This has been a well-known conundrum in business for quite some time. There are always three variables associated with getting the product or service that you want. The variables are Quality, Price and Speed. They are normally associated with the words Good, Cheap and Fast. The conventional question has always been that you cannot get all three variables at high levels at any specific time. If that indeed is a limitation, the question arises: If you are a vendor or supplier dealing with your customers, which two of the Good, Cheap and Fast variables do you choose when delivering your products and services?
As a customer, the simplest answer has always been to demand all three variables, and to demand them immediately. They want the lowest price, the fastest delivery and the best quality. They want it now and please don’t argue. We have all been there. However, even the most demanding of customers recognize that this is usually only an opening gambit and that there will always be negotiations associated with what is actually obtained and when it is to be delivered.
In the past customer hierarchy of desirable product attributes, Quality has ruled as king. The higher the quality, the more reliable the product, the better the customer liked it. They would possibly make concessions to either Cheap and Fast, if they got the best Good there was.
If Quality, or Good, was the given, then the customer (and vendor) needed to decide which other variable, Price or Speed was going to be sacrificed. I think that history will show that for the most part it was speed. (In support of this position I will submit that almost all product and productivity focus in the last few generations of products have been on how to take time out of the equation). Even the axiomatic statements associated with business in general refer to the fact that the pace of change within business has been accelerating.
That meant that a good customer would wait for a good product, and that they would get at a good price.
Those were the days. That does not seem to be the case anymore.
As I just noted, everything about business has accelerated. Cycle times for everything from product development to customer billing have been reduced. No one wants to wait for anything anymore. What was once fast or accelerated is now the new normal. Full speed is now the minimum accepted and if you expect to get ahead you had better figure out how to go even faster. They want it all now.
We have become an immediate gratification society.
What was once saved for, and purchased later, is now purchased today on credit, and paid for later.
So, if this increased focus on Speed, or Fast, is the new primary given requirement (instead of Quality, or Good) for driving customer satisfaction, then which of the two, Good and Cheap, will be the second factor chosen in the customer purchase decision? (remember, the axiom of you can only have two of the three variables at any time still pretty much holds in reality – or does it….) One would suspect that since Quality was so important in the past that it would also be of high importance today. That would leave cheap as the odd variable out.
That would also mean that customers want their products and services Fast and Good, and would hence be willing to pay the requisite higher price associated with this variable selection.
I do not know about you, but it has been a very long time since I have dealt with a customer that is willing to pay more for anything, regardless of speed and quality.
I think the reality is that price is still king. It is very difficult to sell a higher price versus a competitive product regardless of the speed and quality delivered. It can be done, but you are starting out at a significant competitive disadvantage if you start with a higher price than your competition.
As I have noted in the past Good in the business vernacular has been replaced by “Good Enough”. As product life cycles have become shorter (there’s “Fast” again) and prices have come down as components, support, warranties and service have been reduced (there’s “Cheap” again), Good has been reduced down to Good Enough to compensate.
The answer to the Good, Fast and Cheap, pick two conundrum in today’s business environment is now Fast and Cheap.
How quickly can the product be in the market? It has to be fast because there will be another, better competing product put out by a competitor soon enough. It better be cheap because customers most likely won’t buy a more expensive product, regardless of any (temporary) advantages. As for quality? That’s now a given. It is almost impossible to differentiate in the market based on a quality variable. Almost all manufacturers in just about any given market can be viewed as having a high-quality parity.
Today, if a company is not viewed as having a high / acceptable quality level in its products, they won’t be surviving for very long.
As an example, look at automobiles. Manufacturers have tiered the market into sub-markets based on car size (e.g. Sub-compact, compact, mid-size, etc.). Many manufacturers have created specific models to address and compete in each specific market tier.
The model for buying a car has “Fast” as a given, since I don’t know anyone willing to wait for a specific car to be manufactured for them – they want to drive off the lot in their new car when they buy it, not at some later time. That leaves Price and Quality as the final negotiation variables. I think Quality for the most part is also a given since now almost all cars come with similar warranties, usually somewhere between six and ten years. If you don’t believe Quality is a given in cars, try negotiating a longer warranty for your car as a term of the purchase agreement.
Let me know how that works out for you.
That essentially leaves Price as the next (only) selected variable in your car purchase decision. The starting price can vary a little, based on the feature set that the car is equipped with (X, SX, LX, etc.), but even that is limited. Fast (you want to drive off in it) and Cheap (you don’t want to pay anything more than you absolutely have to), are the criteria.
Fast and Cheap. That’s it. That’s where we are in business.
Now there may be other variables that you input into the decision criteria such as the car must have an appealing design. This is a matter of personal taste. Car companies spend incredible amounts of money in creating appealing designs for each of their cars. Car companies also spend incredible amounts of money advertising these appealing designs with the objective of convincing you that theirs is the most appealing, (Mazda has gone so far as to create a commercial showing what I suppose is a sculptor, sculpting the latest appealing design of their latest car model) and hence getting you to come to their dealership where you can negotiate the price and then drive off in that appealing (work of art) car.
There are always exceptions to every rule in business. That is also probably also a rule of business as well. However, when putting together a strategy on how to attack a market in general, and to pursue specific customers on an individual basis, with quality now thought of as a given in the market where “Good Enough” is now good enough, focusing on speed and price will most likely provide the best competitive advantage.
Answering questions as to how quickly the solution can be acquired and more importantly implemented will be a differentiator. Price, more so than almost ever before will be a decision driver. With almost all products now being viewed as easily interchangeable, why would a customer pay more for anything?
I remember the good old days where management would blithely tell the sales team to sell “quality” when their market price was higher than the competition. Management would say reference the product’s “quality” when there was a delay in product availability.
Now if a product takes too long to arrive in the market, or the price is too high, the opportunity is most likely lost. It doesn’t matter what management will want to tell the sales team. A competitor will have a substitutable product available when the customer wants it at a price they can afford.
Times have changed. Quality was once a product differentiator. It is probably not anymore. Of all the resources available to everyone, time is the only one that we cannot readily get any more of. Hence Speed has become the new prime differentiator. With Quality a given, and speed a differentiator, that leaves Price as a decision driver.
Customers might pay a little more for a preferred product, but that differential is closing fast. The more expensive you are versus the competition, the more disadvantaged you are. There will always come a point where the Price differential will always outweigh any Speed or Quality advantages. That Price differential point is always moving closer and closer to the Cheapest solution.