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Choosing on Price Alone Has a Cost

September 7, 2015

The age of the Internet has allowed us to comparison shop like never before, which has its pros and cons. Instead of evaluating products and services based on our needs and requirements, we start evaluating on one component: price.

 

Low Price Has a Cost

 

Let’s look at Spirit Airlines, a notoriously cheap alternative to the main airline carriers. However, Spirit charges for carry-on bags. Want to request a seat? Extra charge. Print your boarding pass at the airport? Extra charge. All of the sudden, that “cheap” ticket isn’t actually so cheap anymore.

 

It’s not enough to look at the price of a product or service, we have to look at the overall cost. But what about the costs that don’t necessarily increase the final price?

 

High Cost, Low Price

 

Sometimes the costs aren’t as easy to spot, like the additive fees in the Spirit Airlines example. Sometimes the extra costs come in the form of quality of service.

Let’s examine Wal-Mart. You can find the same products in their stores as other stores, so you aren’t giving up quality of goods. But head to the register. What do you see? Long lines with few registers open. Now try to find someone in the store to help you locate an out-of-stock product; you’ll likely be hunting for hours. The cost you’re now paying? Your time. Convenience. Quality of service.

 

While these intangible qualities in a product or service aren’t directly translated to the hit on your wallet, they still have to be considered in your buying decision. A cell phone company that offers you the cheapest monthly bill but leaves you with no reception in your home city and a customer service department who can never find a resolution to your problem actually ends up “costing” you a lot more.

 

How to Evaluate

 

You need to stop and begin again as you start exploring a new product or service and the first question asked is, “How much?”

 

Your first question should always be, “What problem am I trying to solve?” Followed by, “What do I gain if I solve this problem?” After answering those questions, you can start sketching out your product/service requirements.

 

Budgets are tight and people today have a fiduciary responsibility to make sure they are spending their (or their employers’) money the right way. But that doesn’t mean looking for the cheapest price. Your responsibility is getting the right product or service that solves your problem; giving you evident benefits that are greater than the price you paid.

 

One Last Thought

 

There’s no judgment in the above examples. Their business models work and both of the companies mentioned are successful. But there’s a bit of caveat emptor that must accompany buying from those companies. You have to know what exactly you’re getting in to, or you’ll experience quite a bit of disappointment.

 

This process applies when choosing an IT services partner. You can always find cheaper. The question is: at what cost?

 

 

 

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