My experience in renting the cheapest commercial place I could find reminded me of a lesson I forget every now and then: never buy the cheapest – it costs too much.
Cost vs Price
The great American salesman and sales trainer Zig Ziglar had a lesson he would give about price and cost. It goes something like this. I’ll paraphrase it, but you can watch Zig tell it here in all his 80’s glory.
Most people, if you ask them the difference between price and cost they’ll give you a funny look and say well they’re the same thing, right? Let me tell you a story to illustrate my point (Zig has many many stories). I went down to the bike store to buy my child a bike. The salesperson had two options, one was $35 and one was $65. They looked about the same, though the more expensive one had a better reputation and the details looked a little finer. Those differences didn’t seem worth it to me, so we bought the one for the lower price.
Now after about a month that bike’s handlebars started to come loose. We took it down to the store and it was still under warranty so they fixed it for free. Then a three months later the entire sprocket apparatus broke down. We took it back to the shop and paid $15 to have it replaced. Then a month later the bearings started coming loose and the handlebars were off again. At at that point I had had it and bought the $65. He rode that bike regularly for five years and periodically for about ten years without incident.
(Zig does some math on a pad of paper) The cost of the first bike was $9 per month. The cost of the second bicycle was $9 per year.
This bike had a price of $35. But it had a cost that was much much higher.
The Cheapest is Too Costly To Buy
Sometimes the thing with the lowest price is the way to go. But when it comes to important things, that is rarely the case. Unless you have no other choice, accepting the cheapest home, car, bike, surgeon, etc rarely turns out to be the least costly. Because there will be other costs – perhaps both hidden and obvious. Making a general rule that you never buy the cheapest when shopping for important things will rarely lose you money.
The Cheapest is Too Costly To Sell
From a business point of view, I think it’s a terrible idea to aim to offer the cheapest product.
First, if price is the only thing you are competing on, then there’s always other people with deeper pockets that can out cheap you.
Second – and to me this is the worst part about selling the lower price products – you will have to deal with some of the worst customers to ever walk the planet earth. Cheapskates demand more, nag for special treatment, complain more often, are never satisfied, and do not care one bit about your company. They will leave you as soon as they can save even a penny somewhere else. When you offer the lowest price, not all your customers will be terrible but you will attract all the terrible customers. Just don’t do it.