Every Little Helps: The True Value Of Value In Business
Corporate giant, Tesco, the second most profitable commercial retailer in the world after Wal-Mart, has been fined £300,000 following allegations that they had misled customers.
The retailer admitted to four counts of unfair commercial practice following allegations that Tesco had misled the public over the real value of the strawberries. The strawberries were sold for one week each at £3.99 and then £2.99, then sold for £1.99 and labelled “half-price” for the remainder of June, July and August.
Tesco has apologised, accepted the fines, and released a statement. “We sell over 40,000 products in our stores, with thousands on promotion at any one time, but even one mistake is too many.”
Value for money
In issuing this statement, Tesco recognise their customers’ expectations to be sold a quality product, for good value. We have already discussed the relationship between cost and quality, and how each can be optimised within your business.
The central issue here is that of value. Tesco’s decision to sell the strawberries at £1.99 for most of the summer implies that there was no real bargain – no real value for money. But this illusion was nevertheless created by the words “Half Price”.
When dealing with your business, your customers want to know that they will benefit from the value of your product or service. Shep Hyken, customer service speaker and blogger, argues that if you fail to provide good value, your business will ultimately not be as successful.
Real vs. perceived value
The strawberries on sale for £1.99 at Tesco in 2011, have been criticised as “not good value.” But at the time, the offer was perceived by many to indicate “very good value.” The difference between real value and perceived value is crucial, but it can be a slippery measurement.
Real value can be measured by weighing production costs against the cost of an item or service for the customer. Perceived value, however, is much more subjective, dependent on the value the customer attributes to a service or product, in relation to how much it costs.
Brand is an important consideration here. Customers are arguably more inclined to perceive value in a supermarket because we are accustomed to seeing a wide range of offers on various products across stores. We assume that because these chains are so big, they can afford to provide value, and still make a profit.
When customers make the decision to deal with your business, what value do you offer in return? Do customers perceive your product or service to be of better value than those of your competitors?
Focus on the provision of real value. Make your service as helpful, and useful as possible. Build a reputation for reliability, and sustainability, and the perceived value of your product will increase. People will recommend your business and add to your credibility. They will basically market your product for free by word of mouth.
Make sure to provide real value, and you can increase your brand’s perceived value
It is marketing’s role to convert the real value of your product into perceived value. Conduct customer interviews, or surveys, to discover how they see the value of your service. Social media is a good way to receive feedback. Play to your strengths, and work to fix your weaknesses.
For Tesco, this half-price blunder will prove an embarrassment. But they will apply a heavy dose of PR, and probably continue to be the second most profitable commercial retailer in the world.
For your SME? If your customers realised that the value of your product or service had been inflated, would they continue to do business with you? Your company’s perceived value should rest on the actual value of your product. As your brand grows, so too will the perceived value of your products.