Peter Drucker, Women’s Shoes, and What Customers Really Buy

October 12, 2018

It’s not a stretch, by any means, to say that management consultant Peter Drucker defined ground breaking management practices which American corporations and non-profits still operate by today. Management by objectives, “SMART” goal setting (Specific, Measurable, Attainable, Relevant and Timely), decentralization into smaller, independent teams, and the importance of knowledge workers are just a few of the concepts first promulgated by Drucker.

In his book Management: Tasks, Responsibilities, Practices, Drucker breaks down the concept of value as defined by the customer:

The final question that must be answered if management is to come to grips with business purpose and business mission is ‘What is value to the customer?’ It may be the most important question. Yet it is the one least often asked.

One reason is that managers are quite sure that they know the answer. Value is what they, in their business, define as quality.  But this is almost always the wrong definition.

For the teenage girl, for instance, value in a shoe is high fashion. It has to be ‘in’. Price is a secondary consideration, and durability is not value at all. For the same girl a few years later, high fashion becomes not a necessity but a restraint. She will not buy something that is quite unfashionable, but she Is more interested in durability, price, comfort, and fit. The same shoe that represents the best buy for the teenager is a very poor value for her older sister.

The customer never buys a product. By definition the customer buys the satisfaction of a want. The customer buys value . . .

Yet we as business people focus on the features and specs of our products. If we're services providers, we talk about our degrees and the qualifications we possess to deliver those services.

What we often ignore is what the customer is really buying:  the satisfaction of a want.

And it’s this failure which diminishes our pricing power.

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About me:  I’m enthusiastic about how changes in pricing strategy can significantly change profitability for a business and enhance life choices for business owners. I live this passion through Ray Business Advisors, my outside CFO and business advisory practice, in which my pricing is exclusively value-based, not hourly. I work with business owners on how they can change their pricing not just to increase their profits, but better serve the wants of their customers. Want to talk? Call me at 404-287-2627.

 

(Photo by Porapak Apichodilok from Pexels)

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