I’m not going to draw a value triangle because (a) everyone knows what a triangle looks like, and (b) I don’t find it particularly helpful. The value triangle is the forced compromise many businesses have to make between three aspects of their business:
- Quality
- Speed
- Cost
Your customer can have any two but not all three. So, sacrifice any one and this is what you get:
- Low quality means your offer is fast and cheap. This is not always a bad thing. Fast food, for example when buying a sandwich for lunch. You would not offer the same sandwich for an expensive meal.
- Slow means you can order something but not insist on instant access. For a lot of services slowness can be an advantage.
- High cost means you will have something of high quality delivered quickly. You may be paying to move up the queue, for example private medical care, assuming their services are high quality.
The point is, as a customer you can’t expect to optimise all three. If you want something of high quality and fast, expect to pay for it. If you don’t want to spend a lot of money you must sacrifice either speed or quality.
For the business owner, the challenge is to work out what their customers want. My own business provides a non-directive consultancy or coaching service. My aim is a high quality service and I expect to deliver over 3 – 6 months or longer. This may seem slow but it is right for a consultancy service. My prices are relatively low when compared with Done for You website design and offers a service that integrates online and in-person activity, which many website designers do not offer. It is certainly cheaper than employing a worker to build and maintain a website, so long as there is someone who can dedicate the time to work with me. The client who wants a high quality website tomorrow will need a Done for You service. I offer a slower more considered and eventually more effective route to being effective online.
Cost is a real pitfall for many businesses. There is a tendency to under price offers. Think it through this way, are you going to sacrifice speed or quality? If you offer a service at a low price you will need more clients to break even. This will mean you will have less time to focus on your clients and so compromise quality. Or else if quality is essential you will need to extend your contracts over a longer time.
The first thing is to explore how your service compares with others. What alternatives might your clients be looking at and how are they priced? If you can cut the time you spend on each client without compromising quality or add to your basic offer in a way that enhances quality this may enable you to adjust your price. You will normally be aiming for the highest possible price your customers will accept that enables you to provide the highest quality service.
Some business activities have various options. For example, a cupcake business may offer celebration cakes at a premium price. Something really special for a special event. This would be high-priced, for example the business I heard of recently where the owner breaks even on 6 wedding cakes a year.
Another cupcake business might produce large numbers of cheap and cheerful cupcakes that are low-cost, quick to make and tasty. So long as it’s a good product, it should be easy to sell a lot and break even on the cheaper end of the market.
The first business offers high quality at a high price. Don’t expect to order a wedding cake anything other than months in advance. The other offers something over the counter at low-cost. Their quality may actually be fine but not wedding cake standard!
If you get a chance to interview potential clients, it may be worth asking which two out of the three, they would choose first and second. They can rank them in order of importance and then discuss, the implications of discarding their third choice. Sometimes customers will be more flexible when they understand this basic dynamic.
This post is part of a sequence based on the circuit questionnaire, the branding element.
