Why Worth And High quality Are Weaker Differentiators
Value consists of four key elements: price, quality, service and convenience. The added value of a product or service traditionally means a certain compromise. If I want the lowest price, I sacrifice quality. If I want the most convenient option, I'll have to pay a little more. However, the modern consumer, equipped with more options, tools, and resources than any other consumer before, has become accustomed to a market that assures them that they will not have to compromise. You can have it all and should expect it all. In order for companies to win and grow in the future, we must find ways to differentiate ourselves from the competition while meeting the high expectations of modern consumers. To achieve this, companies need to focus on service and convenience to differentiate.
When price and quality rule
Traditionally, price and quality have been the two levers that companies could pull to improve their value proposition. Larger companies were sized to offer quality at a low price and hold a significant market share. But the modern economy has allowed smaller competitors to disrupt this reality. Innovations in digital and manufacturing technology have lowered the barriers to entry for smaller competitors who can now scale audiences and production faster than ever and challenge incumbents. The result is a decrease in price for both price and quality in order to stand out from the competition. While price and quality are certainly still important, there is great potential in harnessing the other two elements of value – service and convenience – to help businesses separate from competitors and meet consumer expectations.
Service and comfort are the softer elements of value. They deal with intangible consumer needs such as the desire for experience and the pursuit of headspace, which while not as specific as price and quality, are becoming increasingly important to consumers these days. 58% of Americans, including 70% of Millennials, agree that no matter how hard they try, they never seem to have enough time to do all of the things they need to do. Hence the desire for convenience and service in every interaction with the market. Simply put, companies that meet this need will find growth.
Service and comfort = the future of differentiation
Take Best Buy, for example, which has had financial success in recent years due to retail bankruptcies and store closures. The electronics retailer initially met consumer expectations for price and quality. It matched Amazon prices and prioritized high quality providers in the store. With this competitive edge, Best Buy doubled its service and convenience, improved its website and app experiences, revamped staff training, and expanded its Geek Squad and in-home advisory services. These are all service and convenience efforts that have helped Best Buy succeed as the competition struggles to stay afloat.
In short, service and convenience are key differentiators for the future value proposition. Companies that focus on innovation in these areas will find it easier to meet – and benefit from – the high expectations of the modern consumer.
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