When Black Wednesday happened in 1992 I was blissfully unaware of it all, being 30,000 feet in the sky between Singapore and New Zealand. It was only when I arrived in Auckland that I realised that the rest of my holiday was going to cost about 10% more than expected.
Last week, however, I was painfully aware of being in Switzerland when the whole world decided that the Swiss Franc was a safe haven currency with the consequent effect on the sterling franc exchange rate.
It was pointless trying to think in terms of the sterling cost of what we were buying, because if we had done we just would have been too scared to do anything. Certain things, such as food in the shops and beer and wine, were reasonably priced compared to the UK. However restaurants and consumer goods were almost prohibitively expensive. Nevertheless we had to enjoy ourselves somehow. More importantly we had to eat! Therefore in our minds the cost of a Swiss Chocolate Doodle ice cream at the Lausanne Movenpick Hotel by the shores of Lake Geneva on a sunny day was more than compensated for by the value of a tasty treat in idyllic surroundings.
Yes it all boils down to those old chestnuts, cost and value. The current climate has seen a real focus on the former which is understandable. Like the cynics quoted by Oscar Wilde it is easier for many finance people to calculate the costs of goods and services rather than the value. However more experienced finance professionals, as well as understanding in detail the cost of doing something, will also understand the costs of not doing something.
You probably feel that once again you have been subjected to the sad ramblings of an accountant. And yet cost and value are at the heart of most pricing strategy discussions, and the businesses and their financial personnel that fail to understand how their customers deal with these concepts are not going to achieve their profit potential.
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