(FORTUNE Magazine) – DURING a world tour that took him to Saudi Arabia, Indonesia, India, and much of Europe, General Electric Chairman Jack Welch kept hearing the same refrain from customers: Don't tell me about your technology. Tell me your price. He brought home the conviction that buyer expectations have fundamentally shifted. ''The value decade is upon us,'' he warns. ''If you can't sell a top- quality product at the world's lowest price, you're going to be out of the game.'' This is a global change that is transforming markets for industrial and consumer products alike. On the theory that bells and whistles went out with the 1980s, GE is emphasizing dependable, basic units at prices that can't be beat in products from refrigerators to CAT scanners to jet engines. Industrial companies around the globe -- Siemens, Nissan, Apple Computer, PepsiCo, Dow Chemical, and many others -- are searching for ways to pack their products with value. It's not just the worldwide economic slump that is making value imperative; other factors will maintain its importance even after economies pick up. A key factor is excess industrial capacity, which definitely exists even though traditional measures don't capture its full extent. In the U.S., the Federal Reserve says plants are operating at a bit less than 80% of capacity, down over six points from the pre-recession high but considerably better than during the 1982 slowdown, when utilization dipped to 72%. Such numbers are less meaningful than they used to be. Thomas J. Malott, CEO of the Atlanta-based Siemens unit that makes heavy electrical equipment and motors, argues that robotics and other productivity enhancers have made existing measures of capacity utilization obsolete. As he explains: ''The available technology to increase output per square foot or per unit of time is tremendous. In the U.S., a relatively small percentage of factories use that technology now. But competition will force that to increase -- and as it does, you'll see capacity continue to outpace demand.'' Malott points to his own plants, which he says have cut total floor space in half since 1986 while increasing output nearly 50%. He estimates that his industry is operating at only half its true capacity. Another profound change that won't end when economies revive is the novel idea that quality can and should be affordable. The dramatic improvement in the quality of most products over the past decade or so helped create the new psychology of value. As manufacturers everywhere have improved goods, buyers' expectations have soared. The Japanese call this atarimae hinshitsu, which means ''quality taken for granted.'' Quality can even cause unexpected setbacks. GE's aircraft engines unit was surprised this year by a sharp decline in spare-parts sales. The problem? Its engines are lasting much longer than they used to. The unprecedented abundance of high-quality manufactured goods ensures that ferocious price competition is here to stay. Jack Welch expounds on the value decade in Control Your Destiny or Someone Else Will, a forthcoming book about GE (co-authored by this writer). Says Welch: ''There's going to be global price competition like you've never seen. It's going to be brutal. When I said a while back that the 1980s were going to be a white-knuckle decade and the 1990s would be even tougher, I may have understated how hard it's going to get.''

Today's buyers know what they want and how much they're willing to pay. ''During the era of mad purchasing, people learned how to shop,'' says James A. Taylor, CEO of the research firm Yankelovich Partners. He figures affluent baby-boomers his age (44) have each seen some 500,000 TV commercials and spent $1 million on personal consumption. ''They decide what they're going to buy -- whether a TV or an industrial turbine -- spec it to need, and find the specific unit they're looking for. Then they wait till the price comes down.''

So just what is value? ''It's not as simple as price, or we'd all be driving Hyundais,'' says Charles Pankenier, IBM's corporate director of brand management. The concept can be nebulous because each buyer assesses value individually. In the end, value is simply giving customers what they want at a price they consider fair. That may sound awfully basic. What is making these times so tough is that now more than ever you have to provide the best value -- better than any competitor's. Different customers have different needs; the only way to please a lot of them is to offer a carefully segmented product line. Big Blue is learning the lesson. In September it completely revamped its PC offerings, creating four distinct lines aimed at corporations, small businesses, laptop users, and bargain hunters. The machines range from high-end network servers at $13,000 or more to no frills, $1,300 clone-fighters. You can buy them with three-year warranties and lots of handholding by neatly attired IBM representatives, or order by phone (1-800-IBM-2YOU). The prices are not quite rock bottom, but they're the most competitive IBM has ever offered, and there's a PC in this line to match almost every need. Don't assume that delivering value means selling a bare-bones model. You won't know what's most important to a customer without asking; it could be greater durability, faster service, any number of features, easier financing, or something else. In cars, Hyundai, Daihatsu, and Isuzu are going nowhere, while Lexus and Infiniti are selling briskly. By providing high performance at a lower price, the Japanese luxury cars are weaning a whole generation of Americans from their craving for overpriced German sedans. Result: BMW and Mercedes have introduced competitively priced models. Luxury still sells. One difference between the Eighties and the Nineties is that many features once sold as options now come standard, usually at a discount. To attract recession-battered consumers, Burger King offers deals on meals -- but it still serves croissants. Air conditioning adds roughly $600 to the price of a car, but just try buying one without it: Last year more than 90% of all autos sold in the U.S. had A/C, vs. 75% in 1980. By standardizing options, manufacturers can reduce costly assembly-line changeovers, enabling them to offer extra features for less. Buyers usually view that as an enhancement of value -- and before long, what used to be an extra becomes something they expect. The lesson for marketers: During the value decade, the so-called basic model is more likely to be a sensibly featured midrange product than a stripped-down unit at a lowball price. The rule applies to corporate customers as well as consumers. GE Medical Systems offers CAT scanners starting at $350,000, but the units most popular worldwide are more powerful ones that go for around $850,000, in the upper middle of the line. They use reliable, proven technology while providing images precise enough for accurate diagnoses. Or consider the forthcoming Boeing 777 passenger jets: Priced at about $100 million a pop, they will come standard with cabins that can be completely reconfigured in 72 hours. Not just the seats, but even the galleys and lavatories can be moved, a feature that demands structural reinforcement as well as extra wires and plumbing. Company President Philip Condit says Boeing's sales pitch is based on value: The 777 can change as an airline's business does, and that flexibility will enhance the plane's worth at resale. Condit insists the feature doesn't add much to the 777's cost -- and won't add a penny to the jet's price. Price is an important component of value that sellers often mishandle. In many industries, notably autos, anxious manufacturers have relied so heavily on sales, rebates, and other forms of price paring that they have trained customers to wait for price cuts. The resulting irregular waves of demand are disproportionately costly for manufacturers, which oscillate between sitting on expensive inventories and paying extra to meet sudden surges in demand. The efficient alternative is so-called value pricing, in which companies eliminate the sawtooth pattern in favor of moderate everyday prices. Procter & Gamble is a recent convert. To win shelf space in stores, the consumer products giant used to routinely discount items 30% to 40% for short periods. Since 1990 P&G has reduced list prices on half its brands and eliminated the temporary discounts. CEO Edwin Artzt says the plan will save the company $175 million a year -- the equivalent of nearly 10% of last year's profit.

STICKING TO rational pricing doesn't mean you escape ferocious pressure on prices. Toyota has seen a dramatic increase in potential buyers who reject its cars on the basis of price: from 30% in 1990 to 40% this year, says George Borst, vice president for strategic and product planning. Philip Morris's famous Marlboro brand is losing share to discount smokes. In soda pop, the big sales increases are in 24-can packs, which offer a lower unit price. One message seems clear: Businesses can't count on price increases to drive profits -- or even to recover increased costs. Improved productivity, which helped get companies into this pickle by contributing to overcapacity, can help get them out. Says Siemens's Malott: ''The customer is only going to pay you for what he perceives as real value added. When you look at your overhead, you've got to ask yourself if the customer is really willing to pay for that. If the answer is no, you've got to figure out how to get rid of it or you're not going to make money.'' GE Aircraft Engines, which produces engines for commercial and military jets, is a best-of-breed example. The defense slowdown and lower-than-expected demand for commercial spare parts have depressed sales somewhat from last year's $7.9 billion. Yet Aircraft Engines chief Brian Rowe has committed to a net income goal of $750 million -- the same as last year's. To help achieve that, Aircraft Engines is paring inventories by $1 billion. Says Rowe: ''We've worked very hard at getting costs out. While our material costs have been increasing about 3.5% per year and our business has flattened, we've counterbalanced that with productivity gains and remained about even.'' In the personal computer industry the focus on value started early. Its experience is a paradigm of what other businesses can expect: increased competition and buyer resistance that can quickly transform high-margin products into commodities. ''Whatever used to differentiate the products -- chiefly brand -- doesn't matter as much anymore,'' says a top PC marketer, who prefers not to mention his brand in this context. Quality still counts: Zeos, Northgate, and the other clone companies that offer low prices and little more are ailing, while Apple and Compaq, which make high-end PCs, have been thriving since they started cutting costs and passing the savings on to buyers. Says Benjamin Rosen, Compaq's chairman: ''If all you have to offer is price, I don't think it's a successful long-term strategy in the value decade.'' These companies nearly fell victim to margin creep, a characteristic affliction of the 1980s. It is the common and ultimately suicidal tendency of companies to focus on top-end products with rich profit margins. IBM and Compaq started out serving prosperous corporate clients, who could afford to pay more for extra quality and service. Their initial success encouraged Apple to go upscale too. Before long, the three most important PC companies had all but abandoned the bottom of the market. That allowed competitors such as Dell to enter and grow strong: They learned to thrive on margins much lower than the premium companies needed. The big guys' error proved doubly damaging because the new low-cost products expanded the whole market, attracting a new class of customer with different needs from the corporate buyer's. The center of the market moved ever downward, and the former market leaders lost touch. As unit volumes grew and the technology matured, the quality of low-end machines improved to such a degree that eventually even corporate buyers found it difficult to justify paying premiums of 100% or more for IBM or Apple PCs -- especially during the recession. Result: The cheapo vendors thrived while IBM, Apple, and Compaq slumped. APPLE WAS the first of the top-tier companies to wake up; Compaq and IBM slept a bit longer. Two years ago Apple introduced the Macintosh Classic, a stripped-down Mac that sold for 40% less than its predecessor and 25% or so more than a similarly configured clone PC. The Classic's huge sales made Apple a serious competitor again, and the company's market share has been growing