5 Deflationary Indicators – And Their Implications To The CMO
- Direction, from one of my Doctors, to either Target or Walmart to fill a generic description for $4.00, as opposed to my regular pharmacy and higher prices.
- The rise and use of social networking coupon sites, and extreme couponing.
- The reported lack of full time dentist hygienist positions…the work being done by part-timers…saving the dentists the costs of a full time employee.
- The increase of “2 for $20.00” meals at some restaurants, where essentially an appetizer or desert is thrown in for free.
- The promotion of “X years free service” when you buy/lease a new car. Unless car prices have gone up to cover providing free oil changes, tire rotations, etc. this is a cost coming out of some profit center.
And I am sure that you have your own examples. The point is, as the economy slowly moves out of the Great Recession, the 99%’ers are taking advantage of every-day cost savings which, when aggregated together more than offset the inflationary effects of increases in gas and health care. These cost saving actions and the cost saving mind set easily translates to business decisions, where the buyer or buying committee becomes receptive to "added value" when making a purchase.
For the CMO, this means making sure that each product offering now includes something “extra” that wasn’t there last year. This could be free added service, lower cost financing, no cost installation, etc. It is important to note that the value added is not adding another feature (higher speed, more I/O ports etc.); rather it is adding a new additional value to the original product package.
In short, in today’s environment even though a product/service’s value proposition separates it from the competition, the total offering has to be enhanced with an additional value in order to close the deal. This is especially true in highly competitive oligopolistic markets where the differentiation between the key competitors is very small.
For management worried about how to pay for this change, the answer comes from the company's buyers/administrators. For every 2-3% that is added to the value of the product, management must demand that the buyers get at least 2-3% added value from suppliers.
On a personal level, are you taking advantage of added value in the products/services that you are buying? Has this added value swayed your purchase decision making? Do you see how this process can translate to your firm’s product and services? Are you prepared for deflationary times?
Or, do you feel that we are in a time of inflation and are acting accordingly? Let me know how you see the future unfolding, and how your competitors are acting.