Product
In business we either produce and/or sell a product for consumers. That product may be airline travel, breakfast bars, nursing care, automotive repair or consulting services to name a few. A key attribute of successful business is to determine what a customer needs or wants and then to produce a product that fits that objective. At times the customer knows exactly what they need in a product making our job in business much easier, produce it. A great example is the manufacturing of a car since there is an enormous need for people to drive. We live in societies around the world where using a car or truck to move people and supplies is an everyday requirement. Consequently for vehicle manufacturers meeting the customer’s needs for an “automotive product” are easy to define. It must hold people and supplies, roll down the road, have an engine that can perform the work and provide safety to those in the vehicle. Consulting services are another product for sale to consumers. The customer that is evaluating consulting products may not know exactly what they do or don’t need. It may be a challenge in employee retention, an onslaught of poor customer reviews or a failure to meet the needs currently present in their business environment. Customers may have exhausted the most common tools to rectify the challenge and many times have reached a critical point before resorting to an outside consulting product. Therefore the consultant must first help define exactly what the root challenge is and then provide the product. The key for all successful businesses is to produce and/or sell a product for the consumer. The best products are those that the consumer needs, like the car to travel in or the consultant to keep the company on track. The worst products are those that we don’t need, we normally wouldn’t even want but today it caught our eye and we will splurge and go for it. This product is time limited and difficult to produce in the right amount, at the right time and for sale in the right place. Businesses must assure that they have produced and/or sell the products their customers will buy.
Performance
Producing and selling the right product is only the beginning of a successful business. The next step is producing and/or selling the product that can perform to the customer’s expectations. Customers usually expect failure of the product at some point and usually that is based on the value/price of the purchased product. Failure of the business to meet the expectations of the product line will ultimately result in a lack of success for the business. Consider the car example from the product model. It would be reasonable to say that customers know there is a difference in the overall quality, performance and expected life span of the $14,000 budget car compared to the $38,000 luxury car. The customer expects that the no frills car will accomplish the goal of movement of people and supplies. The customer realizes that the life expectancy of the vehicle will be shorter and that for the price paid this is an acceptable trade-off. Perhaps the vehicle is for the new college graduate so that they have dependable transportation for that first “real job”. The key aspect for this customer is to have a short-term solution that will bridge the time needed while the graduate begins making money and can put more assets towards a better car a few years down the road. They will live without the latest navigation system, will survive in the cloth/vinyl seats and will merge carefully onto the busy interstate with the underpowered engine. This is dramatically different from the customer that is purchasing the luxury car. This customer has decided to invest in not only a transportation asset but they also need and/or want more then just a vehicle product. Perhaps the customer is a regional sales executive who spends a significant amount of time driving from one location to another. They want and may even need a vehicle that is incredibly comfortable to drive. The vehicle is full of high-tech gizmos and gadgets that help improve their driving experience with on board navigation, lane change monitoring, rich leather interior with climate controlled seating and spirited engine performance. This customer demands a different level of performance from the product and will either proudly proclaim how great their car is or will quickly change into something different and perhaps never buy from that product line again. Consequently the business must meet the customer’s performance expectations whether on the low or high end. Failure of the business to recognize the appropriate performance mark will definitely affect the long-term success of the business.
Price
All products have a price that a potential customer will accept. Whether the product is something the customer needs like food to eat, wants such as the larger house or splurges for, i.e. first class seats, there is always a price that the customer will accept or deny. The key for successful businesses is to first recognize that price does matter and secondly to assure that the price meets the performance requirements at that price point. Businesses that succeed in accomplishing these two critical points help to assure that their product will at the very minimum be a potential product for the customer. Using the consulting example previously addressed in the product category we can evaluate this further. Lets say a family owned small grocery story has progressively lost customers over the past two years and is beginning to feel the effects on net profits. The owner attends a national small business association meeting and meets a representative from a large multi-national consulting firm that specializes in grocery retail improvement strategies. The consulting firm clearly has a product that the customer needs and meets all of the performance or expectations that the customer needs and wants. The firm is happy to take on the customer and has an initial retainer fee of $50,000. In addition the firm bills hourly for assistance and charges $250/hr. for junior associates and $400/hr. for senior members. The customer is genuinely concerned that even though the firm would be able to assist them in identifying why customers have been lost and how to correct this the price of finding out this information is so high that any return on investment will take decades to achieve if even possible then. Simply the family owned store does not produce enough profit to sustain itself while paying for this type of consultant. After returning from the small business conference the owner is having breakfast with other small business owners at a favorite restaurant. The discussion revolves around lost customers and revenues and one of the small business owners passes on a name of a smaller consulting firm that provides services in the region. The owner makes contact with the consulting firm who also specializes in small retail environments and has done previous work in grocery retail. The firm is also happy to take on the customer and charges an initial retainer fee of $5,000. In addition the firm utilizes a no-hourly pricing format that matches specific outcome criteria with a particular cost. In this case the firm will evaluate why customers have stopped shopping at the small grocery and what would be needed for customers to start shopping there again. The firm will charge $20,000 in return for these services. The customer evaluates the two different options and recognizes that the smaller firm has a much clearer return on investment then the larger firm. The price is fixed and the product results are clear. There is a high level of expectation that the consulting firm will move definitively on the project since the more time they are required to spend on the project the less true profit they will make. The customer has a high level of expectation that they will have meaningful results that they can utilize to improve their grocery sales. In addition although the price for this product is still high it is reasonable to recoup over the next 3-5 years. Consequently the customer accepts the price and the small firm is awarded the contract to help identify how to improve the grocery stores sales.
Businesses that utilize the 3 P’s regularly are more likely to be successful in meeting both short and long term goals. Having the right product that meets the customers needs and wants, producing a product that delivers the performance expected and accepted while keeping the price appropriate are all key factors to success.
Businesses that utilize the 3 P’s regularly are more likely to be successful in meeting both short and long term goals. Having the right product that meets the customers needs and wants, producing a product that delivers the performance expected and accepted while keeping the price appropriate are all key factors to success.
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