Value–not Price–is the Key to Future American Sales

The days of conspicuous American consumption are over. Just like corporations have “right-sized” their employees numbers for years to stay profitable, it is time corporations “right-size” their sales expectations in order to stay, i.e., survive. And, these sales expectations should be based on value propositions–not price.

Conspicuous and debt-increasing consumption by American Consumers has fueled US and Global economic growth for too long. The American Consumer is not longer capable or willing to continue its participation in the Capitalist’s folly, i.e., spending more for the sake of spending without a definitive value.

Value–not price–will be the new American Consumer’s mantra. The days of disposable products are numbered. American value convenience, ease, usefulness and now green over cheap. Myriads of Microsoft Windows computers sit idle because people bought cheap and did not get value. In contrast, Apple through its iPods and iPhones has finally conveyed its computer and operating system (Mac OS X) values proving cheaper isn’t worth it.

Americans have also figured out that a high price tag does not mean value. May products are overpriced for no reason other than someone is willing to pay the asking price. US Drugs are a good example. Drugs are priced the way they are because third parties, i.e., insurance companies are paying for them. I have frequently stated that the best way to cut the price of drugs by over half is to mandate non-coverage by third parties. Consumers/Patients will then realize the true value of generics and that expensive “me too” drugs (drugs that are no better than other, cheaper drugs in their class) are not worth their asking price. Too often direct to consumer drug marketing is directed a getting insurance companies to pay a premium price for a drug. Shame on these capitalists. The almighty dollar has harden their heart and left them with no conscience. Increasing co-pays and co-insurance is making patients realize that more expensive is not necessarily a better value.

Americans are not opposed to spending money for something they value. Cheap Japanese transistor radios of the 50s and 60s evolved in much valued Japanese electronics of today. Korea, Taiwan and China have taken the same route.

Corporations should and cannot ever expect to return to quarter over quarter sales growth. Smart investors (as oppose to greedy capitalists) know that a good company is profitable and stays that way. Increasing profit usually means giving up something of value. Unfortunately, profits is rarely given up in order to increase corporation value and profits. Instead corporations give up intangibles usually experienced employees that eventually erode profits. So, little or no gain is realized.

I find it ironic and paradoxically that a company suffers for not meeting “analysts expectations.” This means a company producing actual facts suffers from not meeting an analysts guess of the future. My expectation would be that the analysts should suffer for not guessing right. Thus, it appears that ANAL-lysts are part of the problem and not the solution. Companies should stop pandering to ANAL-lysts expectations and instead do what is right for the company. They should make products based on value rather than just increasing revenues or profits to satisfy ANAL-lysts. The best way to do this is not report the irrelevant “numbers” needed by ANAL-lyst to make their guesses and instead concentrate on their value propositions and customers.

Value–not price–is key to surviving in the new American markets. How this value is reached and maintained remains to be played out.

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