Milking it for all it’s Worth

Milk! It contains a good balance of protein, fat and carbohydrate and is a very important source of essential nutrients. Kids most usually like to drink it and your cereals taste vile without it. Cleopatra was said to bathe in it and Moses left Egypt for a land flowing with it – ah yes and honey too.

Contrary to a widespread belief it comes from cows not cartons and some poor sod has to get up at an ungodly hour to extract the substance. Lately it’s been the subject of a stoush because apparently, the processors, influenced by the super duper markets don’t want to pay a fair price for the lovely white stuff. ‘Fair’ of course is a pretty subjective word, but it all boils down to the fact that self interest overwhelms all else at the expense of others.

So, I thought. “What constitutes ‘fair’ and what do we mean by value?”

Before this little fracas, I would have accused the average consumer of not understanding the meaning of the word, but I’ve had to change my thinking after I read and saw consumers’ reactions in their outright rejection of price over their concern for the farmers; and rightly so. Consumers were saying what marketers have always known, we’ll pay more if you give us a good enough reason to pay more. They were a lot smarter than the super duper boys and they told them so.

I’ve always believed that ‘price’ is that thing you pay just once and ‘cost’ is what you go on paying for a lot longer. Mostly, not always, if you pay a low price it’ll cost you later. Take desk top printers for example. You can just about get them free with every packet of Tim Tams, but try buying the printing cartridge. A $29 toaster is cheap, until it gives up the ghost after two months and after two more tries, you work out that a $80 job would have been VALUE!

The milk saga is pretty simple really. You can have as much cheap milk as you like now, until you’ve sent the farmer’s broke and then when the inevitable shortage comes, you’ll pay through the nose. It’s the old ‘Price’ verses ‘Cost’ equation.

Speaking of equations, someone once introduced me to what he called, “The Value Formula”, it’s also pretty simple and it puts the whole thing into perspective:

Value = The Solution to a Problem
  The Cost

Please note he wisely didn’t say ‘price’, he said ‘cost’. Like all things in life, there are no free lunches and the sooner we all understand that every buying decision we make has a consequence the better we’ll all be. So my tip for the month is never believe that the cheap way is the best way. In most cases it’s not.