Wednesday, December 19, 2007

Price vs. Value

Thanks for the comments on my most recent article, TQM is Not Just Dead, It's in an Unmarked Grave. I especially liked the additional tag added by my friend Jim Anderson in Florida, who added, "and the unmarked grave is surrounded by armed guards to ensure nothing miraculous occurs."  I love it. If you have a similar comment, please let me know.  By the way, I plan on writing some book reviews and other articles to keep the thoughts on processes and systems alive. It's not about documentation - it's about profits and effectiveness!

On a different note, I was in a store yesterday with my wife and grandson just to pick up a few small Christmas wrapping items. They had some action figures for $1, and my grandson really wanted one, so I thought, "OK, what the heck." and bought it for him.

Of course, I knew that for a dollar, not to expect too much. However, my 3 year old grandson was expecting more.

When the figure didn't hold the sword very well, he started getting frustrated. He also didn't understand my explanation about "you get what you pay for."

Why am I going down this trail?  It reminded me of how people think first of the price of services, but fail to consider the value (or lack of it).

For example, a prospective client may ask for a price quote for me to come in and train their people. When I provide the quote, I also convey the value of the services, such as more defects found, better information provided to management, etc. I encourage people to consider how many defects prevented or found it will take to pay for the training. I have known some companies that measure defects that have found an average defect costs in the neighborhood of $5,000 to fix in production use.

However, some people just look at price alone. They will get a variety of quotes (nothing wrong with that), but then the comparison is on price alone. They may choose the cheapest option and then ask me to match the price but still deliver the same value as with my normal pricing. I will work with people to get a "win-win", but I don't play the car dealer game to match my competitor's lowest price. I just feel that it's a no-win situation. The client doesn't win because although they might get a low price, I'm not feeling good about my end of the deal and I don't like to risk that affecting my delivery of the service.

On the other hand, when I'm making my rate I go the extra mile for my clients and the results are spectacular. I have clients who think I should be charging higher rates. How often do you hear that?

I know this seems self-serving, but I don't talk about rates very often and it's on my mind so I thought I would blog it. Setting rates is a strange art, but I believe that someone's rate should be based on the benefit delivered, not on the "going rate" or how much it takes to keep the lights on. Consultants and trainers often get a black eye because the service doesn't give the value in relation to the rate. My motivation is to deliver the value in excess of my rate. I like for people to know my thought process about rates.

Speaking of rates, sometimes people ask why I don't post them on the site. I feel that 1) the rate depends on the job and each job is unique at some point and 2) I don't like to let my competitors know. All I'll say is that I'm not cheap, but I'm good!

So, if you ask me for a rate quote and choose someone else, I'm not offended. I just want to make sure you understand that just like the $1 action figure, you get what you pay for.

Have a great day!


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