I don't know what her motivation was – maybe her dream was to retire by the sea. But from a business perspective, it wasn’t a smart decision. The reason for her failure is simple – she had never considered what the VFP of her old successful restaurant was, and what the new VFP should have been. People came to the old restaurant for a special meal and the ambiance. Visiting this restaurant was an event in itself, and customers willingly traveled several miles for the experience. The new restaurant was nothing like that. It only had the good recipes from the original restaurant, but without the supply of special fresh produce and the unique setting. This new restaurant, which was actually one of many located in the neighborhood, had a completely different VFP. Lack of understanding of the exact product the client is paying for resulted in her almost losing the business.
Retail companies have their own VFP, and it is not the merchandise they sell. By definition, the VFP is what a person produces, and retail companies do not produce the merchandise itself. Retailers "produce" the availability of a product to the customer. Trading and retail activities always entail providing a certain selection of goods at a particular location, plus some additional services. That is why in retail it is so important to assess the selection of goods provided in relation to the location. Duane Reade[5] stores offer their customers a limited range of everyday products conveniently located so that they could drop in during their commute. Macy’s[6] department stores offer their customers a wide selection of inexpensive clothing and household goods. You do not stop there on your way home. You go there to buy a summer dress and end up leaving tired, with stuffed shopping bags that barely fit in the back seat of your car. Both of these are in the retail business but they have very different VFPs. And what’s interesting, is that in both examples the function of selling the merchandise is practically nonexistent, as they are self-service stores. It would be erroneous to state that the VFP of these stores were “sold goods” when they don’t take effort to sell, i.e. to exchange goods for money. By selling, I mean conscious actions of a salesperson that lead to a customer making a single purchase or purchasing more items. Yet, these stores consistently and successfully create a selection of goods wanted by their customers and correctly present them so their customer can easily find the right product by himself. They ensure that the store’s location is convenient, and that the product’s price and quality meet clients’ expectations.
If you haven’t been to the Apple Store on 5th Avenue in New York, you should stop by and you’ll see that nobody sells anything there either. The store’s staff offer advice, demonstrate products, answer customers’ questions, do the checkout, and hand over purchases to the buyer. However, they do not persuade the customer to buy the product or handle their objections. Apple has created such a compelling product, that during the Christmas season, customers have to squeeze through the crowded store to stand in a humongous line for the treasured box with a new iPhone or iPad. This store is a hybrid of a showroom and a warehouse. The difference from a showroom lies the large number of consultants and being able to pay for merchandise right on the sales floor.
Another example of a special VFP in a retail company, similar to the Apple store, is B amp;H Superstore of digital equipment in Manhattan. They have solved the problem of selling a large variety of sophisticated digital equipment in a relatively small space. The way the shop is set up, a client can get familiar with the equipment, get expert advice from the employees, as well as quickly pay and get the products they want. To display an array of equipment without overloading the area with stored goods, B amp;H installed a conveyor belt right below the ceiling of the sales area. It quickly delivers the desired items from the warehouse into the customer’s hands. It’s surprising that B amp;H has not yet become a well-known franchise. The volume of the VFP of these stores is something to truly admire. What is the VFP of such a store? Not of the company as a whole, but of a store, specifically? The VFP will definitely include wording such as, “assistance with making a choice", "speed", and "a certain selection of goods".
It does not matter whether one is managing just a single division or an entire company, if they don’t understand the group’s VFP, sooner or later, they will fail. In about 50 % of my consulting projects, I found that even the founder of the company did not have a clear understanding of the product the client was paying him for. If you’re an expert skier, are knowledgeable in the subject, and have been selling ski gear for more than 10 years, then your understanding of what is valuable may differ significantly from the viewpoint of the majority of customers in your store. This is because most of your buyers are beginners who are just taking their first steps. Beginners are the ones who tend to buy most of the equipment and gear, not those who have been skiing for years. Experienced skiers already have their “tried and true” gear that they keep throughout the seasons.
Finding out what holds value for your customers is simple through the use of surveys. A customer survey asks them what is valuable, important and what is missing for them in your product. This survey is not for promotion purposes, but its results are necessary to understand the client’s point of view. When conducting the survey, ask about the product’s shortcomings, because shortcomings and values are two sides of the same coin. If the responses say that they do not like slow service, that means that fast service is valuable. If they say that pricing isn’t clear and that annoys them, then a simple pricing system would be valuable. Think of The Dollar Store or The Dollar Tree – they can be found in any city because their VFP is in demand and have their own clientele.
It is not always easy to objectively look at the results of these surveys. It took me a couple of years to agree with the survey results from our own clients. When I took my first steps in consulting as a business lecturer and owner of a training company, we were conducting great seminars where we taught management tools to business owners and managers. The seminars were attended by thousands of people every year. We had great reviews where they talked about how they wanted to change something in the way their business was organized or how much they liked the ideas we taught them.
But when I analyzed statistical data, it turned out that the average client attended two to four seminars and then stopped attending. Some customers had even booked one or more corporate seminars, but after some time they stopped working with us. Those great reviews they initially gave us after the seminars did not allow us to see the actual situation. Naturally, we waited until we were not doing so well, the number of seminar attendees declined, and it became increasingly more difficult to fill events. Only then did we conduct surveys about the VFP of our company.
It turned out that the clients who wanted to organize the workflow in their businesses and could pay for our services, were not getting what they had expected. We didn’t meet their expectations of implementing management tools. When they came to our seminars, they had hoped to implement the management tools in their organization and, consequently, improve its performance. However, in most cases that wasn't the way it turned out.
We conducted customer surveys regarding the value of our product and it was particularly valuable and important to interview two categories of clients:
