What is value and why is it more important than price? — Part 1

Before I answer that question, let me first state that the difference between value and price (a matter I’ll come to in a moment) really depends on the context in which the latter is being experienced. In recent years, more and more products and services have become increasingly commoditised, by which I mean that they have come to be sold more by price point than by any other measurable criterion.

In the context of travel, airline fares are a perfect example of this phenomenon at play whereby low cost carriers such as Ryanair and Easyjet have driven down the price of point-to-point air fares because of their lower cost base than legacy carriers such as British Airways or Lufthansa have been able to do, with the result that they now dominate the skies — and the markets — in terms of their market share of short-haul flights. Consumers have quickly come to realise that what they think they’re paying at the outset, doesn’t necessarily tally with what they end up paying when all the hidden or optional extras have been added to the final bill. They also now realise that they’re not necessarily being flown into the city that is featured in the headline fare: so, for Paris — read Beauvais, 75 kilometres away from the advertised destination!

Consumers continue to put up with this artifice as they accept that that is how companies like Ryanair operate. More importantly though; they put up with it because, at the end of the day, the final cost of getting to their chosen destination is nearly always cheaper than all the other airline options available to them. The rigidly upright seating on board, the narrow width and pitch of the seats themselves; the distant airport locations and the draconian rules surrounding reservations are all endured because the ‘experience’ is usually short-lived. Once the flight time begins to lengthen with low cost carriers, more and more consumers start to vote with their feet as they opt for more ‘user-friendly alternatives. Of course, there will always be a cohort of people who are made of sterner stuff and who can endure any privation that low cost carriers like Ryanair can throw at them but I suspect that even they would have second thoughts about supporting the consumers champion, Mr O’Leary if he decided next week that he was going to launch a low-cost service to Australia!

The fact of the matter is that most people by now do understand the old adage that ‘you get what you pay for’ but sometimes forget to factor in their own tolerance for how much they’re prepared to endure in the interests of securing the lowest price and at what point in the process do they flip from being a consumer that is motivated by price and become a consumer that appreciates the value of value.

(To be continued in Part 2 next week)

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