Cheap Is Expensive

People believe that the way to determine whether something is cheap or expensive is to look at the price, oftentimes comparing the price of one offering with a similar offering. While price can sometimes be a factor, it generally has less to do with whether something is expensive. In large part, it is because companies have taught people to expect that they can have better, faster, and cheaper.

Let me explain this in a way that makes this simple to understand. Price and cost are different factors, and they are separate from one another. Let’s assume you are looking at two pairs of shoes, one pair with a price tag of $250 and the other priced at $450. There is a massive difference in price, but you do not have enough information to determine which pair is more expensive. To make that determination, you need more information.

The $250 shoes are of average quality, and they will last about 18 months if they are worn to work every day before they need to be replaced. These shoes cost you about $14 a month. The $450 shoes are of a much higher quality, lasting 48 months if worn to work daily. These shoes cost you something less than $10 a month, meaning that they have a lower cost, even while having a higher price. You have to buy 2.5 pairs of the lower-priced shoes over the 48 months, which means you will spend $750 to cover your feet over the same period of time.

“Cheaper” tends to come with a lower price and a higher cost. When this is true, cheaper is more expensive. “Expensive” tends to come with a higher price and a lower cost. When this is true (and it often is true,) even if one does not appertain the value, expensive is actually “cheaper,” if by cheaper we mean a lower cost.

This rule of thumb applies to all kinds of things in life and business. The cheap fast food place may be expensive because of its impact on your health. The employee that you hire because you are trying to save money can cost you much more than you saved by being thrifty. And being cheap with your attention can be expensive when it comes to producing the results you need.

Filed under: Sales Acumen

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