What's your favorite brand of pinto beans? Where is the best place to get a gallon of milk? How do you decide which package of printer paper to purchase? The answer to all of these questions will most likely be the same--whichever is cheapest! These items are commodities. One item within the category is the same to us as all other times within the category. So, all things being equal, it makes sense for us to opt for the lower price.
We as consumers are very price-driven, sometimes to our detriment. We tend to look at all items within any given category as being the same. We have a tendency to commoditize everything. It's one thing to pay the lowest price for a can of beans or gallon of milk, but what about more complex transactions? What about car insurance? Do you go with whoever gives you the best quote? Is car insurance a commodity to you? For most people, I would say that it probably is. All car insurance companies do the same thing, right? They're all more or less cans of beans.
Or are they? How much time have you spent on hold for customer service with your car insurance ageny? How quickly do they respond to claims? How pleasant are they to deal with? All things things factor into the differentiation within the category of car insurance companies. We can carry this same idea into any industry: banking, automotive sales, lawncare, construction, childcare, you name it. When you bid for the lowest possible price, chances are you are going to get the lowest possible return.
Why do you buy things? Is it to save money? Or is it to improve your lifestyle? Do you want the value you get from all of the money you spend to be mediocre? Imagine the aggravation that could be removed from your life by spending just a little more in every category of your life. Services you pay for would most likely be a lot more pleasant to deal with. Products that you pay for would most likely enhance the pleasure you get from those products. I don't know. Maybe Bush's Pinto Beans are better than the knock-off brand. If you want a better life, you're going to have to invest a little more.
Why does paying a high price generally result in a better experience with products and services? Well, let's do a thought exercise. Suppose you shop five or six local dealers when you are buying a car. Since you are such a savvy negotiator, you manage to play the dealers off against one another to the point that one dealer finally agrees to an absurdly low price for a car. You get the car, but the process is terrible! You don't get floor mats. You don't get a coffee mug or a t-shirt. You have to wait three hours before getting into the Finance office. The salesman tries to be pleasant enough but you can tell throughout the transaction that he isn't happy with you. Congratulations, you got a good price.
Maybe that's all you wanted. Maybe you don't care about the livelihood of anyone else as long as you are saving money. That's fine if that is who you are. I would venture to say, though, that most of us aren't like that. We want people to be successful so that they will be more well-equipped to turn out a better product or service. We want to pay the salesman a little extra so that he will go out of his way to provide us with the perfect car buying experience. This principle applies to everything that we buy.
Why should we pay a little extra? Because we incentivize companies selling us the products and services to improve their products and services. We reward those who reward us. We'll always get what we pay for. The question is, 'do we want to invest our money into a marketplace that provides the worst possible products and services or the best possible products and services?' When it all comes down to it, the purchase is not the end of the game. A purchase is also an investment in the quality of future purhases.
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