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Home » Strategy

best v’s cheapest

Corrupted

Creative Commons License photo credit: charlesdyer

This is a Guest Post vy Ben Lumley from Thebenlumley.com. Ben is a super geek and motivational speaker, fighting evil forces and keeping you on the straight and narrow with your goals. If you want to find out more about his services click the link. If you’re interested in writing a guest post check our guidelines here.

Over to you Ben:

So for my j-o-b I do a lot of driving up and down the country, visiting schools and colleges. When you’re on a long drive it’s easy for your mind to wander slightly, or in my case, you become inherently nosey and start looking at the other cars and people around you. This isn’t always well received but it’s definitely fun!

I was on a drive like this the other day when, in the space of an hour or so,around 10 different cars and trucks passed me with slogans like…

  • lowest prices,
  • great value,
  • we won’t be beat on price,
  • if you find it cheaper we’ll give you the difference back

It struck me that I don’t actually like buying the cheapest stuff.

Why?

Because low prices don’t always equal great value. Sometimes paying the lowest price means you get the worst product or service and in the end you have to go and spend more money to have it fixed or replaced.

Here’s what I want to ask you today about your business: Are you selling at the lowest price or are you offering amazing value and quality?

I’m my mind it’s very hard to give amazing value AND quality to anyone for the cheapest possible price.

Some examples:

Apple

So being a massive geek I couldn’t really have talked about examples of high quality without mentioning Apple. Apple don’t sell at the lowest price, not because they can’t, but instead because they don’t want to. Jobs wants to build quality products and sell them to punters who appreciate that quality.

Apple probably could easily make a $50 iPhone but it’d be crappy right? And they’d probably sell loads of units. But they’ve sold far more iPhones the way they have because they’ve built a high quality product. Users have seen that and that’s created excitement and buzz every time they’ve updated the device.

Do your customers buy from you because you offer amazing quality? Are they repeatedly coming back because what you offer they can’t get from another vendor or service provider?

Yes, selling at a higher price point will mean some people simply can’t afford what you offer. But if what you offer is stunning, most people will find a way to pay for it. They do it all the time for Apple stuff, why not yours?

The Library

Our local library had a refit last year. A load of builders and architects were asked to submit plans. After a few weeks the council picked the winning solution and who had they picked for this new, two floor construction? The best? The most stunning? The builders with the best reputation? No. The cheapest.

The new refit project for our local library was given out to the lowest bidder. Now I don’t know if you’re like me but I’d rather not climb a set of stairs made and built by the person who offered the lowest amount to do the job. Makes me kinda doubt the quality of the craftsmanship.

Are you offering the lowest price in your market place? Are you undercutting your competitors just to make the sale?

So…..

What appeals to you most for your business? Being the cheapest or being the best? Now I’m not saying that you need to be the Ferrari of your market but do you really want to be that company who’s renown for their stuff falling apart. You can think of a few companies right off the bat like that I’m sure but do you want that kind of tag for your business?

Deciding on your prices is tough. I know because I struggled with the same decision myself when I was working out the prices for my coaching products. I could have gone in at the lower end of the market to get lots and lots of clients who could easily find the cash. But I didn’t. I decided to set my price in line with other coaches who I really respect because I believe my time is worth as much as theirs. Sure, that might well wipe a lot of people out so they can’t afford to work with me but I think my time is that valuable to people.

So where do you sit on this? Low Cost or High Quality?

16 Comments »

  • Patricia@lavenderuses said:

    Hi Matthew

    Thought provoking topic! My Father always taught me in relation to goods purchased: Buy cheap, buy twice. Over the years I believe this often to be true.

    I look for value for money. If something is reasonably priced then okay. A lot of cheap goods and cheap services are just that….CHEAP!

    With the products I sell they are reasonably priced but inferior products (ie those with chemicals added) are cheaper. My health is worth more than that and my customers tend to agree. Re-ordering means customers are satisfied.

    Although some marketers can be greedy and hike up prices cos they now are the “big names” in their field. I don’t ever want to do that. Fair price but reasonable, for quality products is the way I want to go.

    Patricia Perth Australia

  • Ben said:

    I think you’re father was right Patricia, buying cheap usually means buying twice.

    Thanks for the great comment.

    Best of luck with everything in 2011

  • Anto said:

    Hi Matthew! Sometimes we cannot compromise quality and most of the times quality never comes cheaper!

  • Ben said:

    Dead right Anto! Quality rarely comes cheaper.

    Have a great 2011

  • Vernessa Taylor said:

    Hello Ben – You are absolutely spot on!

