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Dairy HorizonDo Consumers Matter? |
ROBERT A.
MILLIGAN |
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"Whatever color you want, as long as it is black." - Henry Ford The Model T was an immensely successful car. But do you think a car manufacturer would be successful today with Henry Ford's attitude? Of course not! Today cars come in untold combinations of sizes, colors, trims, and so on. What's the difference between the Model T and cars today? The Model T was produced in a producer-driven economy. Today we are in a consumer-driven economy. Right after World War II, consumers had money and goods were scarce due to the war. Whatever was produced was purchased. Within a few years, however, production caught up with demand, and consumers started to exercise more choice. They began to "vote" with their pocketbooks. As the economy continued strong in the 1950s and 1960s, we moved more and more into a consumer-driven economy. In the same period, W. Edwards Deming introduced Total Quality Management (TQM). Some have suggested that TQM was the most important development of the 20th century. TQM transformed how quality is managed. It led to the modern employee empowerment movement and altered how the consumer is viewed. The first two principles of TQM are that the consumer defines value and the producer adds value. Henry Ford looked at his Model T as simply a car. When he produced it at a very low price, almost everyone bought one. Today auto makers must look at a car through the eyes of the consumer; they look at attributes including price, status, mileage (including environmental perspectives), color, and many others. They are seeking to determine what customers will pay for. Customers decide what they will purchase. The customer determines value! Producing this value is then an opportunity for the automobile manufacturer. The profitability of automobile companies is determined by how successful they are in producing what the customer values. Let's apply
this same analysis to milk. The equivalent of "whatever color
you want as long as it is black" is, "however you would
like your milk as long as it has 3.5 percent butterfat." How should the dairy farmer view milk? As the customer views it - by its attributes. What are those attributes? Certainly price is one attribute. Another is nutritional quality. Various levels of fat content has been a reflection of this attribute. The customer has determined value and the dairy industry has responded. An increasingly important attribute of all food products relates to food safety. Consumers increasingly value dairy products or dairy product production and delivery systems that have real or perceived food safety advantages. Recent events, including livestock disease outbreaks, new biotechnology products, and food contamination, have heightened interest in and concern about food safety. Dairy farmers and everyone in the food system will continue to be faced with these issues. As you are faced with these issues, including proposals for animal identification and trace back, I encourage you to think about the consumer's view. Just as with cars, if consumers value the attribute, they will pay. That is an opportunity for producers. |
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