The Power of Value for Money

The story is told of how the executives of one big company’s executive committee convened a retreat to assess how their business was doing. During the retreat, it emerged that because of the sheer size of the firm, top management did not seem to have clarity about what business they were in.  Some of the top executives thought the company was in exploration, others thought it was in logistics and others thought it was in marketing! After a lot of soul searching, the executive retreat agreed that the company was in the business of energy. That company is Shell™. Once they had agreed on what business they were in, it became easier for them to prioritize their operations and focus on the core functions of the business so as to grow it.

What business are you in? Many of us in the SMEs sector think we are in the business of selling a product – what we produce in our factories or what we buy and wish to sell. This way, several business owners ignore the importance of the power of value for money. We often think that our involvement with our clients is supposed to be limited to the exchange process. Provide a product and let the client pay. Once that is achieved, the relationship is consummated and we may as well forget the interaction. Wrong on all counts.

Read: The Power of Knowledge [5 minutes]

What is value for money? Value for money (VFM) means that our interaction with the customer is a lifetime relationship, which provides economy, efficiency, and effectiveness in terms of what we give the customer. Is the product properly priced given its quality? Is the product usable without difficulty or does it carry hidden costs and complications for the customer? Does the product do what we proclaimed it is supposed to do? While VFM may appear to be more relevant to service-oriented businesses, it is also important where we are selling consumer products to the customer. As a means of attracting and keeping customers, VFM is a very useful technique in SME in growth and sustainability. How can we incorporate VFM in our business model?

Product Integrity

Product integrity means that we ensure that we deliver a wholesome product to our customer. Today there are international standards on product quality. If we want to be competitive, we need to ask how do we measure up to these product standards. Take the example of concrete products. Over 90% of the concrete products on the market do not meet ISO standards. They are made of substandard materials, do not include the right material mixes and are not water-resistant. If one is operating in this industry, and they are not able to meet these ISO standards, they will be losing their customers over time, it goes without saying. So what is the quality of your products? Do they stand up to the test?

Product Support

After-sales support is another critical aspect of VFM. After the customer has started enjoying the benefits fro our product. How do we provide continuing support so that the product’s life is enhanced? This can be done by ensuring ongoing contact with. When customers buy products, we need to ensure that their names are entered into our databases, and we follow up with information on maintenance, new products and other tips that can improve the value of the product for customers. If one is in the business of electronics, one should note that there are many improvements taking place in the industry. How does one get customers to upgrade or purchase add-ons? This can best be done by emailing to customers product news relating to industry innovations and providing facilities for servicing the products.

 Product Availability and Quality

Once your customers have bought into a product, it is important to ensure continuous availability at the right quality. In a study of British American Tobacco Uganda (BATU) supply chain management system, it was found that one of the key considerations in taking on a supplier was the capacity to ensure continuous product availability and quality. If one wants to work with big multinationals, which usually purchase in bulk and pay good rates, it is important to show business continuity, which is the next aspect of VFM.

Business Continuity

Through good management practices, like bookkeeping, proper governance –whereby we separate our private selves from the business and a clear organization structure all help ensure business continuity. Good records management enables us to know if we are making a profit or not. That way we can improve our cost containment strategy. Good governance means that we do no comingle business resources with our private resources and thereby end up consuming our capital. A clear line of command ensures control and continuity, even if the business is a family business. That way you become more attractive as a business partner and that enables you to.

Read: The Power of Customer Service [5 minutes]

How then do we achieve VFM in our SMEs? We know that for small firms there are several constraints ranging from technology, finances, human resources, and even social capital. As we are undertaking the business it is important to be aware of the importance of research and development (R & D). While we may not be able to invest huge amounts of money, it is also not necessary to reinvent the wheel. Lots of information is available on the Internet and this can be easily accessed if we know what we are looking for. Powerful search engines like Google™ make product and process searches much easier. Thus while we may not invest heavily in R & D, we can invest smartly by using the Internet to research on product quality and processes.

We can also improve the VFM proposition by encouraging customer feedback. We need to create a system through which our customers provide information on the different ways in which we can improve the various aspects of the product. One business guru advises that ‘do not create a business suggestion box – be the suggestion box!’. It is therefore important to interact with your customers, to know them personally and obtain feedback to enable you to improve your products as soon as possible. Remember, if it works, it is obsolete. If you want to keep ahead of the market, you must be innovating continually.

Good businesses are created over a lifetime. They are the result of a labor of love, failure, and determination to go on in the face of insurmountable odds. The tendency in developing countries is to think that if we open a shop today, we must succeed tomorrow just does not work! New businesses are like children. They face a learning curve and have to walk through the valley of death, emerge strongly from the experience of near failure in order to succeed. A successful SME is a result of conviction, passion, and perseverance. VFM as a principle may not make money for you today, but who said it is a sprint? Business sure is a marathon, so do you have the staying power?

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