Is More Necessarily Better?
A better way to phrase the question in the title might be "At
what cost is something too expensive?"
Cheaper is better, right? Get all you want before the price goes
up! Can something be too inexpensive? Can cheapness cost you? How
does cost relate to value?
We have a limited concept regarding the true nature of value. Yes,
most people are familiar with the concept of value as the performance
you get for the price you pay, but is that the entire story? Is
there more, or are we missing a crucial piece? Do we really understand
As you ponder these many questions, here's another, which might
lead us to answers: How often do we spend money to save money and
then discover that we have acquired useless assets? We do it all
the time. Someone might purchase 20 packages of yogurt that normally
sell for 79¢ each at 50¢ apiece. After six weeks, eight
packages are discarded because they spoiled in the refrigerator.
Was any money saved? Not really! Twelve packages were eaten for
a total of $10 or 83¢ each - a loss of 4¢ per piece versus
the normal price. Were the eight tossed yogurts - or the 12 eaten
ones - a good buy? Were they a good value?
You might laugh at the yogurt example, but how many of you have
purchased a 55-gallon drum of cleaner when your normal consumption
of the product is 5 gallons per month? You buy the drum
in February and it's empty in August. Did you have more business,
or did your employees waste the material because it's cheaper in
drums? Has it happened to you? Was the drum a good value? This example
brings to mind the story about the person who went broke saving
ETHICS IN SAVING
How are ethics involved with value? Wouldn't you agree that if
someone were exploited for you to save money, then the action would
be unethical? When one abuses power or position, the people or things
on the receiving end are the exploited. Are the abusers or exploiters
criminals? Some are. After all, what can you call an investment
banker's dishonesty - dare I say greed - that resulted in the loss
or diminishment of hundreds of thousands of retirement accounts?
Exploitation can take many forms, and I am reluctant to write a
whole article about the kinds of abuses that can take place in the
pursuit of maximum value. However, I think that there are several
broad kinds of abuse:
Exploiting people. One of the least honorable forms of
exploitation is hurting employees to reduce costs (e.g., manufacturing
under conditions that would be described as unsafe). How many
"bathtubbers" are there who use ingredients and techniques
that are less than safe? Sure the product may be inexpensive,
but your support of these companies by purchasing their products
encourages unsafe practices. At the shop level, you have to question
detailers who use HF (hydrofluoric acid-based) wheel cleaners.
There are safer cleaners that do not pose the hazards of HF cleaners.
When you look for ways to find value, you should emphasize your
commitment to social responsibility by selecting products and
procedures that protect employees.
Exploiting the environment. One of the challenges of running
a shop is choosing safe products. Select products that pose the
least risk to the environment. Sometimes you can accomplish wonders
by using products without excessive colorants. Consider that many
cleaning products do not biodegrade as well as others.
Exploiting distribution. Distributors are often the victims
of shops' insatiable appetite for increased value. Think about
Coke and Pepsi. Is there any rationale why 12 oz. cans of Coke
or Pepsi should cost 20¢ (in bulk) while 20 oz. bottles cost
$1.25 each? The distributors may make some money on such a promotion,
but do prices like these produce new, loyal customers? Probably
not. Usually buyers who switch brands are those who are drinking
whatever is cheapest - not best. But do low, low costs guarantee
increased sales? If a consumer was going to purchase a case of
pop regardless of its cost, does a low price accomplish anything
other than exploiting the distributor? Years ago I read a quote
from an automotive aftermarket distributor who said that retailers
that sell on cost alone only rent their customers until somebody
with a lower price comes along.
Other forms of exploitation. One area of continuing concern
is finding a balance between the needs of your business and its
responsibilities. As you can see, there are numerous areas of
injustices that can minimize the value of a product to a constituency.
Thus, low cost does not appear to be sufficient justification
for the acquisition of the cheapest product. You must know a product's
cost before you buy. A low price could mask an exorbitant cost.
So much has been written about value, and everything always seems
to point to buying the lowest-cost product that will get the job
done. The foregoing, I hope, will help you think about some other,
less-well-known aspects of cost.
The difficulty lies in trying to find the balance. This applies
to all levels of the distribution chain: manufacturer to distributor
to shop. Perhaps I should also include the vehicle owner, because
our actions are based on satisfying the vehicle owner's needs. In
all the confusion and concerns, I suspect that the
vehicle owner is the one who is most neglected. All of our thoughts
seem to focus on moving stuff rather than ensuring the satisfaction
of the vehicle owner.
My experiences over the years indicate that there is extreme shortsightedness
in this business. All we can see is the next step in the chain,
because that is our meal ticket. If you were lucky enough to visit
Las Vegas in May for Car Care World Expo, I think that you would
have been able to see this for yourself. Many of the factory people
at the booths always seem so amazed when a shop user - or local
owner - tells them that their products don't work very well. Of
course, many people deny the honestly offered comments because they
don't fit their beliefs. Too bad.
IS TOO LITTLE TOO MUCH?
We have already talked about some of the things which diminish
value when the price is "right," but there seems to be
a dreadful lack of concern for how much a product or service should
cost. While we are aware of the risks and dangers of exploitation,
perhaps we also err on the side of expecting and encouraging our
customers to expect high value without the commensurate cost.
This is an odd twist, but let me put it this way: Are you selling
your services too cheaply? Do the benefits you offer exceed any
reasonable value calculation? Are you exploiting yourself and your
business? One of the most important responsibilities of any business
owner is charging a price that is fair and reasonable for both the
customer and the business. You provide a service - not a sacrifice!
Yet, there appears to be a continuing temptation to equate value
with lowest-cost and, as a result, the price of a service becomes
lower and lower until nobody can afford to profitably provide it.
There is, however, a point where customers are willing to invest
in your services. You owe it to yourself to understand customers'
perceptions and how they assign value to your services.
One of the things that you may learn is that customers are probably
paying you too little and are willing to pay the difference between
your normal charges and those that you should be charging.
This knowledge of "what the market will bear" is neither
a mark of greed nor the response of a capitalizer. It is the response
of a businessperson who seeks to build a profitable relationship
with a customer. The value of a service often lies in the quality
and attitude of the performer as well as the performance.
John Lamade has extensive experience in the marketing of detailing
products and is a contributing editor to Auto Laundry News. Contact
John via e-mail at firstname.lastname@example.org.