I met Money the other day and told her, “Hey, you are just a piece of paper!” Money smiled and said, “Of course, I am. But I have yet to see the face of a dustbin”…Says a SMS forward.
It might not be the only motive, but earning money is one of the most important reasons why human being toil day-in day-out under the scorching sun or under the synthetic cold waves (AC) to earn every extra penny. As it is the output of our sweat, we try to maximize every ounce of it every time and hence the concept, Value For Money or VFM.
A web business-dictionary defines VFM as the utility derived from every purchase or every sum of money spent. VFM is based not only on the minimum purchase price (economy) but also on the maximum efficiency and effectiveness of the purchase. In simple term:
VFM = f (Price; Cost of Transaction; Utility Derived from the product)
- Price (P): The money paid for the product
- Cost of Transaction (T): Cost in monetary, physical and emotion for getting the product
- Utility Derived (U): Need or the problem solved by the product
Think again for once:
- Was that last purchase really worth the money you paid for?
- It was cheap but was that purchase really needed?
- Could that buck worth more if you would have spent it elsewhere?
Yup! Truth may be painful sometimes and the answers also are…
The problem with VFM is that P overshadows T and U in most instances. P is the front end, it is in the top of the mind and it can also be easily influenced by externalities, while T and U are the back process, they are back of the mind phenomenon. Unless you seriously analyze or use your mental faculty T and U will not surface and P will disguise them in their favor. Hence you end up making a decision based on P. You may call that VFM but it actually is not because you are not considering T and U, which have equal if not more stake.
The next questions is then what should govern the decision making process?
Let’s deal this question with a simplified buying process given below:
I believe the above picture is self explanatory. It simply says that you buy because you have a need and then you review your purchase based on that need. The price or the experience are part of the process. Hence the success or achievement of that purchase should be defined by the last step, which is “Post Purchase Review”.
So then do you still think P (third step) should govern our decision?
If it is still yes then you are as good as saying “I went to buy a dozen eggs but because I saw a nice diary at 50% discount which is the same price of a dozen eggs, I end buying the diary even though I know I don’t maintain a diary, maybe it might maintain a dairy someday. Let me not have breakfast today so that I’ll fulfill a probable future need”.
Well! the analogy might sound dumb but most of the time we end up doing the same mistake in the name of Value For Money. To get a clearer perspective, let me give you a couple of my personal experience and which are what made me jot down this piece.
I generally buy a 100gm toothpaste because it last me about a month. In one of my grocery shopping to the nearby mom and pops, the guy sold me a 200 gm paste (not the brand I usually used) because it has a tooth brush free, hence it ought to be Value For Money. In retrospect (after long time) I realized that I never used the tooth brush and when it was time to replace I bought a new one. Though it sound VFM at the time I made the purchase but in retrospect it is costlier then my normal 100 gm purchase because :
- I didn’t buy the brand I wanted
- I block 100 gm of working capital
- I wasted a new toothbrush (extra plastic on this planet from me)
I was in need of a shirt so I went to the nearby shopping mall. In one of the supermarket, I came across an offer from a leading brand that says “buy 2 shirts and get the third one free”. VFM attack surfaced again and I bought 3 shirts. Choosing the first one was easy, the second was indifferent and the third was tough, so I end up buying a semi formal as well. I do wear all the shirts but I’m not sure how much value does the second and especially the third shirt brings. But I know what additional cost it add
- I was supposed to spend about Rs. 800 and I end up spending Rs. 1600.
- I hardly wear the third shirt because I wear formals on weekdays and on Saturday I try to be as fancy as possible. So the third shirt is as good as not used, meaning irrelevant, just an extra space in my closet.
We always get duped in the name of VFM. I’m sure all of you would have done many similar blunders. The bigger blunder with this is that we conveniently assumes it as a VFM even before undergoing the “Post Purcahse Review” and close the entire process which has resulted in repeating the same mistake again. Post Purchase Review is a postmortem, hence it is often neglected unless it is a very high involvement purchase.
Is there an EXIT then?
Let not only P decide what VFM should be. And keep asking the following:
Do I really come to buy this product?
Am I within my budget for today’s shopping?
Let not the sales person or the advertising material astray you from your objective. Focus!
For a moment, before making any payment, calm down and think of the usage or the needs the good is going to provide you after you reach home and later.
Lastly but not the least, as a thumb rule you should always remember that this is not the last time the store or the brand is offering you such a sale. Shinier days are beckoning and that too very soon.