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First cost farce

Oct. 22, 2015
How many of us have bragged to a friend or coworker about the great deal we got on something? We are in an industry that is always getting more competitive Let’s admit that a lower price does not always mean lower quality

Throughout my career in sales, I have always heard my customers say, “It doesn’t have to be the cheapest…” This is usually followed by a number of varying statements referencing “value,” “quality,” or “service.” 

My experience though, is in the end the vast majority of these customers buy from the lowest priced supplier. I understand it, in fact I often do the exact same thing with my personal purchases. How many of us have bragged to a friend or coworker about the great deal we got on something?

We are in an industry that is always getting more competitive. We are servicing a marketplace that is continuing to pressure suppliers for better prices. Better prices that many of these companies need just to survive. But I wonder why we all continue to avoid the honest discussion about, and the ultimate decision that, first cost matters.  Almost always we skirt the topic using terms like “value engineered” or “competitively priced.” But in the end that usually means least expensive. There, I just said it, and the earth didn’t stop rotating on its axis. 

I have sold products across the price spectrum. Certainly premium products have a very important place in our ind]ustry. These products create revenue that drive innovation and new product development. There is always a segment of the market that wants “best in class” quality and performance, and we are willing to pay more to get it. But in reality this represents a very small segment of the consuming market. The larger portion of buying decisions is still driven by lowest first cost. 

As manufacturing globalizes (yet another euphemism to communicate not made in the USA) there are many inexpensive, very high quality products available as alternatives to more entrenched, higher priced products. How do these “global competitors” exist, survive and in some cases thrive? Because they have the lowest first cost. That’s the reality.

My point is simply this: let’s be honest. Let’s admit that first cost does matter. Let’s admit that a lower price does not always mean lower quality and that most customers do buy based on lowest cost. Remember the old saying, “Price, quality, service … pick two?” In today’s evolving marketplace you are likely able to get all three.

About the Author

Mark D’Agostino | Vice President of Sales

Mark D’Agostino is vice president of sales for Power-Flo Pumps & Systems based in Mansfield, Ohio. Previously he was president & CEO, as well as vice president of sales and marketing, at Wilo USA. Also, D’Agostino has worked for the wholesale supply industry, as a manufacturer’s representative and as a senior manager for manufacturers. 

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