Tuesday, January 25, 2011

Is It REALLY a Good Deal???

I had a coupon for a free coffee from Speedway. I stopped there to get gas and, as I approached the coffee station, I surveyed my options. The largest size hot coffee was 24oz and it would have costed me $1.29 without the coupon. However, there was also a 24oz iced coffee available that would have costed me $1.99 without the coupon. Naturally, I chose to use the coupon for the iced coffee. It was a better deal, right? I saved more money. I got $0.70 more value, right? Well, here's the catch: it was eight degrees outside.

As I held the frozen coffee in one hand and the gas pump in another, I began to realize something. Sometimes $1.29 is worth more than $1.99. Or, to put it into more general terms, price isn't everything! A price reflects a general consensus on how much something is worth to the average person (a very weak economic definition, I know). The problem is that none of us are 'average people.' All of us are unique individuals with a unique set of values. Sure, we share many values, but it sometimes only takes a single value to sway a purchasing decision.

Would you rather buy a $60,000 car discounted to $48,000 or a $52,000 car discounted to $48,000? All things being equal, most of us would obviously buy the car discounted more heavily. But, let's be honest. In the marketplace, all things are never equal. Let's say the $60,000 dollar car is so expensive because it has 20" wheels and a muli-leveling sports suspension with bucket seats and a turbo-charged 400 horsepower engine. Really, all you want is a nice, comfortable ride and not a racecar. The $48,000 dollar car has things like heated seats, automatic headlights, lumbar support, a moonroof, a navigation system, etc. Will you really buy the sports model simply because you are saving more money? Perhaps you are saving more money, but you aren't getting what you want!

Take it from me. Don't buy iced coffee in eight-degree weather. Make your purchases decisions on values first, then on price. It doesn't matter how cheap something is if it doesn't mean anything to you. You are spending money to derive benefits, not to save money!

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