The cheaper you buy things, the better?

A look at the relationship between cost, price and value

John Ruskin once wrote: “It's unwise to pay too much, but it's worse to pay too little. When you pay too much, you lose a little money - that's all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot - it can't be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”

It’s clear that although Ruskin was writing over hundred years ago, the principles of business were the same then as they are now, and he’s examining the differences between cost, value and price. Perhaps to define two key areas, we can look to Warren Buffett, who said, “Price is what you pay and value is what you get.” In other words, price is the amount of money paid for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.

Cost is what we pay over time for what we have bought. In other words, buy a cheap printer and you will have bigger service bills and inconvenience in the following years. You’ll have a higher cost over time than the lower price you paid. When customers are asked what they want, they often respond by stating that paramount is a low price for the product or service, but is this truly what they want? Normally, the true desire is for low costs over time, which is value.

Value is always ‘perceived value.’ Every customer interprets value in his own terms. Customers don’t want a cheap product or service, they want value. They don’t really want things that rust, break, are inconvenient or difficult to understand. People want products and services which help them to make their life easier, less complicated, less stressful, happier and more fun. If a product or service satisfies this demand, the price of the product will not be the most important aspect for the customer.

Value, then, is arguably the most difficult message to get over to a prospective customer and this applies to the print trade almost more than in any other industry. Customers work on assumptions, many of which are actually governed by what they pay. They expect their merchandise to be delivered on time, to be of quality, and made of good materials. What is commonly believed is that all these things will be delivered, but what must be done is to negotiate a lower price for the product. There is no doubt that negotiation can be important, but it can to be the detriment of the value that the customer will receive and, therefore, this could mean a higher cost over the long term, as the goods either don’t last or aren’t of the required quality.

There is a theme here: businesses often fail to communicate the value of the service or goods they are selling. Conversations move to price before value has been explained, and negotiations are made over a product not yet sold – which brings us back to the assumptions that buyers make. Guarantees, however, are a good way of verifying the dedication to value. It might be difficult to guarantee an accurate delivery time, but guarantees on the quality and longevity of items show that price is not the only thing to consider.

The internet has given many advantages to many businesses, but perhaps the most detrimental thing has been the obsession it engenders over price. This now means that value has become less important to many. Where a customer comparing identical products, this works well, as long as enough money is paid for the item to be in stock and delivered within an agreed time frame. However, if a customer doesn’t know which product will best suit his needs, then price is less important than the advice he receives from the company recommending the solution. This should lead, over time, to a more efficient and cost-effective solution that will dwarf any minor saving made on the purchase of an alternative product or service.

Perfect Colours is a business that is dedicated to providing its customers value-for-money – large format print solutions that will make a substantial difference to their business, lowering costs over time and increasing efficiency, leading to an overall lower long-term cost. If you would like to find out more about the value Perfect Colours can add to your business, please call 0845 680 9000 or email us using our contact form.

Photo by JJ Ying on Unsplash