Even in a relatively successful business, sometimes the executive does not understand the VFP of the company, and, therefore, his own VFP. Two years ago, I visited a restaurant that served Russian cuisine about 6 miles outside a small Russian town. The restaurant was unique because they grew their own delicious vegetables and herbs, and the interior of the restaurant consisted of separate rooms that emulated the rooms of an ordinary residential house from the Soviet period. No two rooms looked the same and each guest was greeted by the waiter who acted as the owner of the house. Having dinner there was more like visiting the house of your hospitable friends rather than a restaurant. Even though Id eaten in many Russian restaurants, I'd never tasted such delicious Russian cuisine. That restaurant became extremely popular and well known in the city, and generated a decent income for its owner. After several years of business success, the owner decided to expand the business and opened a restaurant in a resort town by the sea. She invested all her savings in this new restaurant that was completely different from the original. It had neither its own vegetable garden nor the unique rooms. She transferred the chef and the best waiters to the new restaurant, and within a year she experienced nothing but losses. Moreover, the lack of attention to running the first restaurant, loss of qualified staff, and cutting operating expenses resulted in a significant decline of the business.
I don't know what her motivation was maybe her dream was to retire by the sea. But from a business perspective, it wasnt 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. Macys[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 whats 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 dont 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 stores location is convenient, and that the products price and quality meet clients expectations.
If you havent been to the Apple Store on 5th Avenue in New York, you should stop by and youll see that nobody sells anything there either. The stores 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 customers hands. Its 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 dont understand the groups 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 youre 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 clients point of view. When conducting the survey, ask about the products 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 isnt 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.