Mandy: Why the Lowest Price is for Losers

low price As someone who writes and talks about frugal living all day, I must admit that I’m a sucker when it comes to spending. I not only overreact whenever I need to make a purchase, I probably ask way too many questions about the price of any item too. Why pay $50 when I can get it for $40? Why does it cost $40? How about $30? Can I get it for free?

Almost always, I feel that I’m getting a better deal by asking and scrutinizing the buying decision. But is it really the truth? Is paying less always gaining more?

We were all taught to find the lowest price possible. In fact, one of the first things I learned in business was to get three quotes for the same service whenever you need something done. The idea was to compare the quotations and figure out whether the higher cost would be necessary, but more often than not, the price becomes the deciding factor. Price almost always wins, but I think it’s totally wrong because only looking at price shows ignorance. Here’s a story that illustrates what I mean.

The Story of the Swollen Beef

Ever wonder why some restaurant just serve better tasting beef? My wife met with one owner in the beef production business and what she learned was shocking. In order to make more money, this owner would let meat sit in a bucket of water to add weight. Then, the “swollen beef” would be frozen and voila, heavier meat that can be sold for more money. Or more likely, the owner can lower the price to attract more business and still profit.

Yikes.

I don’t know enough to say whether that’s against the law or not, but it certainly changes the texture and the nature of the product. This kind of behavior will not pass the standards of high end grocery stores, but other cost sensitive merchants may decide to look the other way.

Loving Waiter

Many people know that a little trick to getting better restaurant service is to go frequently and paying more tips than what is deemed standard. Start doing that and waiters, managers and maybe even the owners will start coming over to greet you, making your dining experience more enjoyable. All of a sudden, paying more for the same product changes the product for the better.

What I’m Trying to Say

Next time you are in the position to pay for a product or a service, think of the following few factors before you look at the price.

Level of Service – How are you treated and how is the overall process? When things go wrong, be thankful that you picked the right company to deal with.
Expertise and Specialization – Is the company you are buying from a specialist when it comes to your product? Walmart may have a lower price, but you can bet that the workers at Home Depot can help you figure out why your toilet seat doesn’t sit flush (were you to ever need that advice).
Relationship – Having a good relationship with someone can help tremendously if you need questions answered in a hurry. If paying a little more helps you create a good relationship, consider this seriously.
Risk – Is there a money back guarantee or a life time warranty? It may seem like you are paying more up front, but having a real life “undo” option is worth the price of gold.

This list is just the beginning because there are so much more. Price is just the lazy way to decide, and they always lose out.

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