Buyers of catering wish for many things. K-value is the term economists give to the ratio between the increased price of a product or service and its perceived increase (or lack of increase) in value to the buyer. The “begrudging index” is how the buyer relates to the actual price; do they perceive it as a rip-off or as proper.
For example: A driver on vacation using a rental car needs to buy gas. He pulls off the interstate and sees two gas stations to select from. One has gas for $3.95 per gallon; the other has gas for $3.65 per gallon. What station does the driver head for? K-value tells us that since it is a rental car, the driver doesn’t see any need to buy the more expensive gas; there’s no increased value to him in putting the better gas into a car he doesn’t own. The same driver might purchase the more expensive gas if the car were his own.
Another example: A buyer is trying to choose between two bids sent from different caterers. Caterer A has event staff that costs $14 per hour, while Caterer B’s staff costs $18.50 per hour. To the buyer, is the $18.50 staff better than the $14.00 staff? Which staff charge creates a higher K-value in the buyer’s mind? If the buyer’s event is extremely important from a show point of view, the $18.50 staff will have a higher K-value in the buyer’s mind, because if you pay more for staff, the staff must be better.
If the event is not deemed important, or special, the buyer may find that the $18.50 staff is a waste, since staff is staff. This means the buyer doesn’t feel more expensive staff is better for this particular event, so the staff price is not as important as what the buyer wants from the staff.
Let’s look at food. A buyer comparing two different menus of chicken curry, each made with boneless breast of chicken, will have greater difficulty believing that the higher priced menu has better chicken curry, since chicken is just chicken. However, if they are comparing the chicken curry with a boneless chicken entree that’s topped with fresh crab and shrimp, they will be expecting to pay more since this menu item has a higher K-value in the buyer’s mind.
K-value is how the buyer feels about comparative pricing in relation to the purpose and concern for the catering needed. Most American buyers know that, generally speaking, the more costly a bottle of wine, the better it is. When it comes to buying wine, buyers believe that the quality and value increase as the price goes up.
Buyers tend to think of value is something that is cheaper, or saves money. K-value affects the concept of value, because it puts impact into the equation. Buyers are willing to pay more for the same item or service when a high impact is required. When a corporation is entertaining a special client, it is willing to spend more for better service or menu items. On the other hand, if the corporation is entertaining its own staff at a party, the concern for higher prices and greater impact decreases because the K-value is low.
When a corporation is going to entertain the board of directors, the caterer needs to find the answers to some questions: Was it a good year? Was it a bad year? Has the company recently let go 2,000 employees? How is the stock doing? The answers will help determine the level of K-value to the buyer. Make sure you understand what the buyer is thinking, however.
When a company has just laid off 2,000 workers, you might think it would have a desire for lower K-value and lower prices. But perhaps the company needs to build the morale of the remaining staff, so it’s thinking in a higher K-value range. Don’t make assumptions; offer options on menu and services to the buyer that permit both high and low K-value decisions.
This is really not that hard to do. Besides the obvious option of a boneless breast of chicken with or without a topping of crab and shrimp, some caterers offer K-value options in the style of service and the level of staffing. Other K-value concepts deal with plastic vs. glass, paper vs. cloth linen, silver vs. stainless, tuxedos vs. casual, fresh vs. frozen, 8 oz vs. 10 oz, charcoal vs. mesquite, service vs. self-service, 25 percent deposit vs. 50 percent deposit and Friday vs. Saturday. Options are the answer to fulfilling the K-value concerns for buyers. Don’t be afraid of options!
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