The Tempation Of Cheap

I've worked on many projects where I had to overcome someone's decision to go the cheap way, yet when starting my own projects I'm tempted to go the cheap way.

The profit margins using cheap inputs can be enormous.

Yet those cheap inputs and methods create standards and expectations, which future clients and colleagues will measure you by.

This isn't about being expensive- its about being on the good side of the value equation between you and your client. Even if their budget is $50, you deliver (in their eyes) $51 of content. Going the cheap route too often delivers only $45 worth of goods- and eventually the client will figure it out.

In the long run, being known as "the guy/company/organization who does things on the cheap" will cut into future profits.

Consistency

As humans, we don't like to change much. We relish our routines. Since we're prone to doing the same thing again and again, we self-justify why we make the choices we do.

If I eat lunch at the same place every Tuesday, I will quickly understand the range of deviation in my experience at The Tuesday Place. The more trips, the more I can explain away a bad lunch, because I have so many more positive lunches to balance against it.

In other words, it only takes two or three consistent experiences to lock in, for better or worse, where you will live in that customer's mind.

Peter

Appearances

Some things are bought because of what they are. Some things are bought because of what we think they will make us.

There's more margin in the latter.

Peter

The Value Equation

Costco succeeds because it has chosen to provide a lousy shopping experience.

The store has zero ambiance- it's a warehouse.
The selection is horrid, often limited to one brand of a product, usually in one size.
You can only buy products in gigantic portions. A gallon of ketchup, anyone?
The checkout takes forever because they is only a skeleton crew.

But the prices are so cheap that you accept all of the limitations. Happily.

Businesses that succeed make a similar calculation of what their customer's priorities are. Costco shoppers will endure all of the downsides to save money. Neiman Marcus shoppers value quality goods and insane service over price.

What part of business is your company choosing to do badly in order to deliver great value in another?

Peter

One Is Not The Other

Strategy is not execution.

You can buy strategy by the bucket. Execution, done well, is your most valuable skill.

Sell the execution, and throw in strategy for free.

Peter