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the time/cost/benefit ratio
Today, consumers are buying into five key factors:
The above are the key factors in marketing leisure in the millennium and it is no coincidence that all the above factors have one common factor running through them - the very appropriate factor of time.
In today's world, it is hard to create 'time' so we try to make the best of what little time we have. This means that in many cases, a time saving, equates to a corresponding willingness to pay a higher price. Take the oft-cited demise of the traditional lunch hour. The cost of one large family loaf, one tub of butter and one jar of jam is about the same as that of one pre-packed sandwich. The former can feed us for a week, the latter for one day but many choose the latter because they are willing to pay a premium price for convenience, speed and a choice of fillings (i.e. three of the five key factors listed above). Provide delivery straight to the desk and an even higher price premium can be charged. How do we define our five key factors?
Convenience
As evidenced by the product or service's ease of purchase, packaging, ease of consumption, length of consumption, ease of product disposal, or ease of moving on to another or complimentary product/service, etc. In a hotel, this could mean that while you stay, the car gets washed. The extra 'hidden' price in the room bill may be £4.00. The local petrol station may charge £2.50 but the convenience factor of not leaving the hotel makes up the difference in cost.
Quality
The higher the quality, the more time a consumer is likely to allocate to a particular product/service with a corresponding willingness to pay a higher price. No examples needed!
Availability
Point of purchase, ease of repurchase, immediate or later consumption, direct availability e.g. door to door versus indirect availability via a reseller.
Speed
Immediate delivery of product/service versus various waiting times. Speed of service, mode of getting the product to you and how fast problems are sorted are all factors affecting the resultant, speed.
A state of the art computer from ten years ago is today, 'painfully slow'. Products and services are expected to be delivered increasingly faster as this corresponds with our perception of the technology cycle.
Choice
Is the service or product a fait accompli or just one of a number of available product/services. Choice includes:- choice of product, where to buy it, where to consume it, how to consume it, where to dispose of it and choice of payment. Out of all our five factors, 'choice' may well be the key and this has special significance to the specialist or one product type company. Such companies are, in most cases, a dying breed and the past logic of 'sticking to your core business' is now, positively dangerous.
The concept of choice doesn't seem to fit easily with the marketing logic of loyalty schemes, since they seem to be a deliberate attempt to negate consumer choice by tying an individual to a particular supplier.
Working examples
As an example, there is currently a movement in the restaurant sector from pizza to pasta. (i.e. Ask, Pizza Express and Zizzi). The theory is simple - by offering more than pizza on the menu you can attract more people. Go to a Boozy Rouge's restaurant and you can get a choice of two menus - casual and gourmet. Go to a modern club and you may find two dance floors with different music. Choice is undoubtedly the 'king pin' of the time/cost/benefit ratio.
Implementing a strategy
Generally, the more of the five key factors you can provide, the higher the prices you can charge.
And finally...
Not a News at Ten cuddly end story but a warning about the negatives of getting your time/cost/benefit ratio wrong.
How often have you been enticed by a special promotion i.e. cheap beer only to find a skeleton staff serving it? Is this an out of stock situation, or a drop in product quality? One example of the consumer applying this ratio was a McDonald's Big Mac promotion where the demand created by the price promotion could not be met. Speed and availability, two of our five key factors could not be delivered, the ratio went pear-shaped and it was Burger King, a direct competitor that ultimately claimed the benefits. So you must be aware of the dangers of getting the ratio wrong!