Forums: Discussions for entrepreneurs and small business.

Is going cheap better than spending for quality? Is it always better to get the lowest possible price? Is cheaper better than....what?

More and more people are shopping at Wal-Mart. Why? Because they`re either losing their jobs or they`re worried about reduced income. They believe that Wal-Mart offers "quality" merchandise for below typical prices. That`s actually not true.

Wal-Mart has been raising their prices steadily over the past couple of years. We know because we`ve been shopping there for quite a while. We also track prices at many other local stores, and we live in an area that has a very strong and diversified retail sector.

Over the past few months we`ve found that Wal-Mart prices are now higher than most other stores, excepting for the major name stores.

We`ve also found that Wal-Mart doesn`t stock many items we can get at other stores. Why? Because they can`t force those manufacturers to sell at very low wholesale pricing.

Additionally, we`ve found that many products have been replaced with super-cheap versions manufactured in China. They fall apart or don`t work, so we end up having to buy them all over again, usually at a higher price for better quality.

Wal-Mart is a great example of retail. But what about services? Think about building a Web site, developing a shopping cart, going to a doctor, getting your car repaired, or hiring someone as an outsource solution for some part of your life.

Price -vs- Quality has been a topic for ages. It relates to the question of when to raise or lower prices, and whether to sell many items cheap or a few items at high prices. In today`s economy, lots of people are re-examining the same question.

We also know that "you get what you pay for." But a subtle change to that old platitude comes into play when you examine a fundamental shift in market prices.

For example, if the price of piano lessons has been $50 per hour (I`m making up a price) for years, then that`s the price. But that price relates to the overall economy. It relates to typical wages, typical costs, typical utilities, typical energy prices and so forth.

What if wages and goods have been over-priced for a few years? Suppose inflation has pushed up entry-level wages to unsustainable levels? If a family wage-earner makes $40,000/yr. to be an administrative assistant, then $50/hr. is a simple and affordable price.

On the other hand, if more and more people are losing their jobs, and the new entry-level is minimum wage, then $50/hr. becomes expensive.

Suppose the piano teacher has reduced his or her lifestyle, cut costs, and restructured. And that piano teacher offers lessons for $20/hr. Although the market rate is $50, can we "automatically" say that the $20 lessons must not be very good?

Price and quality directly connect with market stability. These days, almost anyone can agree that we have almost no stability whatsoever. With the DOW Jones Industrial Average acting like a roller-coaster, and housing prices collapsing almost everywhere, do we have stability?

And does that stability apply only to the financial or housing sector? We`ve seen the price of a pound of butter go from $1.49 to $3, over and over again. For no apparent reason. That`s doubling the price, then falling backward, then doubling again. And again and again.

What about gas prices, going from $2 to $4, then back, then up again?

Without market stability, how do we say that "you get what you pay for?" Does that even mean anything anymore? If not, then how do you judge quality?

More importantly, is it worth having to buy the same thing twice because the first purchase fell apart? Many people do exactly that, and then get frustrated because they can`t get "good stuff" anymore.

When you look for the lowest price, do you consider at all the underlying quality of what you`re hoping to buy?

we like cheaper until it comes to the price of what WE SELL [including our time].

-------------------------

James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com

Ah...so we should have the new congress pass a law. Only OTHER people must sell for cheaper prices. The legal definition of "other" will be "all interested parties who are not Me, I, or any government official."

Would that work? :-)

Most people think that purchasing is the art of finding the lowest price item.  That concept could not be further from truth.  Here is the golden rule of purchasing.  "Buy the item that meets your needs and specifications at the lowest price possible.  Price includes negotiated freight costs."


-------------------------

The older we get, the more excuses we make for not chasing after our dreams. But truth is, goals are attainable at any age.

the law would just screw it up - particularly under the current crew we have in there.  Despite that, Obama is still trying to think of a way.  We actually screwed this equation up a long time ago with minimum wage laws, among others.

-------------------------

James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com

Nevada,
That`s a concise and perfect point! Most Excellent!

What I`m looking at is the "meets your needs." I believe we`ve now entered a phase of history that will re-clarify the fundamental difference between "want" and "need."

I also think many people simply don`t know how to shop. Women have sort of appropriated the entire skill-set, making it seem as if men are the ones who don`t know how to shop. I wonder though, do women (in general) pay that much attention to "meets your needs?"

Another critical component is that a product meets your needs for how long? Does a washing machine remain a good deal if it lasts for 20 days? Of course not.

I like to research what exactly I think I need and then go searching for the appropriate vendor.  In most cases, I end up taking the `goldilocks` approach: too expensive = a waste of money, too cheap = probably not the quality I want/need. Middle ground = just right for cost and quality.  I follow this same formula for both goods and services.

My father is one of those people who believe if it costs more, it is worth more.  My sister goes for the absolute cheapest she can get and often ends up paying more in the long run due to having to replace products sooner or have services re-done properly (as my grandmother said, penny-wise and pound-foolish).

I try to find a balance between cost and quality - which is also why I price my OWN services in the middle; I am assuming that the people I wish to work with have a similar philosophy.  It has been my experience that bookkeepers who charge really high rates generally just think they are worth more than they are *eye-roll* and the ones on the low end of the rate scale are either starting out, clueless, or incompetent.



-------------------------

Lily E. Chambers CPS, CQU
"Why hire a mere mortal when you have access to a Goddess"
www.virtualofficegoddess.com

I think it`s difficult to make a hard-and-fast rule that price is directly related to quality. The two attributes really should be looked at separately. Overall, quality should take priority whenever possible. After choosing the Best, then look at the price. If it`s not affordable, then slowly lower the quality standards.

That way, you know that you`re specifically choosing a lower and lower quality item and in particular because you don`t have the money for the Best.

The converse of that is to realize that saving the money until you can afford the Best is another option. We Americans tend to forget that not everything has to be instantly gratified. :-)

I don`t use the `price=quality` as a hard and fast rule - which is why I said "in most cases..."  And truthfully, the BEST is not always the best fit - sometimes `good enough` really is good enough.  My point was that knowing what you need (or think you need) is the key to finding the right item/service/widget instead of blindly flailing around until you find something you WANT rather than what you truly NEED.  I believe part of the reason Americans appear to be so wasteful is that there is a large component of impulse purchasing that happens in our culture.  To paraphrase "Purchase in haste, repent at leisure."


-------------------------

Lily E. Chambers CPS, CQU
"Why hire a mere mortal when you have access to a Goddess"
www.virtualofficegoddess.com

Ah...good clarification. And I completely agree that so few people really sit down and contemplate what they need, what they`d like, and what they can afford. It`s the old best-case; worst-case analysis.

I think the main point I`m trying to make with this thread is that too often, and particularly in tough economic times, the very first thought people have is to cut back on spending, cut back on price, and cut back on all operations.

It`d be nice if the first thought people had was to sell more, increase production, develop new products, and create new money. That`s not always possible, but it at least ought to be the first thought.

From the "cut back" perspective, that`s where inexperienced shoppers find themselves falling for the cheaper-is-better belief system.