French Laundry--Talk About Perceived Value!!

The French Laundry is a Yountville, CA restaurant that is widely regarded as the best restaurant in the United States. It is one of only a few restaurants in the U.S. that has received the prestigious Michelin 3-stars, the highest rating for a restaurant.

The French Laundry serves only a prix fixe menu with a price of $250 per person, exclusive of wines. When all is said and done, a meal for two people is about $900. The restaurant has 60 tables.

Reservations can be made 60-days in advance, to the date. It takes about 2-hours for the entire restaurant to be reserved on the day the reservations are open. In other words, this is a tough table to get. I have heard of people trying for over a year to get a reservation.

Now, let's consider that the world is in one of the worst economic downturns since the Great Depression. Still, there are enough people willing and able to spend $400+ on a meal to fill the restaurant. This, despite the fact that fine restaurants around the world have been failing at a record pace due the poor economy.

What is the secret to the French Laundry? It is all about perceived value of the brand. In this case there are two--the restaurant name and the chef's name, Thomas Keller. He is the endorsed brand. His name adds value. Witness his bakery, Bouchon, that has lines at all hours wanting to sample a bit of his magic.

What makes a Keller/French Laundry meal worth this much money? Well, it is damn good. But, at some point, most of us if we are not food critics or chefs (let's be honest here) cannot distinguish the quality of food. So, it is all about the perceived value, the prestige, the ego boost, etc. We are swept up in the brand. We fight to get the ability to give over a lot of money to eat a meal that few people can afford--it makes us feel special. What makes a Picasso painting worth so much? What makes an Apple computer worth so much more than a PC?

This is the thing about prestige brands. We spend because we believe it is worth it--we must have the experience. The brand becomes our mark of distinction. I have now eaten at the French Laundry. I now join a rare breed of people who can make the same claim. I have paid for one meal what it would take me to spend for 3-4 meals at what would be considered outstanding restaurants.

I mentioned to someone the other day that I had eaten at the French Laundry. They looked at me in amazement and asked how I was lucky enough to get a reservation. My perceived value seemed to grow as a result of having gotten a reservation--who ddid I know? Who was I anyway? Talk about the perceived value of a brand and what it does for those who are associated with it!!

The Recession has Changed Consumers--Perhaps Forever

This recession has been the first time since the WWII-Depression generation that we have felt totally vulnerable financially. My parents, perhaps your grandparents, felt very vulnerable. They lived through war, rationing of food and goods, and a depression that wiped many of them out. They never forgot these hard lessons. They always had an aversion to risk--they knew that things could change quickly.

The "Baby Boom" generation that I am part of and the generations that followed, were raised on affluence. We bought houses that we thought would always appreciate in value; we bought things we didn't really need but which made us feel better or made us look better to others; we spent and spent. We never believed that things could go any other way but up. We had minor recessionary setbacks and inflation and even "stag-flation", but we always knew things would get better.

This recession has hit everyone hard. It had impacted ever sector of the economy. Virtually no one is unaffected. We all know someone who has lost something--money, a job, etc. It is the first time that we realized that everything we had could disappear quickly. Even if we have regained our wealth in the stock market, we feel reluctant to spend since "conspicuous consumption" is being frowned on. There is actually a new cottage industry of personal shoppers who buy the expensive things that the wealthy want so that the actual consumer will not be seen shopping "inappropriately".

While this has not been as severe as the Great Depression, it is a Great, Worldwide Recession. It will leave us scarred in a similar way the 1930s and 40s left that generation scarred.

McKinsey & Co, did a study and found that perceived value is changing. If we were to develop a matrix with one axis being perceived price and the other axis being perceived customer value, we always knew that those who exceeded perceived value relative to perceived price would win--price would become less of a factor. This recession, though, has caused a lot of people to start to question their own buying patterns and they are trying the brands they by-passed previously. Those brands that were just nice-to-have and do not have the solid, binding, necessary attributes of value, are losing perceived value.

Companies, not only those in the consumer packaged goods business, need to reassess their attributes and positioning and assure themselves that they are part of the needs-based set for customers. Those who sold on exclusivity or "show" of wealth or taste, are finding themselves undercut by a climate that questions these values. People are "settling", something we never have done in the past 50-years. True, there will be BMW and Mercedes buyers; there will be those staying in the Ritz Carlton; there will be those buying the latest and most expensive fashions. There has always been a segment that wanted and was willing to pay for the "best". But, these people are shrinking in numbers as more ask the question of themselves: "do I really need this?" More people are asking this question than ever before.

There are many businesses banking on the fact that the consumer will return to the way they were before the recession. Read the McKinsey report or the work of John Quelch at Harvard Business School. I do not believe we will return to the way we were. We are a mini-version now of the generation that proceeded us. They never returned to previous buying behaviors and will not either. As risk increases in people's minds and buying decisions, more and more people back off decisions and "settle". We will be in this mind-set for the long haul.