Direct Line’s three rules for developing a robust value proposition

Cinema has lost its magic for me. Not because I’ve fallen out of love with the movies. On the contrary. I’d enjoy nothing more right now than settling down in my local multiplex with Mission: Impossible, a wheelbarrow of popcorn and a bucket of fat Coke.

But with young children, that’s off the menu. By the time my wife and I add the cost of a babysitter, it’s more than we’re willing to pay to watch a film. Instead, date night normally ends up in the pub, followed by a family-friendly trip to the cinema the next morning to watch the life-affirming adventures of some squealing farmyard animal, which is frankly murderous on a hangover.

Which brings me to MoviePass, a US cinema subscription service that’s reportedly in serious trouble. It was offering customers the opportunity to watch one movie a day for $9.95 a month, which was astonishingly generous. In the UK, a subscription to just one cinema chain costs around £17.99 a month.

It quickly piled on the customers because it offered such clear, transparent value. But arguably, the consumer value proposition was simply too good to be true. And sure enough, it’s had to rein it in. From today, while the price is still $9.95, users are now restricted to just three movies a month.

There’s many complex reasons for its troubles, which are widely covered in the business press. But it’s the value equation that jumps out to me. There’s giving customers a great deal, and then there’s jumping off a value cliff and giving them far more than they’d ever expect. And ending up in a commercially unsustainable situation.

Finding shared value

To my mind, there’s three golden rules to creating a great value equation. And there’s plenty of examples from this side of the pond of brands getting it right.

First, the value has to be shared. There’s got to be something in it for customers and brands. For example, Aldi’s simple range and focus on everyday low pricing instead of discounts is a compelling proposition. And it has convinced enough shoppers to propel it to being the UK’s fifth largest supermarket because its customers know exactly what quality they are getting for the money they pay. And what’s in it for Aldi? It clearly has a formula for growth and is still hungry for more. The downside is that in a sector known for price wars, it has to juggle maintaining low prices with profitability.

The second rule is that people aren’t stupid. So, established brands need to think long and hard before they tinker with their value equation, or else they’ll end up like Toblerone, which reduced the size of its product.

People know that ‘shrinkflation’ is a thing, and as I found out in a recent focus group, they can be pretty suspicious too. Forget JFK and faked moon landings, the real conspiracy is parking spaces and pizzas getting smaller. Evidently the government has nothing better to do with its time than tinker with the high street to prop up the panel-beating industry, or else to make us thinner. So quite how Toblerone thought that consumers would blithely accept it when it gave them a chocolatey toast rack in place of an alpine range is beyond me. Play around with your established value equation at your own peril.

Third, and last, your value equation has got to be believable. When we relaunched Green Flag last year, we realised that consumers knew we had great prices. Our challenge was to square off the quality side of the equation, by making sure people could see our service was just as good as competitors, to prompt people into thinking twice, rather than simply sleepwalking into more expensive versions of the same service from our yellow and orange rivals.

I’d love MoviePass to succeed. It has a bold model, which potentially changed movie-going behaviour in a way that supported smaller, independent films too.

Customers have more than an inkling of what value means to them. It’s our task as brand owners to make sure we have a clear point of view on the value we offer.

But just check Twitter today though, and you’ll probably see the backlash. Customers willingly suspended disbelief that it was a win-win for brand and consumer alike. In practice, it was unnecessarily generous to customers, and in all likelihood, not commercially sustainable. So now its fans feel cheated. And worse still, made to look stupid when they are asked to pay higher prices for less quality.

There’s a lesson here for all brand owners. Customers have more than an inkling of what value means to them. It’s our task as brand owners to make sure we have a clear point of view on the value we offer, that it’s realistic and sustainable and that we follow through with it across our products and our prices.

That said, if any entrepreneurs out there want to charge me a fiver to look after my children while I watch Tom Cruise doing gymnastics off the side of a helicopter, sign me up right now.

Piers Newson-Smith is head of brand planning at Direct Line Group