    I’ve found charging a “higher” price often has brought me consulting clients who are used to paying for top of the line products and services. Even if a business owner would like to serve a market that cannot afford their fee, there are ways to do that. One way I’ve done it for clients I wanted to work with, but whose budget wasn’t very steep, was to give things like “Valued Customer Discount” or throw in a product that they might would have had to pay for. Then, my fee wasn’t devalued and — from the comments I’ve received — the customer felt they’d gotten even more value.

    No siree, cheaper is not always better. And like you, I’m hesitant to trust myself on stairs built by the lowest bidder! Great article. Best wishes for the coming year.

  • Matthew Needham said:

    Thanks Vanessa for stopping by. If as a supplier you don’t value your product very highly, you can’t expect your customers too, which is why, as you say, that people save up to work with you if you value your services highly.

    Thanks for the comment and a Happy 2011 to you.

    Matthew

  • Ben said:

    I really like the idea of a Valued Customer Discount. Seems to make really good sense.

    Thanks for stopping Vernessa and have a great 2011

  • El Edwards said:

    You’re right about setting prices Ben, it can be really tough. This is especially the case when you’re relatively new to the table and fewer people know yet how awesome you are. But reading your post I was reminded of the times when I’ve found a way to buy into stuff that, logically and on paper, I couldn’t afford. And you right, I did it because I saw huge value in what I was buying and, in the case of learning resources, the potential to earn back the investment.

    Someone once told me about a triangle made up of price, time and quality and how it was impossible to get all three (i.e. low price, short time and high quality) Two out of three is possible but where you skip on cost you lose out also on speed or quality for example. This post backs up that thinking (I just wish I could remember who told me about it so I could quote it better!)

  • Matthew Needham said:

    Hi El, thanks for commenting. I agree, setting prices when you have no track record is tough. Which is why it’s good to get more experienced/well known people to endorse your products and promote them. Maybe giving review samples and getting people to talk about your products/services will create a buzz which in turn will generate sales. What you’re actually refering to is the Project Triangle – used extensively in project management http://en.wikipedia.org/wiki/Project_triangle

    You’re absolutely right, you can’t have all three. Ultimately, it’s a compromise.

    Thanks again, and all the best for 2011 El.

    Matthew

  • Ben said:

    Thanks for stopping by as always El.

    Its my belief that if someone really sees the benefit and they really want it, they’ll find a way to pay for it. That might sound a bit arrogant but I believe its true

    Have a rocking 2011 🙂

  • Steve@Lifestyle Design said:

    Ben,

    How have you been, man? Good I hope. I hope you’re getting ready to really kill it in the new year.

    I definitely agree that value can sometimes mean that you get such significantly lower quality than it actually is not worthwhile. On the flip side some things cost more money simply because “they can”.

    Sometimes what you’re paying for is as much advertising and packaging as it is and quality of the item. Ultimately I think that quality can be had for value in some instances but most likely what you will get for value is “relative” value.

    ultimately it all comes down to studying and knowing your products and what you actually paying for.

    @Matthew AND Ben: I hope you both had a wonderful Christmas for yourselves and your families as well as a great New Year’s. I wish you both the best for 2011. 🙂

  • Matthew Needham said:

    Hi Steve, thanks for the comment and good wishes. Ultimately, value means different things to different people. Cars are a great exampl. There’s a balance between affordability, practicality, functionality and quality. Ultimately driven by what you can afford.

    All the very best to you and yours – 2011 is going to be awesome.

    Matthew

  • Ben said:

    Hi Steve. All the best for 2011.

    I think you’re point about relative value is key. There are some things out there where the value will far exceed the price being paid but sadly that’s not common.

    And as Matthew says value ultimately means different things to different people.

  • Ryan Biddulph said:

    Hi Ben,

    I feel that high quality is always the way to go.

    Apple is the perfect example. Steve Jobs and crew believe fully in what they have to offer the world, demand a higher price for their products and people still line up out of the door to grab Apple’s latest and greatest releases. The company knows the worth of its products.

    Under-cutters usually don’t believe in their product or service enough to charge what confident entrepreneurs charge. You might find a rare bargain here or there but once the under-cutter smartens up the price will rise. Of course you must deliver value but if you’re willing to get through the uncomfortable “am I charging too much” feelings and realize your self worth expect to prosper.

    Be fair but firm in setting prices. People respond to you on a subconscious level. Believe in your heart that your service is worth what you’ve priced it at. Customers will line up.

    Thanks for sharing your insight.

    RB

  • Matthew Needham said:

    Hi Ryan, thanks for the comment. I agree with you. I think quality will always be your strongest competive advantage.

    Undercuters can be a source of irritation, but unless their quality stacks up, then you’ll be well placed to compete.

    Thanks for adding your wisdom.

    All the very best for 2011.

    Matthew

  • Ben said:

    I completely agree Ryan, be firm but fair in your prices because people pick up that you’re genuine in what you do.

    Have an awesome 2011