I admit that I can get wound up quite easily, and unnecessarily , by the words people use. Business jargon is a particular bone of contention, but why should it matter? It shouldn’t. So going forward. I’m going to be proactive in pushing the envelope, so that at close of play it will no longer bother me. It’s going to be a paradigm shift for me…a game-changer.
But that’s for the future, and for now there’s one word I’m hearing more and more which I think does matter. Because if you take it at face value without thinking about what it really means, it could cost you a great deal of money.
That word is…affordable. A…bloody…fordable!
In the last few days I’ve read about affordable housing, affordable cars, affordable wristwatches, affordable road bikes and affordable 4k T.V’s. The ‘affordable’ label is being attached to anything and everything, but what the hell does it mean?
Well I assume that it’s supposed to mean that prospective buyers have the means to purchase it. But is that really true, and is it in any way helpful if it is?
Just yesterday, I was looking at road bikes which fall into the ‘affordable’ category. Someone has decided that this is somewhere around £1,000 to £1,500. Apparently £2,000 isn’t ‘affordable’ but £1,500 is. Why? A few weeks ago, I read an article about affordable ‘wristwatches’ (it was an American article) and the price limit was set at $10,000.
In whose world is that classed as ‘affordable’, and how does that square with a bike only being affordable if it’s a fraction of the price? Are watch enthusiasts wealthier than cyclists? I think we should be told.
If you want proof of the worthlessness of ‘affordability’, you need look no further than that – two discretionary non-essential purchases with vastly different values attached to what is affordable.
But affordability isn’t just worthless, it can be financially harmful too. I think the affordable label is dangerous for several reasons:
- It annoys potential customers who don’t find the price affordable at all. How are you going to feel if you can’t even afford the affordable? If a watch maker loftily calls it’s £6,000 model ‘affordable’, how does that make you feel? Like going and buying something from another maker would be my guess.
- It devalues something which may be a dream purchase for someone. Do you want to stretch yourself to the limit to end up with something dismissed as ‘affordable’?
- It is fundamentally meaningless. What’s affordable to one person may be beyond the dreams of another. What’s unaffordable to one person could be pocket change to another.
- It shapes pricing and marketing decisions in ways that are not conducive to maximising profits.
This last issue is where the real danger lies for you and I as business people. If we aim to make something ‘affordable’ to our potential customers, we should surely only do so when we have a very clear idea of their financial position and the importance and weight they put on purchasing what we sell. And who the heck has that?
And even if we do have that information, our customers are rarely (if ever) a homogenous group. Affordability will mean very different things to each of them.
The reality is that we should only create products and prices after careful testing and not via some subjective notion of what is affordable. At the risk of re-stating the obvious, what’s affordable to one is out of the reach of another, what’s unaffordable to one is pocket change to another…and what’s worth making financial sacrifices for, for one, is of little importance or consequence to another.
A focus on affordability ignores the fact that there is a wide range of buying power in every market. Focussing on affordability ignores the needs of the more well-heeled who will almost certainly be craving something exclusive and ’unaffordable’ to the masses. And this is frequently where the biggest profits are to be found. Because in pretty much every product category I can think of, diminishing returns loom large. You don’t get an awful lot more for your money once price starts to rise above the market average – perhaps the point at which it moves out of the so-called ‘affordable’ category. The incremental cost of turning a bog standard product into a premium one is often not that high, and considerably less than the uplift in price.
I hope I’ve been able to peel back the onion for you on this one and expose the elephant in the room. I know you’ll be empowered to really buy in to this idea now, take it offline and reach out….
Sorry I can’t go on. Think I’m going to be sick!