Costs vs. Value – The Delicate Business Balancing Act

By: Nathalie Schooling

One of the most valuable lessons to come out of the 2008/09 global economic crisis was that effective cost management is a vital component of lasting business success. It’s clear that when times get tough in the business world, the tough (and successful) save money.

However, the real key to success through cost savings is not how much you can save, but whether you can save without reducing the value you offer your customers. And while achieving this balance of savings versus value delivery is particularly important during difficult economic times, it’s also an essential component in business success at all times – whether good or bad.

The problem is, however, that a lot of businesses seem to have the misguided belief that the only way to cut costs is by taking shortcuts. Unfortunately, this inevitably leads to a situation where short-term cost saving efforts turn into long-term expenses, as unhappy customers are forced to complain repeatedly, return goods, call back service providers or, in many cases, simply take their business elsewhere.

The cliché about time being money is an overused statement for a reason... it’s true. And in the context of any sales transaction, it’s a truth that applies equally to the buyer and the seller. If a customer has to keep returning faulty goods, sending food back to the restaurant kitchen, or recalling a service provider to re-do a task that wasn’t completed properly the first time, nobody in the transaction is enjoying any form of value.

The time wastage and frustration experienced by customers in these situations is actually costing them money and stands to severely diminish their perception of the business. Of course, apart from the long-term brand damage the business is enduring, it is also losing money every time it has to spend more time fixing what it should have done right the first time.

The good news is that this type of lose-lose situation can easily be avoided simply by staying committed to doing things right first time and only ever taking a calculated and carefully considered approach to saving on costs in a way that doesn’t place customer value creation at risk. To this end, a rule of thumb for any business – particularly one that understands the value of delivering consistently positive customer experiences – should be that if your cost cutting effort has even the slightest potential to result in an unhappy customer, find some other way to save money!

An even better approach is to adopt a ‘cost saving, value-adding’ approach as part of your business strategy at the outset. By doing this, you can establish a culture of value creation in your staff that includes cost effectiveness and customer service excellence in everything they do. And if it’s part of your strategy, that means you can monitor it. Which also means you’ll never find yourself in a situation where you have to take shortcuts to save money when times get tough – so your customers can be confident of consistent product and service quality from you.

The result: No returns. No complaints. No repeat callouts. No unnecessary expenses. Just satisfied customers who appreciate the value they get from your business, and are happy to return the favour.