Values must evolve
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Abercrombie is feeling the heat of value migration this
week. They are being raked over the coals in the media for selling only certain
sizes and not selling other, larger, sizes. They didn’t care what larger
teenage girls thought about them, as long as their skinny customers continued
to shop at Abercrombie. They were sticking with their value of exclusivity.
But, customers don’t like that value any more. Abercrombie’s skinny customers
stopped shopping there and the company is reeling from poor financials. Now, smug
statements of pride in their exclusivity have changed to be more inclusive of
all teens. It appears the company is going to assess its values and try to
repair the damage done by sticking with outdated values too long. (Abercrombie
Apologizes: Retailer Meets with Teens to Address Controversy)
Another example of value migration happened to Rubbermaid,
the maker of household and commercial storage products. Rubbermaid was known
for innovation and quality. It was always near the top of America’s Most
Admired Companies, and it enjoyed extreme brand loyalty from the time it
launched in Ohio with the red rubber dustpan in the early 1930s until the
mid-1990s.
In the mid-1990s, the cost of resin needed to make Rubbermaid’s
products increased 80%, and Rubbermaid tried to pass the cost increase along to
its largest customer: Walmart. The problem is that Walmart valued low prices
over innovation and quality. Rubbermaid could not reduce its prices to meet
Walmart’s needs, nor could they meet Walmart’s other demands. Walmart wanted a two-day
delivery of orders, to dictate what products Rubbermaid should make, and to
dictate how they make products (emphasizing cost over quality). Walmart’s price
demands also affected Rubbermaid’s other customers, who wanted the same low
prices.
When Rubbermaid could not accommodate Walmart, the retailer reduced
Rubbermaid’s shelf space and gave more space to a lower-quality, lower-priced
product line. Of course, Rubbermaid could not recoup its costs. Its earnings
fell 30% in one year and four years later, Rubbermaid was bought by a
lesser-known company. Rubbermaid could value innovation and quality forever, but it was going out of business because those values were no longer feasible for its customer.
Many industries have seen
customers’ values change in recent years. Customers who valued quality now value price. Others who valued speed of delivery now value innovation. Companies have two choices: change to value the same things
as their customers or get customers who share their values. Both are reasonable
options companies face all the time.
Individuals face the same dilemma, right? One of my friends
worked in advertising in Chicago as the lead account person for the RJR
account. After a family member suffered through lung cancer, she could not
manage the cigarette account any longer. Her values changed, so her job had to
change too.
Individuals and companies need to pay attention to their
values. As life happens, or the marketplace changes, be aware of value
migration and adjust accordingly.