We are living in interesting times; historic, to be sure: first African-American U.S. president; a lingering war on a terror with an enemy that is hard to see; and a global economic epidemic with effects not seen since the Great Depression almost 80 years ago.
Our economic situation is reaching far and wide disabling businesses of all types, disrupting utilities, and forcing budget cuts across many municipal, city, county, and state governments. In fact, our economic situation has spread, creating not just a domestic crisis, but impacting the global economy as well, truly limiting the ability to do business as usual.
Consumer spending is down in almost all retail sectors. The news during the recent holiday season was bleak. Retail and restaurant giants (Linens & Things, Circuit City, Bennigans, etc.) with huge market presence and household recognition have either shuttered their doors or filed to restructure. US unemployment was at 7.2% to start 2009, and as of today 3 months later it sits at 8.1%. Some analysts are predicting that number to reach as high as 9%this year, and CNN reports that 36% of its poll respondents claim unemployment to be the biggest issue facing Americans. It seems like every day, big US companies are announcing massive job cuts. Alcoa, Microsoft, Caterpillar, Pfizer, Home Depot, and Sprint are among the latest to announce large layoffs. A recent Bloomberg report claims the economy has lost 4.4 million jobs since the recession began in December 2007. The list goes on and keeps getting longer.
Dismal, cloudy, murky, hopeless, desolate these are some of the adjectives people are becoming accustomed to seeing & hearing. Not everyone or every company is associating these dark adjectives to their lives or businesses so what are they doing that we can learn from? Two attributes that are enabling some to endure these troubled times are quality, and value.
Quality is typically an attribute that is understood differently by different people. While it is perceptual, conditional and a somewhat subjective attribute, the term quality is generally thought of to refer to the non-inferiority or superiority of something.
Value is another, perhaps more subjective attribute. With many definitions, contexts, and theories supporting them, the term value has puzzled economists and others for centuries. Some high profiles such as John Ruskin, Karl Marx, and even Gandhi have had a say in what the term value means. In the consumer world, value refers to the market worth or estimated worth of products, commodities, services, etc., and is also defined as wealth maximization. Wealth maximization, according to Wikipedia, predicts that a person will choose to obtain the good or service in the place where it is cheapest, where the amount given up is the least.
To survive in the business you must start focusing on delivering quality and value.
Some companies are finding success by bringing these two attributes together: Costco, Target, Trader Joes, Southwest Airlines are some examples. Quality and value have always been core attributes for these companies, enabling their popularity before the economic crisis began, and now enabling them to endure the turbulence in the market.
As an example, quality and value have long been virtues at Costco Wholesale. Members of this warehouse club have bought-in, literally and figuratively to the concept at Costco that they can find the best possible merchandise at the best possible price. Costco drives its supplier community to constantly improve its offerings higher quality ingredients in its food products, finding manufacturing or logistical efficiencies that can be passed on to members, increasing the integrity of products by using stronger materials or emerging technology, etc. To be sure, this is a strategy Costco outlines in their mission statement, but their focus on quality and value extends far beyond just what is offered for sale on their floor.
Costcos continued success lies not only in the quality and value of the merchandise they sell, but these attributes prevail in almost every component of their business. They have long resisted the influence of Wall Street to lower wages and increase prices because they feel that the truly significant guiding voices come not from Wall Street but from their customers and employees. By serving these two groups first and foremost, their company flourishes by retaining top performing employees and keeping the best offering for its members. Quality and value; Costco also offers these two virtues in their return policy tightened a little recently to keep up with fast emerging technology, Costco still offers a satisfaction guarantee that is rivaled by very few in the industry. Their belief is that giving its members a sense of confidence about their purchase will lead them to buy more and buy more often; Quality and value.
For suppliers, contractors and service providers to Costco there is a quality and value exchange in the relationship. Costco is demanding of this group as demanding as any $72 Billion company would or could be. But as long as there is quality and value in exchange for goods and services, Costco rewards this group by not charging fees to do business with them, paying their bills on time, and being a good partner in business.
Quality and value, as illustrated above, can cross over in application and are most effective when they are combined. Combine these attributes and apply them to anything, and watch the chances of success increase. One valued supplier to Costco said it best in a recent edition of the Costco Connection. Marketing opens the door, quality keeps it open. Andrew Ly, Sugar Bowl Bakery, Costco Connection Feb 2009. You lose quality, you lose the faith of your customer.