One reason that the current economy is the Age of the Customer is what I call downward mobility. Simply put, although we make more money than our parents did, we are actually less well off, because the cost of liv- ing has outstripped the increase in salaries.
For instance, about 35 years ago, a three-bedroom house in my county might have sold for $20,000, and the person buying it was earn- ing maybe $15,000 to $25,000 a year. Today, that same house goes for $200,000—ten times as much—but the buyer is earning $60,000 to $75,000—only three times as much. What this means is that while we make more than our parents did, our expenses are disproportionately greater, so we’re not living as well.
How does this affect you as a businessperson? Disposable income is
less. Consumers are still buying, but they are spending more carefully. In- terestingly, they are buying some small luxury and expensive items (air- pump sneakers, gourmet ice cream, take-out sushi) to compensate for the fact that they can’t afford the big-ticket items. They’re also buying ser- vices that save them time, such as housecleaning and baby-sitting, but are cutting back in many other areas. Downward mobility reduces buy-
ing power and makes your customer extremely deliberate about pur- chase decisions.
As a result of all the factors just discussed, there has been a funda- mental shift in the way consumers and businesses acquire products and services, and in their relationships with retailers, service providers, man- ufacturers, dealers, and others who supply these goods and services. Un- derstanding these differences, and accepting that this is the way it is right now, will make your life easier in two respects. First, instead of be- ing frustrated by the changes taking place, you’ll recognize them and ac- cept them. You’ll still have to meet these challenges, but you’ll at least learn to accept reality and stop longing for better days.
Second, the first step in solving a problem is understanding the problem—not the apparent problem, but the true nature of the chal- lenge you are facing. By recognizing that these fundamental shifts in the customer-vendor relationship have taken place, you’ll be better able to adjust not only your customer service and product quality to meet these new demands, but also your sales and marketing efforts to sell this new consumer.
As a direct result of the recession of 2001–2002, your customers have become more price sensitive. This does not necessarily mean that price is the only concern, or that the low price or low bid will be the one that makes the sale. But it does mean that business and consumer buyers are
more concerned than ever about what things cost. While it might be true
that price is always a factor, to some degree, its importance has escalated dramatically, and the way you price your service plays a large role in whether the customer is happy with you or whether they will begin to look elsewhere.
Consumers evaluate many purchases more carefully. In the corpo- rate world, the manager is increasingly rewarded for being a good
buyer, which translates into getting vendors to do the job for as low a price as they can be negotiated down to.
Another reason to consider repackaging your offers is because you need to appeal to consumers who want price, quality, and service. In the past, firms would choose their area of superiority and market themselves
based on one of the three values. Some vendors got jobs on price—they always bid low and won contracts from prospects who looked to get it as cheaply as possible. Other vendors stressed quality. They said, “We take our time, and you’ll have to wait, and we charge a lot. But if you want the best, you have to pay for it.” And customers looking for quality re- sponded to the pitch.
A third group of vendors stressed service. They weren’t the cheap- est, and they weren’t the best, but they would do anything the cus- tomer asked them to. If the customer said “Jump,” they asked “How high?” Customers who valued service above all else gravitated toward this type of vendor, even if the price wasn’t low and the quality wasn’t absolutely the best.
Now, however, all that is changed: You can no longer specialize in
price, quality, or service. Your customers want all three. They want a
top-of-the-line product, but they also want a good price, and they want you at their beck and call. This is a difficult bill to fill, and it’s why many service providers long for the golden years of the 1980s. But it’s what you’ll learn to live with today, and repackaging your services and goods allows you to offer all three values to different customers.
The market is more price sensitive, but as I’ve said, this does not mean that offering the lowest price is an automatic winning strategy. There has always been a segment of your market that buys primarily on price. What has happened is that the size of this segment has increased. Not everyone is a price-buyer, but more people are. Pressured by lack of disposable income or a corporate mandate to control spending, they want you to give them a break on price, price, price. To the price-buyer, the winning bid is selected by the bottom-line dollar amount: The job goes to the firm who can do it for the least amount of money. They figure it will be good enough and so do not consider higher bids.
You must be able to spot the price-buyer and decide if you are willing to play this game. As a rule of thumb, when a customer calls you and the first thing they ask is what so-and-so will cost—with no apparent inter- est in your qualifications, track record, product features, or experience— you are probably dealing with a price-buyer.
Some industries have been harder hit by an increased emphasis on price-buying than others. In contracting, for example, independent contractors who do home remodeling and building face stiff competi- tion from bigger firms that advertise standard-design family rooms, dormers, or other add-ons at a low package price. “These firms generally don’t do good work and can rip you off,” one independent contractor
told me recently, “but that low, low price does sell for them. Prospects ask me, ‘Why do you charge so much when so-and-so firm advertising in
TV Shopper can do it for $10,329?’ And it’s a problem: Many don’t un-
derstand, don’t believe, or don’t care when I point out the difference be- tween our work and the bargain-basement contractor’s. And we lose business to them.”
So part of this price-consciousness trend is that many of the con- sumers who were not previously price-buyers have been converted to price-buyers. As for those customers for whom price is not the major is- sue, most of them have changed as well; they have become more value conscious. That is, they aren’t necessarily going to buy the low price, but they do want to be sure they are getting the most value for their money.
Be aware that the value-conscious buyer is going to be a demanding customer. But there are very few nondemanding customers left. So you’ve got to adjust your marketing. Be prepared to provide more service, to do more, and to act faster, for the same or lower price than you were getting five years ago.
Value-conscious buyers will often meet your price but in return want to make sure they are getting the most they can out of you, and every- thing you do will be scrutinized carefully. These buyers are less shy than the 1980s consumer about complaining when they’re not happy, and they’ll often complain about small things—every detail must be to their liking. Get used to it and prepare to accommodate them. This is business in the 2000s.
An important note: If you are going to give extra service to a cus- tomer, do it immediately, pleasantly, openly, and willingly, without grip- ing about it.