since. Shrewdly, Apple invested big money in the R&D program that produced the PowerBook, the world's most elegantly functional -- and best-selling -- notebook computer. Apple sold more than $1 billion of the PowerBooks in the product's first 12 months. Ian Diery, Apple's head of worldwide sales and marketing, describes the virtuous cycle his company now hopes to perpetuate: It starts with moderate pricing. The next step -- easier said than done -- is the introduction of a hot product. In addition to sparking buyer demand, a hot product establishes the differentiation that customers perceive as added value. Proof that Apple is still delivering that value is the brisk sales of its products, despite the 10% to 15% premium over similarly configured IBM clones that they still command. Closing the loop, Apple reinvests in R&D: $600 million last year, almost 9% of sales. If the result is another hot product, the cycle will continue. As the PC industry's experience demonstrates, the best way to provide high- value products is by designing them for value from the bottom up. Keep asking customers what they want, then keep creating new products that deliver it. Don't panic over the cost of all that creating. An efficient manufacturer who keeps working on productivity should be able to make new products that offer improved performance over existing models at an equal or lower cost. That has been GE's approach in diagnostic medical imaging equipment such as CAT scanners. Until a decade or so ago, the hospitals that bought these machines simply passed their costs on to patients and insurers, so Siemens, GE, and other vendors competed for sales by rushing exciting new technology to market without worrying too much about cost. As each new product matured, the makers would find ways to produce it for less -- but by then another expensive new technology would have arrived. Now, says Paul Mirabella, who's in charge of magnetic-resonance equipment at GE Medical Systems, a salesperson calling on a hospital ''may get ten minutes with somebody who's got a $30 million or $40 million cost problem. These people don't want to hear why our product is better. They want to know how we're going to help them solve their cost problems.'' Since the customer's needs have changed, so has GE's design process. ''We ask an awful lot of tough questions. Most revolve around so what -- what difference will this feature make to the customer?'' GE has created two distinct lines of CAT scanners: the basic Sytech and the premium Advantage. Within each line the units share common technology and parts, which reduces development and manufacturing cost and makes upgrading easy for customers. GE further segments each family of scanners into several main price groups, enabling the company to straddle the entire market, from entry-level systems to top-end scanners selling for $1.1 million. Covering the whole spectrum is important, says John Trani, CEO of GE Medical Systems: ''If you can make the base product at the lowest cost, you win, because you can add features to migrate the price point up. And you need preeminence at the top end to get the new technology. Once you've got that, you can strip away a lot of features and provide a great basic product.'' Nissan applied that principle to the creation of its midsize Altima sedan, introduced in September. Priced at $13,000 and aimed squarely at the Honda Accord, the Altima is assembled with an advanced robotic welding system that Nissan developed for its $45,000 Infiniti. The sales pitch is that Altima buyers will get Infiniti-quality fit and finish at an affordable price. ONE OF THE most visible signs of the shift to value marketing is the hasty rejiggering of many companies' mix of products. Manufacturers that had failed to segment their lines enough are rushing out arrays of new products, while others are pruning excess. In late October, Borden announced a $450 million restructuring aimed at tightening its product line. In snacks, the food processor makes about 3,200 sizes, brands, types, and flavors -- but gets 95% of its revenues from just half of them. Perhaps surprisingly, many experts think brands will become more important in the value decade. In consumer products, buyers want to find brands that consistently deliver value. In the industrial arena, the desire to trust has grown even stronger during uncertain times. A buyer who makes a major investment wants to deal with a rock-solid supplier. Says Hans Decker, vice chairman of Siemens's U.S. operations, which sell primarily to industry: ''The company is the product now.'' Another surprise: The new emphasis on value won't necessarily mean a cold- eyed focus on numbers and nothing else. The human element is certain to be more important than ever. To differentiate themselves from competitors, companies increasingly will rely on people who can successfully manage relationships -- with customers, suppliers, subordinates, and peers. GE's Trani says great sales reps will still play a crucial role in the value decade: ''We have people selling the same product against the same competition with the same pricing all across the country. Some of them have an 85% market share, and some have a 15% share. Maybe the difference is the people.'' Although most pronounced in the U.S., the heightened emphasis on value is a global phenomenon. Insisting on value is second nature to most people in the world but a novelty for many U.S. buyers, who have enjoyed extraordinarily high levels of disposable income. Now purchasers everywhere are negotiating tougher deals. In Japan, where discounting usually is considered a sign of weakness, PC prices have plunged 30% in recent weeks. But important national differences remain. While Americans buy 97% of their Ford Tauruses with automatic transmissions, 94% of Ford buyers in Britain prefer the same model with a manual transmission. The delivery of value to the customer is the nexus at which all aspects of commerce converge. It calls for a clear understanding of customer needs, superior product design, intelligent application of technology, relentless focus on quality, cost control, and productivity -- and a pugnacious insistence on one-upping the competition. This is the most basic test of business effectiveness. Those who don't pass it may not be with us when the value decade is done.