May I offer a few thoughts that you may find useful? PRICE is an easy figure to focus on because it is easy to identify and see. But the quoted PRICE isn’t what your product/service is really going to COST me! COST is a far more accurate figure – because it includes the price and all the other stuff that goes into a relationship with your firm.

A few ‘frinstances will illustrate what I mean.

Example 1 – CAPE TIMES I placed a classified advert with the Cape Times a few months ago. I had to make 6 phone calls to them, as well as 2 faxes, and I had to give them my credit card details BEFORE they placed the ad. By the time we’d finished – the total cost to me was much higher than the R2700 quoted for the ad, wasn’t it? So imagine my distress when I received a summons 6 weeks later demanding payment. Another long phone call to identify the source of the confusion. My total time-cost in this debacle was about 3 hours – about another R600. Then the cost of issuing a cheque [ABSA charges about R24-00 for anything over R2000] plus postage and envelope. All for something that should be so simple! The PRICE was R2700-00, but the COST was R3325-00.

Example 2 – ABSA One of my accounts is with ABSA [I’m almost embarrassed to admit it – but it’s part of a strategy to spread my banking – which you will understand if you’ve attended the CrashProof your Business strategy]. Last week ABSA managed to mess up a deposit – the end result of which was they charged me 2 x R10.45 for a cash deposit which they never managed to put into my account! It took 3 phone calls [Cape Town – Randburg] and 8 people before I finally managed to find someone to take ownership of the problem at ABSA. The PRICE was R10.45 – but the real COST to me was more than R100-00!

We all have horror stories about bad service we have received – but let’s look at bad service from another perspective. Our suppliers’ bad service costs us real money. That cost is usually hidden rather well – but it is a real cost that we must factor into the price we’re being quoted. And we should look at areas which are not normally regarded as ‘bad service’ but nonetheless cost us money.

Examples are:

Queues – this time is pure waste – and if you employ someone else to do it – then it’s pure cost [and then some]. It’s quite easy nowadays to waste an hour getting to, finding parking, getting through the electronic doors, queueing, getting out, and getting back. Why do we allow ourselves this pain. A recent client of mine took the matter into his own hands when he raised his voice in the banking hall to complain about the poor service – and he just kept getting louder until they put more tellers on! Why are we so scared of making our wishes clear?

Incorrect shipments – the cost of diagnosing the incorrect shipment, arranging the return, waiting for the correct stuff, liaising with our disgruntled clients, losing leverage and goodwill. Why don’t why count these costs when we look at the base price? [I know that most of us don’t because I bump into this question at every marketing seminar!]

Faulty products – the cost to YOU when the damned thing/service does not do what it should. Sure everyone is quick to disclaim responsibility – but when you have a big project on the line the price savings become negligible.

Incorrect [or unclear] Invoices – these cause you to have to make a bunch of phone calls to fix the problem. Because it will otherwise cost you when the invoices are incorrectly punched and you have to fix your accountingsystem. Isn’t it amazing how ineffective some suppliers clerical systems are when you have a problem?

Incorrect [or unclear] statements – which mean that you have to employ someone to reconcile every single account – simply because your supplier is too incompetent to do his books right! It doesn’t matter how great his pricing is – this hidden cost is going to hurt.

Complex contracts – the ones that take 3 weeks to read, and even then you understand just one thing – no matter what goes wrong it’s going to be your fault and you will be expected to pay. Whatever happened to client service?

Rigid ordering procedures – where you have to order on a company letterhead, with 3 signatures and a wax seal! Instead of your supplier having a simple system which takes the order any way it comes – and if it’s really critical you get a fax confirming the details. Why should we have to type it all out and fax it, phone it, post it, etc?

And what about online ordering – wouldn’t that make life easier? If your supplier doesn’t offer it – then factor that into the price as well. I’ve been trying to do everything via email, fax and web – but many of my suppliers don’t have those facilities. As a result they’re becoming too expensive to deal with. And it’s got nothing to dowith their PRICING.

Non acceptance of credit cards – where you have to make out a cheque for every small order – and then physically get it to them! Ouch. The total costs! One of my smaller suppliers refuses to take credit cards because he ‘can’t afford’ the 5% commission to the bank – but he accepts that he will get about R2000 bounced cheques each month – with all their consequent costs [about 5% of his total turnover]!

Inadequate technical support – a fine reason why I no longer use most of the cheaper PC and technology suppliers. When something goes wrong they haven’t a clue about why I might [God forbid] want their product to work! But that lack of support COSTS a fortune. Inadequate order support – which the money it costs you to track an order through a supplier’s interminable red tape! I now draw the line at 5 people having to handle each [long distance] phone call.

To conclude this PRICE vs COST diatribe – it was really intended as a piece on why your salespeople should not get too hung up when facing an objection regarding PRICE – but should rather focus on the real COST of doing business with you [and your competitors]. But then I got carried away! Good luck.

© Peter Carruthers, www.petesweekly.co.za

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