September Newsletter Article...

Cost vs. Value...

By Lanny Keithley


Last month, we delved into the concept exploring “Free Help is Seldom worth the Price”. This month, we will extend those thoughts into evaluating what costs are appropriate to get the value we expect from the product or service we are purchasing.

One rule that I have used in my life that has saved considerable time and energy, is having a minimum cost level under which I do not consume any effort in trying to do better. I get what I like and don’t worry about my normal ‘cost vs. value’ considerations. Say, my level is $10, for example. If I am getting something that is less expensive than that, I just grab the one that catches my eye and get it. Without having such a rule, I could easily spend hours trying to save a dollar or two and my time and energy are worth more than that. This is especially true with the gas prices of today. As my resources, and the value of my time, change throughout life, I adjust my personal minimum cost level as appropriate. Just implementing this concept should take care of the little decisions that can consume a lot of your available free time.

The concept of “Free Time” is having mental time available that you are not compelled to be focused on, or consumed by, the topic. When you’re bogged down in constant worry and concern, you don’t feel free inside. Managing the level of free time you allow yourself to experience is the real message in this article. One of the biggest areas of our available free, time that we have the ability to control and manage, is in selecting and purchasing all the things we need and want in life.

Throughout this article, I will be using three different product examples for discussion. These will be: a car to represent a large and important long term commitment, a puppy for the emotional and personal issues, and a broom for a non-emotional utilitarian, but required, object. Each of these items are above our personal minimum cost level, or we wouldn’t even be wasting our time talking about them – right?

The first thing you need to do when considering any acquisition is to identify what it is and the real value it represents in your life. You also need to define and consider any available alternatives. Your first thought might be that you need a car but, if the real need is to commute to work, there might be other alternatives to solve that particular problem that are worth consideration.

Once you have decided to consider purchasing something, you need to identify all the real requirements and features you need in this product before you spend your time and energy searching for it. By doing this, you can limit your search by focusing on just the models and options that fit your parameters. It is easy to become confused about what you really want, or need, when you are in a sales environment with all your emotions raging. The better you can define your product before you start, the more successful your selection and resulting enjoyment of the product will be. Some of the topics to be considered in any purchase decision are:

Your time and energy – You need to consider the value of your time and energy in the selection process. How much effort will be necessary to select the right product for you? How much effort is too much for this product? A car or a puppy is going to be around for a long time and worth serious consideration, whereas a broom might also be around for a while, but probably isn’t worth spending that much time in the selection process. Put an appropriate limit on how much effort you will spend on any product.

Purchase Costs – What is the extent of your resources available to purchase this product? Is it worth financing the purchase and at what interest rate? How much is it really worth to you? How much is too much? Shop around for the best price, but keep all these other considerations in mind. Don’t spend time looking at a $50K BMW when you only have $25K to spend.

Ongoing Costs – How much will it cost to use and/or maintain this product? What is the gas mileage and parking fees for the car, or the food and vet bills for the puppy? Don’t forget to consider the non-monetary costs of the puppy, such as the barking, chewing and soiled carpets. You need to consider all the ongoing costs over the projected life of the product in your selection and purchase considerations.

Quality – A major aspect of the value you expect to receive from a product is its quality. What is your quality tolerance level in the product? Would buying a used product be OK? Would having a scratch in the finish bother you? How emotionally involved will you be in this product? There is an old saying that you should always consider on the topic of quality, “The bitterness of poor quality is remembered long after the sweetness of low price has faded from memory”. Keep this in mind in all purchase decisions – trust me on this one…

Features and Options - What features and options do you require? Which ones would be nice to have? Do you really need air conditioning or a convertible? Does the puppy really need papers? Do you need a matching dust pan for the broom? Be sure to get and purchase only the features and options you need and want.

Guarantee - What type/length of product warrantee/guarantee do you want included with the product? Is the guarantee from the manufacturer or is it from the vendor where you are purchasing the product. Who will handle any repair or replacement issues that might occur with the product?

Vendor Reputation – Check out the vendor’s reputation, especially on large ticket or emotional purchases. If a vendor has a bad reputation, your guarantee might not we worth the paper it’s written on. Always figure any customer’s dissatisfied comments could be your complaints in the near future.

Service/Maintenance - What are the service/maintenance requirements you desire in the new product? What comes with it and what optional service contracts are available and at what cost? Research whether extended service contracts are a good purchase, or not, for this type of product. Most extended maintenance contracts make big money for the salesperson and are of little value to the customer. But, for some products they are worth their weight in gold.

Considering each of the above topics will help to narrow all the available product options down to those that best meet your needs and wants. The amount of time you spend in this definition process will allow you to significantly reduce the amount of time you spend in the selection process. At the same time, it is helping to ensure that the product you purchase will actually provide all the value you expect from it - for the best price. In doing so, will emancipate some of your potential free time to enjoy your purchase and your life in general.