Increasingly the concept of value has come to mean "cheap," "bargain," "budget," "economical" or "discounted." It has become the opposite of the now passe concept of luxury.
But, in truth, value doesn't mean any of those things. Value means "worth the money." It means a fair and reasonable price for the product or service rendered. Value is timeless; not "the new green" Mark Penn describes in The Wall Street Journal. It exists in and out of a recession.
A $4,000 suit might actually be a good value if it was bespoke and made from the highest and rarest quality materials. While I can't say that a $4,000 suit is something that you'd be willing to spend your hard-earned money on, I can make the argument that the price tag is fair considering the work that went into making it and the cost of the materials to produce it. If you managed to find that very same suit for $600, I wouldn't say that was good value, I would say that was an incredible deal. I would also say that the store where you bought it will be going out of business very soon.
This doesn't mean that everything expensive is of value and everything cheap is not. Quite simply, an object or service is of value if it is worth the price you pay for it.
So who is to blame for this misunderstanding of the definition of value? Quite ironically, it is the marketing-industrial complex itself. It's ironic (notice the correct use here) because the very same minds responsible for misappropriating the term to help clients sell more products and services are now among those suffering the most from the very mind-set they helped to create.
Our clients are now looking for "value" (read: discounts) everywhere. They want lower budgets without reducing service. They are demanding "more for less" and "value-based" pricing. If we push back, they put the business out for bid in the hopes of either pressuring us to lower our fees or finding a lower cost agency. The result: demoralizing cuts in budget, resource draining re-pitches or, worse, participating in pitches for prospects that are only using you as leverage (or are just testing the waters without the real determination or commitment to make a change).
But our product is ideas and they cannot (and must not) be commoditized. Unlike other industries, it is hard for us to meaningfully reduce the cost of production without reducing our most precious asset -- people. By reducing people, we actually reduce our ability to deliver on what our clients expect and need: effective creative marketing solutions that help them achieve their branding or sales objectives.
Therefore, as agencies, we all need to do a much better job of educating our clients on the true meaning of value before it is too late. Here are two examples of brands outside of the agency world that have effectively conveyed value whilst the rest of their industry falters.
If there is one seemingly bright spot in the faltering media world it is The Economist, whose ad pages and circulation are up -- even with a subscription cost of $127. According to Newsweek CEO Tom Ascheim, in an interview with Silicon Alley Insider, one of the reasons for The Economist's success is that it eschewed the traditional U.S. magazine discount subscription model. For the past 25 years, magazines have been steadily lowering subscription prices to maintain or grow circulation numbers so they can charge more for advertising. The result is that consumers devalued the cheaper magazines and have grown used to getting them for almost free. Now that advertising dollars have dried up, most of these magazines are failing because no one wants to pay for them -- they no longer see the value. But The Economist stayed true to its vision and held firm on pricing. The result is a magazine with a unique voice, a loyal following, a reputation for quality and a solid bottom line. That's value.
This past holiday shopping season, when luxury department stores such as Saks Fifth Avenue and Barneys panicked and begin drastically cutting prices before Christmas, Hermès showed consumers that, in many cases, designer products were not really worth the money they were initially charging. When other retailers reduced prices by 80% in some cases, they showed the world that many of the luxury products they sold were, in fact, not a good value. The luxury industry has yet to recover. Following the holiday period, spring was dismal as consumers refused to pay full price and waited for more discounts. It remains to be seen what will become of holiday 2009/10 (if Fashion's Night Out is any indication --- then not good). But last year Hermès didn't seem to panic or go into hyper-reduction mode and, as a result, has done better than most. At Hermès there were no fire sales to be seen. Instead the French luxury retailer focused on promoting its classic leather goods, including its iconic belts and bags, the Birkin and Kelly. Hermès does not use assembly lines and only one craftsman may work on one handbag at a time, hand-stitching each individual piece that often consists of extremely rare materials. Even amidst an economic downturn, Hermès' leather goods were positioned as "investment pieces." As a result, Hermès has actually seen sales in these key categories rise. In the second quarter of this year the retailer experienced a 33.4% increase (to $310 million) for its leather goods.
So, taking these two examples as a model (in addition to numerous conversations on this subject with colleagues), I would like to offer the following four strategies for maintaining your agency's "Value Proposition" during the current recession:
- Identify exactly what makes your agency truly unique from the competition and make sure everyone knows about it. It is not enough to cite clichés such as you "offer senior level attention" or that you "work harder than everyone else." You need to articulate how and why your processes, approach and points of view are better than everyone else's and how these differences will ensure success.
- Never take a client in this recession that you wouldn't in good times. The same goes for re-pitching toxic business. Ill-fitting clients tend to create more problems than they actually solve. They can become dangerous distractions, taking valuable time and resources away from the clients that truly deserve your time and effort.
- Put your money where your mouth is and be willing to risk it all. When clients ask me how they can measure the success of our work, I tell them there is only one way we want to be judged: on the success of their business. If our programs and campaigns aren't driving the business success our clients need (regardless of how creatively successful or innovative they might be) then we should be fired. This only seems fair to me. As agencies, our work is only of value -- and therefore worth the fees -- if we provide real value to our clients' business. If you are unwilling to be held accountable for your work then you can't really expect the client to give it the value it deserves.
- Be prepared to walk away from a client that doesn't value your work. Once you start working below your value it is almost always impossible to recover.
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