(The conclusion of a series on how retailing misses the customer message)
In the last installment, I mentioned some key differentiators between the low-end and high-end of the retail markets, and why that difference can be meaningful to the customer. During this recession, savvy retailers have figured out where they can compete, and it hasn’t always been purely on price-points. It has, however, required some adeptness and knowledge of your core customer and what they’re seeking.
My examples in that blog ranged from Wal-Mart at the low-end and Saks or Neiman-Marcus at its opposite — essentially, it’s the difference between mass discount retailing and the boutique end of the market. Simply put, Wal-Mart will aptly admit that its focus is not on boutique retail, just as Saks would likely agree that it’s not in the business of marketing to the unwashed masses huddling outside for cheaper linens and canned peas. There is a proper place for everyone in the market, and those who don’t know their target markets will be the first to fail miserably when conditions change.
There is an element that I skirted in that post, however, and it’s one on which the last installment of this series has chosen to focus: Quality. While I gave a passing mention of the “quality-floor” in the last segment — the notion that, in order to attain lower pricing, either quality or sourcing location (or both) need to change in order to meet the desired floor — it has particular focus here because of lessons that many of us have heard before and have chosen to either ignore or regard lightly.
I’ll begin with a seemingly contradictory-sounding statement that I’ve heard many years ago, and that rings true today: “I’m too poor to afford cheap things.” It’s an adage that suggests that quality makes a difference, and saving or scrimping on that quality results in more costly outcomes. Not to immediately pick on China or the Pacific Rim, but the evidence exists that quality products from those regions are far less likely because the objective of sourcing outside the first-world for manufacturing isn’t to produce higher-quality but to decrease costs. With that decreased cost comes some concessions, and anyone who has purchased such a product may note that its construction is a substantially different (read: reduced) grade. It may meet the criteria for a lowered standard of quality, but it stops short of being “high quality”.
Allen-Edmonds has been crafting shoes in Wisconsin for over 88 years. They do not routinely manufacture “cheap” shoes, and most products in their line carry price tags well in excess of $200 USD — many are closer to $325 or above. This sounds quite expensive. Consider, however, that many ‘designer’ shoes cost far more — above $500 — and also keep in mind that Allen-Edmonds will gladly recraft the shoes to their almost original state (refinishing the leather, new cork welts, new leather soles and original heels) as well as repair defects for a fraction of the new cost, the same shoe can be kept around for years. I own pairs of Allen-Edmonds that I’ve had for more than 10 years now. During the same time, I could have purchased cheaper shoes, none of which would have worn as long or had equal durability. Effectively, they’ve saved me money (not to mention the pain of breaking in new pairs of cheaper shoes).
We’re all tempted by the allure of a low price, until we recognize that we’re not quite satisfied with the outcome of that low price.
“Designer Imposter” fragrances. We’ve all seen these prominently displayed in Walgreens or shown on TV, someone’s ‘interpretation’ of a familiar and popular scent, except that the interpreter often wasn’t having an easy time translating the essence. “If you like (fragrance brand X)…” is usually how the tagline begins. My wife and I have come to know the knock-offs by a key phrase. “If you like Brand X, you’ll tolerate this other brand because it’s cheaper.” That’s because it’s not the fragrance at all, nor is it close to the level of quality. Perfumers already know that the content of their scents are more than the sum-total of the quality of their components; cheaper components lead to let-downs in the end product.
Pure perfumes of high quality are expensive. Clive Christian’s “C” is $375 for 50ml, and it’s very likely worth that price because it is a 30% concentration of the fragrance. It’s similar sibling, Tom Ford’s Tuscan Leather, is about half that price for the same quantity because it’s exactly half the concentration in the same quantity. A designer imposter impression of a fragrance is perhaps only a fraction of the real fragrance, is made from synthetic scents and components or a series of chemicals, and has a composition of mostly water and alcohol (with perhaps a 2-3% concentration of a very artifical aroma). Can you do something cheaper? Yes. Will it be the same? More than likely, no.
“Buy cheap, buy twice.”
My uncle — a man who craftily survived the Great Depression and and made his way through the economic ups and downs — was a simple man. He never had much money, but what he had he saved or spent well, and he lived by the motto of quality. He rebuilt clocks in his retirement golden years, and when maintained, they kept very accurate time (of course, when wound once per week). He left me with one motto that I vividly recall from my many times spent with him: “Buy cheap, buy twice.” A few times, he was tempted by something cheaper, the lure of a low price being too much to resist. He quickly learned his lesson and always saved until he had what he needed to afford quality.
It’s a lesson that holds just as true today.
“It’s not just a product thing…”
I listened to a networking colleague of mine about a year ago explain that certain companies were still happy to source functions to cheaper regions because of cost, and in-spite-of the level of quality in the output. Off-shore Application Development has been a target of this type of work for more than a decade, with locations such as India flush with highly-educated (in India standards) software engineers ready to churn out application code at a fraction of the cost of the same task on-shore. Most organizations remained unhappy with the quality of the product they were receiving, but it was provided at a fraction of the cost. One rationalized that “even if the code required a complete rewrite once or twice, they’re still saving money over doing that work here”. So organizations heretofore have been happy to sacrifice quality in the short term because of price constraints. But is there a cost in the short term? You bet: It’s very likely your product won’t make it to market when you’d like due to those same quality issues. As a result, many companies have decided on a ‘flight to quality’ (including repatriating the function) where decisions are being made that reflect the values of the organization rather than the simpler short-term economics of tactical cost.
Does quality matter?
The simple answer: Yes.
Consumers will not continue to purchase a product or service if they sense an overall lack of quality. While they may see the short-term increase in sales, customer loyalty in the long-term will suffer if they perceive that an organization’s quality has decreased to an unacceptable level. As a result, the focus on price over quality can result in a customer backlash when the product or service fails to meet expectations. Damage to brand reputation is often the result, and once lost it’s difficult to regain.
Ask retailers such as Lord & Taylor. While under the ownership of Federated Department Stores, the overall experience was similar to shopping at any other of Federated’s properties (Macy’s, for instance). As a result, their brand loyalty and association with a quality retail experience diminished. Now under new management, the focus has returned to quality as a key differentiator.
Price alone cannot be the sole deciding factor in purchasing a product. If it were, all of us would be wearing the cheapest clothing, eating the cheapest food, and driving the most inexpensive (and dispoable) vehicles. Obviously, we don’t. America as a first-world country is far more developed, and we therefore are less price-competitive than economies such as China, India, or much of the under-developed world. Our products will obviously be more expensive because our cost-base is different.
As a result, the key differentiator between our products and those from the rest of the globe must focus on one area: quality. Even when all else is equal, quality is the one aspect of a product or experience that will drive loyalty.
I'm Andrew Buck, the man behind the words. I'm a published author, project management practitioner for over 20 years, work on Wall Street, and am a fragrance aficionado. I've had a passion for fragrance for 30+ years, and enjoy trying scents and adding to an expanding and rotating collection for some time now. This site is dedicated not only to fragrance, but also to the notion that quality matters now more than ever. 
