In my more than 25 years of working in the marketing and communication industry I came across two phrases which were most abused, misused, and ill used. One was consumer insight ( I will post a separate blog on this one later) and the other was VFM or value for money. I will make an attempt here to shed some light towards explaining the correct use of VFM.
So what is value for money? In plain and simple terms it means that as a consumer whatever I got in return of money paid, made me happy and satisfied. This is actually an oxymoron. It is human nature to want more and be dissatisfied with whatever you get, howsoever cheap. Frankly unless it is free we are never fully satisfied (of course that too has caveats). I learnt this from my mother, my wife and those innumerable housewives across Asia, Middle East and North Africa whom I met in group discussions and other such research methodologies. You notice I am alluding to only the female species. I must confess most of my learnings specially on money matters have come from my interactions with the female species.
How does one then define or objectively use the term VFM. What I learnt was simple, without any subjectivity. VFM can have only three connotations.
1) Same for less. This is pure and simple price reduction. The same product, the same brand, the same specifications for less price. Almost all brands do this in some way or the other. The most innovative way of doing this is through exchange offers. Even Apple is doing the same in India. There are but a few brands which never offer price reductions. Can you name any of those brands? By buying the brands at a discount the consumer is satisfied that he/she has got a good deal . VFM.
2) More for the same. This is the most common scheme followed by brands, specially the automobile brands in today's environment. Here the price is not reduced. But at the same price more stuff is added. I haven't paid extra but I have got goodies worth x amount free. So this is VFM. A car with alloy wheels or free service for 3 years etc is a classic example of more for the same. Similarly buy 2 get 1 free or free Lux soap with Lux shampoo.....
Airlines do it with upgrades. You pay for economy class and bingo you could be upgraded to business if some seats are available. The airline does not lose any fare and the passenger appreciates and remembers the gesture and talks about it. In my experience there has only been one airline who never upgrade, ever. Singapore Airlines has a no upgradation policy, not even for its own ambassador or Prime Minister. Its logic is simple. They look at it from the viewpoint of a business or first class passenger. Why should they be sitting with someone who has not paid the same? And as premium paying passenger means better margins it makes eminent sense to indulge them. You have any such examples?
In Far east during the economic recession of the late nineties FMCG companies like Unilever who had a strong presence in the premium segments saw the consumer move towards popular, discounted brands. In categories where these companies did not have popular or discounted brands there was a temptation to offer same for less. This would have helped the brands regain volume at lower margin, but it would have also meant destroying the premium equity of the brands in the long term. Some succumbed and some used the more for the same principle. Unilever for example, in Indonesia, in detergents launched a VFM brand whose promise was more for the same. The brand quickly established a base and still exists as a top 5 brand.
3) Less for Less. Yes, this also is an example of VFM if handled right.. When you can't get a certain brand or product at a certain price sometimes marketers reduce its quantity or weight or ingredient so that it can be available at a price point which is affordable. Think sachets. Think 200 ml soft drinks. But this is a tricky one too. Specially for premium brands. They could lose their exclusivity by going too mass. Car brands are handling it right. BMW 1 series is a good example. The brand becomes affordable but it still is premium pricing within the category. Cigarettes in India have tried it too with mixed success. Given the duty structure based on length of cigarettes, popular brands have introduced shorter versions aimed at bidi smokers, hoping they will upgrade. After all for a bidi smoker smoking a popular brand of cigarette could be a status symbol.
This, then is my theory on VFM. Do share your thoughts and some examples on the same.
So what is value for money? In plain and simple terms it means that as a consumer whatever I got in return of money paid, made me happy and satisfied. This is actually an oxymoron. It is human nature to want more and be dissatisfied with whatever you get, howsoever cheap. Frankly unless it is free we are never fully satisfied (of course that too has caveats). I learnt this from my mother, my wife and those innumerable housewives across Asia, Middle East and North Africa whom I met in group discussions and other such research methodologies. You notice I am alluding to only the female species. I must confess most of my learnings specially on money matters have come from my interactions with the female species.
How does one then define or objectively use the term VFM. What I learnt was simple, without any subjectivity. VFM can have only three connotations.
1) Same for less. This is pure and simple price reduction. The same product, the same brand, the same specifications for less price. Almost all brands do this in some way or the other. The most innovative way of doing this is through exchange offers. Even Apple is doing the same in India. There are but a few brands which never offer price reductions. Can you name any of those brands? By buying the brands at a discount the consumer is satisfied that he/she has got a good deal . VFM.
2) More for the same. This is the most common scheme followed by brands, specially the automobile brands in today's environment. Here the price is not reduced. But at the same price more stuff is added. I haven't paid extra but I have got goodies worth x amount free. So this is VFM. A car with alloy wheels or free service for 3 years etc is a classic example of more for the same. Similarly buy 2 get 1 free or free Lux soap with Lux shampoo.....
Airlines do it with upgrades. You pay for economy class and bingo you could be upgraded to business if some seats are available. The airline does not lose any fare and the passenger appreciates and remembers the gesture and talks about it. In my experience there has only been one airline who never upgrade, ever. Singapore Airlines has a no upgradation policy, not even for its own ambassador or Prime Minister. Its logic is simple. They look at it from the viewpoint of a business or first class passenger. Why should they be sitting with someone who has not paid the same? And as premium paying passenger means better margins it makes eminent sense to indulge them. You have any such examples?
In Far east during the economic recession of the late nineties FMCG companies like Unilever who had a strong presence in the premium segments saw the consumer move towards popular, discounted brands. In categories where these companies did not have popular or discounted brands there was a temptation to offer same for less. This would have helped the brands regain volume at lower margin, but it would have also meant destroying the premium equity of the brands in the long term. Some succumbed and some used the more for the same principle. Unilever for example, in Indonesia, in detergents launched a VFM brand whose promise was more for the same. The brand quickly established a base and still exists as a top 5 brand.
3) Less for Less. Yes, this also is an example of VFM if handled right.. When you can't get a certain brand or product at a certain price sometimes marketers reduce its quantity or weight or ingredient so that it can be available at a price point which is affordable. Think sachets. Think 200 ml soft drinks. But this is a tricky one too. Specially for premium brands. They could lose their exclusivity by going too mass. Car brands are handling it right. BMW 1 series is a good example. The brand becomes affordable but it still is premium pricing within the category. Cigarettes in India have tried it too with mixed success. Given the duty structure based on length of cigarettes, popular brands have introduced shorter versions aimed at bidi smokers, hoping they will upgrade. After all for a bidi smoker smoking a popular brand of cigarette could be a status symbol.
This, then is my theory on VFM. Do share your thoughts and some examples on the same.
