Buy Value Not Products: Quality is Perceived

Buy Value Not Products: Quality is Perceived
In this time of economic slowdown and declining consumer confidence and demand perhaps the one dilemma that companies in the fast moving consumer businesses should deal with is the dilemma between the product and market. If you talk to managers and entrepreneurs in these businesses you will see that many of them are very focused on the product and other so very focused on the market.
To be sure the two need not be contradictory in terms. In fact, there is one concept the companies can use in order to make the product consistent with the market it is the concept of value proposition. The concept of consumer value is very relevant to companies for a number of reasons. The most important one being consumers buy value NOT products.
Actually, we know that every company sells a value proposition into a market. That is a specific combination of benefits and sacrifices that the company wants to give to its consumers. Every product is a potential combination of benefits and by definition every product category is able to provide consumers with all kinds of benefits: functional, emotional, symbolical, experiential, social, and psychological. But my specific company can decide to provide a specific value proposition, a specific combination of some benefits which are related to some sacrifices. This value proposition should be different from my competitors’ one in order to give my company a competitive advantage. So basically what is important to understand for companies is that companies do not compete in markets with products and services, they compete with value propositions.
It is indispensable in my opinion therefore companies should therefore make it their topmost priority to design value propositions which are able to meet consumer expectations.
To design the appropriate value proposition a company obviously should know its consumers. This basically means it has to develop consumer knowledge. Developing consumer knowledge means that a company must have the built-in competency to undertake a sometimes complex but no-doubt meaningful process. It must be aware of the fact that fast moving consumer products are experience products. As such consumers more often than not find it difficult to anticipate the ‘actual’ qualities of the available products. In order to do it, they use some proxies. They use some quality clues to try to figure out the real quality of the product before consuming it.
I think that quality is one of the most used words in the FMCG business players. When I talk to managers and entrepreneurs, the number of times that the word quality is used I think is extraordinarily high. The point is that quality is a very vague and ambiguous concept because quality is like a box, you can fill this box with many different things.
The most important thing to understand is that there is always a difference between intrinsic quality and perceived quality. Intrinsic quality is the intrinsic quality of the product, it is the fruit of the competencies that the company has in combining different raw materials and in making a product which is good from a technical point of view. Consumers however are not able, capable or even willing to distinguish different products in terms of their intrinsic quality. Instead as consumers we reason on the basis of perceived quality. We consumers, as human beings, live in our perceptions. If we perceive something, that thing exists. If we don’t perceive it, it doesn’t exist. This matters a lot in terms of quality because what is relevant to us as consumers is perceived quality, the quality we perceive when we think, when we consume, when we buy products and services. The determinants of perceived quality are often quite different from the determinants of intrinsic quality. The one important determinant in the conception of perceived quality is the information that consumers have, the knowledge they have, the competence they have.
The idea is that a company should keep its intrinsic quality aligned to the perceived quality, and managers and entrepreneurs should try to learn as much as possible what the determiners of the perceived quality of their consumers. This is the only way to match the intrinsic quality of the product with the perceived quality of consumers.
In closing I would again underline the importance for companies to understand is the decision making process of consumers. How do consumers make their decisions when they have to choose a given product or a service? Successfully building this consumer knowledge is the key to designing a different and relevant value proposition.

Posted in Articles, English, Rudolf's Articles.