they really enjoy a particular restaurant, they could be indicating:
- Parking is always easy;
- The bartender recognizes us by name when we enter;
- The food is delicious;
- Daily specials are a great value;
- The service staff makes me feel like one of the family.
Each of these elements can be viewed as specific VRQ that contributes to the consumer’s overall evaluation of enjoyment. The consumer’s value equation.
Value Related Qualities (VRQs) can be found in any consumer product or service. The key to understanding how VRQs create value is to understand the VRQ’s order of importance to the consumer.
Remember, value is in the eyes of the beholder. For a particular restaurant, is easy parking more important than delicious food or for a burger joint, is feeling like one of the family more important than speed of service or consistency of product? And are consumer VRQs fixed in order of importance or do changes in the business environment change consumer VRQ priorities?
Consumer VRQs don’t necessarily remain static over time. And, as often as not, changes in the business environment can dramatically alter how consumers prioritize VRQs, no fault of the provider of consumer goods and services. Value is further complicated because not all VRQs are created equal. Some VRQs are convenient or cosmetic in nature while others can change the way we think about ourselves.
Stocking the larder and COVID-19 –
As COVID-19 spread and news coverage of a possible pandemic declaration became more likely, social media lit up. Hoarding was the order of the day with toilet paper and hand sanitizer being at the top of the list. Almost instantly, these two (2) items went from ordinary household supply items to high value and scarce items subject to rationing. Worse yet, they became items worth fighting over in big box retail outlets!
People were forced to bunker at home meaning the home galleys were pressed into service like never before. Pasta inventories quickly shrank. One of our favorite pastas is bucatini. Manufactures of this specialty pasta shelved its production to accommodate the increased demand for more pedestrian pastas. If you can find bucatini and can’t live without it in your pantry, be prepared to pay between $10 and $60 per pound. Some specialty foods have become scarce causing the consumers VRQ structure, or order of importance/priority, to shift. Cheese and yeast were other items that suddenly became scarce and therefore more valuable.
Grocery pickup services, shopping services and meal kit services also mushroomed as the pandemic took hold of society. What drove the value? People didn’t want to subject themselves to crowds. Grocery shopping could be seen as a COVID-19 super spreader activity and therefore too risky.
Can political views impact VRQs? –
There were the political influences related to the pandemic. Were facemasks really necessary to slow the spread of the virus? Are vaccinations key to eradicating the virus? The science unequivocally says yes and citizens found value in following the guidance and being vaccinated.
However, there was the spread of conflicting non-science-based arguments that convinced others to believe the value to them was in not masking-up or being vaccinated. Depending on the consumer’s point of view, the VRQ for facemasks could have been rooted in personal safety or freedom.
Consumers reprioritize their VRQs –
An example of consumers being forced to reprioritize VRQs would be General Motors doing away with the Pontiac and Oldsmobile brands. General Motors needed to look strategically at production costs throughout the organization. A question raised was whether or not there was enough differentiation between Chevrolet, Buick, Pontiac and Oldsmobile. A result of General Motor’s brands introspection resulted in Pontiac and Oldsmobile consumers being forced to reevaluate their VRQs related to the feelings of a car’s attractiveness or prestige.
The trash heap of failed innovation is littered with great ideas and products with mismatched marketing strategies, e.g. Sony’s Betamax.
Sony’s marketing pitch was, “Watch whatever, whenever.” Their emphasis was on recording TV programing. The Betamax recording machine was solid as a rock at 36 pounds and produced superior recordings on 60-minute tapes. And it was expensive. Early adopters didn’t care about the cost.
Enter JVC and the VHS tape format. JVC’s machines did not produce as quality a reproduction of images and sound as Betamax, but was lighter by 7 pounds which allowed for a significantly less expensive product and their tape recorded for 2 hours which could accommodate TV programming and the length of most movies. Sony thought they would prevail in a battle with JVC.
JVC developed relationships with the now extinct video rental industry and the rest is history. While consumers entertainment VRQ lit up about being able to record their favorite TV shows and watch the shows when it was convenient for them, watching movies at home on an okay tape format using a machine that was significantly less expensive trumped quality and created different entertainment VRQ priority.
Businesses beware –
Consumer driven VRQs are a dynamic ever-changing set of variables. Keep an eye on your industry competitors and work, strategically, to avoid being surprised by the direction your industry may bend to accommodate the VRQ variables your customers rate higher than others.