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Quality, Convenience, Cost

Valuations

Photo Credit: Shutterstock

As I’ve written before, we have two small kids.  Both my wife and I work full-time, and meal planning can be difficult and hectic, especially in our busy season. A couple times time this year, we’ve had to resort to McDonald’s to feed the family. I have nothing against McDonald’s – the fries are great, I’ll enjoy a Big Mac from time to time, and their bacon and egger has saved me from many hangovers in my pre-fatherhood days. But let’s be honest, when someone chooses McDonald’s, they’re picking convenience and cost over quality. 

In any transaction, a purchaser is usually making some sort of compromise between quality, convenience, and cost:

Quality Cost Convenience venn diagram

As a business owner, it’s important to understand exactly where in this framework you are trying to operate. You don’t have to be in the centre. Companies like McDonald’s and Wal-Mart have been hugely successful selling convenience and cost over quality. On the other hand, Costco tries to emphasize quality and cost, as their membership model is not particularly convenient. Some don’t even try to play in more than one circle – buying a Ferrari requires the inconvenience of a years-long waitlist and will cost you as much as a house.

While operating in the centre – providing minimal compromise between cost, quality, and convenience – can be highly satisfying and profitable, it can also be very difficult, and can lead to unhappy customers. Ask yourself what your business is trying to accomplish for its customers, and you might very well find that you should be focusing your efforts outside the centre of the diagram.

And that’s okay! Customers implicitly understand this compromise. The critical element is to manage expectations. If you’re not the cheapest supplier in town, but can offer faster, more convenient service or higher quality products, let your customers know that!  On the other hand, if you are trying to be a low-cost competitor, it may not work to promise the world to your customer. Be clear on what your customers can expect from you, and make sure you deliver. 

Our recent McDonald’s experiences have demonstrated what happens when you don’t meet expectations. The last time I was there, it took 18 minutes to get our food, and to feed two adults and two toddlers cost $47. I can accept the quality of the food, but was expecting faster service and cheaper prices. If I’m getting none of what I expected, why would I go back?


Talk to James about increasing the value of your business by knowing where you operate and doing it well. 403.382.6800 / james.nakashima@availcpa.com.

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