In my previous article I left you with the following challenge:
I challenge you to think about the following variables: C= COST, P= PRODUCT PRICE, V= PERCEIVED VALUE
Try to imagine: Would you want to work in any sector or in a CABLE company or to sell the same CABLES where:
THE COST > THE PRICE
Or where:
THE PRICE > THE VALUE PERCEIVED BY THE CLIENT
Or where:
THE VALUE PERCEIVED BY THE CLIENT > THE PRODUCT PRICE
Well! I can honestly say that I would definitely want to sell VALUE and not PRODUCT in the strictest sense and so undoubtedly I would choose option 3). But let’s take a look together at the various options
THE COST > THE PRICE
If you are actually SELLING or manufacturing products and you are in situation one (C>P), oh dear! My advice is to change the product or even to change everything related to the product and the company… or if you prefer to take what you can get but get yourself ready to change the company and hence cable manufacturer. If in the majority of your negotiations PRICE is the most important issue more than 50% of the time either for you or for the customer, this is already a good warning sign and the reason that it’s time to head for pastures new.
It’s not important to have an example from the world of CABLES because we face this situation every day! Just think about the LOW-COST flight business: how is it possible for fares to be so low and for so long?
In 2008 I was working as the director of a company that was growing fast but had this very situation for many of its products! I’ll let you draw your own conclusions about the position the company found itself in and under what difficulties it has had to operate over the years. We had minimal working capital when compared with the commitments made and every single operational difficulty brought about significant problems at a structural level.
THE PRICE > THE VALUE PERCEIVED BY THE CLIENT
In this situation, your position is not a great deal better than the previous one. You are still one of the many who talks price and only price; and in the world of Cables as you well know, you are playing the game they all want to play… that of getting the price down and buying at the best possible price regardless of quality! Negotiations, however, are always at a low level, never looking for opportunities for collaboration or for the development either of collaboration itself but above all of the products.
In this situation, i.e. with a price that is higher than the perceived value, don’t expect your customers to beat a path to your door. There’s not even any discussion about why one product is technically or qualitatively better than another … Absurd! NUR PREISE! as my German friends would say!
I hate always giving examples from the CABLE sector but I can’t think of anything else; when a customer asks for a polyethylene cable and you’re there to explain why this compound should be avoided when compared with a CROSS-LINKED POLYETHYLENE cable, but the end customer doesn’t seem to understand the difference, or you are not able to make him understand… Hmm! He is certainly not going to pay you a penny more for the enormous added value that you are describing to him; for him, but not for you, the price is higher than the value and so there’s nothing for it but to move on! pack up! and go home!
THE VALUE PERCEIVED BY THE CLIENT > THE PRODUCT PRICE
In this situation, matters are altogether different. It brings to mind the late 1990s when I was living in London, and Saturday afternoons when I would go shopping. When I went out of the supermarket with my ASDA shoppers I felt down, as though I was just one of the masses, whereas when I went to Knightsbridge to Harrods or to Waitrose on Sloane Street I felt completely different and even the food looked better despite the fact that the suppliers (although not all of them) were the same.
So coming back to our industry, it is not true to say that it is simply the CABLE or the CABLES that have a better-perceived value, because the same could also be true of your company through the BREADTH of the RANGE OFFERED or EVEN ITS DEPTH, something we’ll talk about for sure in the future. Creating VALUE is what you ABSOLUTELY need to concentrate on, because it’s the only way you can establish the credibility of your products, your business, and your backers, and beat off the threats from your competitors in the strictest sense and from your detractors in the broadest sense. And even today, as has been the case for a number of years, many brands across all sectors from Fashion to Automotive even FMCG have created incredible value relative to the cost of the actual product! So why can’t this or shouldn’t this happen in our sector? In fact, it is already happening, and METACABLES is an example!