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Is paying rock-bottom prices an awful mistake?

June 5th, 2018 by Bob Bly

A few weeks ago, while in a doctor’s waiting room, an interesting
and nice gent named BC sat next to me, and we struck up a
conversation.

BC is from Scotland and is 92 years old. He revealed to me that
he came to the U.S. in his youth and started a furniture business
in Manhattan, which became very successful and grew to 5 stores.

He asked me if I wanted to know his #1 success secret, and when I
said yes, told me it was simply that he paid wages 20% higher
than any of his competitors.

The reason, he explained, was to keep good employees happy so
that they stayed with him and did not look around for a better
opportunity or jump ship when given jobs offers by other
businesses.

I think this is actually a very big point. Let me explain….

Many of us are essentially price buyers, meaning we get three
quotes, and invariably pick the service provider with the lowest
price.

In essence, we are saying that low price is the most important
factor in our purchase decision, ranking ahead of customer
service, quality of work, reliability, promptness, and contractor
expertise and know-how.

Isn’t that kind of stupid?

Smarter buyers of business, trade, professional, technical, and
health care services look for the best value — not the best
price.

I mean, say you had a tumor in your cranium, needed brain
surgery, and went to three neurosurgeons for opinions.

The first says the operation is $30,000. The second charges
$32,000. And the third, whose neurosurgery practice is called
Brains ‘R Us, quotes a fee of $300.

It’s certainly the low price. But would you go with it? I think
not.

Price buying leads to crappy work from inferior vendors often
found on Upwork and Fiverr, among other online service sites.

People who patronize such sites often look for the low-priced
vendor, usually to their regret.

So why do so many people always look for the low price in so much
else they buy?

I love this quote from John Ruskin: “There is hardly anything in
the world that some man cannot make a little worse and sell a
little cheaper, and the people who consider price only are this
man’s lawful prey.”

There was a cartoon in a magazine showing two barbershops. The
sign in the window of the first said, “$5 haircuts.”

The sign in the window of the second barbershop said, “We fix $5
haircuts.”

I have certainly spent a significant portion of my time over the
years fixing $100 copy.

Back to BC….

He also told me the internet killed his furniture business, in
which his specialty was providing high-end furniture for wealthy
Manhattan businesspeople looking to furnish their entire large
apartment.

In his heyday, said BC, these customers trusted his judgment. And
so they loved the furniture he sold them and kept it forever.

But when the web came along, these customers saw that e-commerce
furniture dealers allowed returns, refunds, and exchanges if the
customer didn’t love the furniture when it was delivered.

Because of that, all of a sudden BC was inundated with calls from
customers who wanted to send back the furniture and try out
something else.

It was so expensive and so labor-intensive, and he hated it so
much, he soon closed the store chain and retired.

It seems that the internet is a mixed blessing for business.

For some industries it’s great. For others it is terrible. For still others,
it is somewhere in the middle, with both many pros and many cons.

JM, who blames the web in part for the closure of his New Mexico
bookstore, says, “People were happy when they came in, but wanted
us to have the resources and pricing of online or they would not
buy.”

For those who embrace the internet, and don’t love bookstores or
brick and mortar, BC’s and JM’s woes mean little.

But writer LD echoes the sentiments of many when she writes, “A
town without a bookstore is a town without a soul.”

And I like a local furniture store, too.

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This entry was posted on Tuesday, June 5th, 2018 at 11:19 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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