Two Things more Important than Price when Shopping Around

Without looking below, close your eyes and answer this one simple question: Why do we shop around?

 

[no peeking]

 

If your answer was “to get the best price,” I can’t give you any credit. Sorry, the price is wrong.

Don’t feel bad. This was a bit of a setup and price is an important part of the reason we comparison shop, or “compete” our purchases, when we buy. But it’s the third and least important of three reasons, the rest of which are explained below.

This is part of a series of articles about the only three paths for a company to save money. In this article we’re talking about what may be the most obvious of the three: Compete.

After the Conserve step – which should always come first – we know whether we want to buy something in the first place, and have a pretty good sense of how that purchase will get us to our goals. For more on how to Conserve read here.

The next step is to COMPETE, that is to “compete the business” by evaluating different solutions and vendors. The goals of this step are to get, in order:

  1. The Right Solution
  2. The Right Vendor
  3. A Competitive Price

Let’s discuss each.

 

REASON ONE: The Right Solution

The solution you buy is more important than the vendor, and more important than the price.

To a large extent, products and services are being replaced by “solutions” which are often some hybrid form of delivery. Consider the way music was sold just a few years ago: you walked into a store and bought a CD, and you were done. Today, you’re more likely to go online and either subscribe to a monthly music service that plays what you ask for, or buy songs in the cloud that you can deliver to your devices or ears when you want. Is that a product? Is it a service?

Businesses face problems and they need solutions. For example, if the problem is a need to do their taxes, here are a few of the options they have:

  1. Buy a $300 software package
  2. Buy a $2,000 software package (with or without support)
  3. Hire administrative person (full-time or half-time)
  4. Hire an accountant (full-time or half-time)
  5. Hire a CFO (full-time or interim)
  6. Engage an outsourced accounting firm

These different solutions have vastly different implications on how their problem is addressed, and how much effort and risk they take on. It wouldn’t make much sense to say “well the $2,000 software package is less expensive than the CFO, so let’s go that route.” Depending on the context that could be the best decision or the worst decision.

So it bears repeating: the solution you buy is more important than the vendor you buy from, and more important than the price.

 

REASON TWO: The Right Vendor

If you’ve worked with the wrong vendor recently in any meaningful area, then you don’t need to be convinced about the importance of working with the right vendor. Poor delivery, bad communication, or surly attitudes can turn a routine purchase into a nightmare that reverberates throughout your company and even impacts your customer relationships.

Think about the cost of switching vendors after a botched implementation. Think about the time sink and stress of working with the wrong team. The good news is that for most purchases there are many excellent vendors to choose from, but selecting the right vendor must be a priority of the “Compete” step, and it is more important than price.

 

REASON THREE: A Competitive Price

Paying less is its own reward and requires little explanation. We explore the dangers of the “best price” and also key process steps to ensure competitive pricing in other articles here on our site, such as “Business Buyer Beware: The ‘Lowest Price’ Mirage“.

 

Application:

Consider your biggest area of non-payroll spending. Do you have the right solution(s) in place? Do you have the right vendor(s)?

In an upcoming purchase, as you start to shop around, make a list of at least three different solutions available to you. Which one is the best choice, and why?

If you need help determining different solutions, don’t hesitate to contact me and let me show you how to implement the right way of thinking when it comes to the “Compete” step in the process.

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