The Variables of a Purchase: Is Price the Ultimate Bottom Line?

My biggest criteria for most of my purchases is simply price. What’s the best deal I can get on an ear of corn or on a book? The answer to that question usually pushes me towards the checkout line.

Yet, quite often, I find myself not always going for the rock-bottom price on specific items. I’ll pay a bit of a premium at a farmers’ market, for example. I’ll stop at the tiny market in my town for a few items quite regularly.

Why would I regularly abandon the lowest possible price? For me, there are a number of factors at work.

Is the location convenient? For the most part, this is the “time” factor. I’m willing to pay a small premium for an item if it’s convenient for me to buy it. If I need a loaf of bread or a dozen eggs in a pinch, I’m often willing to pay the premium prices at the local market just a couple blocks from my home, especially when the next closest market is ten miles away. If I need a book for research purposes, I’ll often get it from PaperBackSwap or from Amazon, simply because of the convenience of clicking a few times to get the item in the mail.

Is there a distinguishable quality difference between the items? I’ll often pay more for a produce item that’s exceptionally fresh versus one that’s been sitting on the grocer’s shelf for a number of days. They’re the same item, more or less, but one will taste better and have more nutritional value than the other, and that’s worth a premium to me.

Am I buying from a local business or local producer? Buying local means that the money stays in the local economy. Some portion of that money winds up in the local tax system, improving schools and other services that I use every day, and other portions of that money wind up getting spent again within the local system. Some fraction might be donated to local charities, and some amount may go towards providing jobs in the community. To me, this is worth a small premium on the price, particularly since the items are often freshly-made, which means there’s a quality difference at work here, too.

Is the business ethical? Does the business treat its employees well? Does the business treat the environment well? Does the business interact well with the community? Some businesses make a great effort to be ethical members of the local community – other businesses could care less and view the environment and their employees as cogs in the machine. To me, it’s worth it to spend a little more at businesses that are stewards of the environment and of their employees.

Does the business have good customer service? A great example of this (from my personal experience) is Apple and Dell. Some businesses go the extra mile to provide good customer service for their customers (Apple), while others make it very difficult to get appropriate help (Dell). To me, that makes me more likely to pay a premium for an Apple product when a comparable one is available from Dell. I apply a similar philosophy to almost any business where service is a useful component, like grocery stores, for example.

Does the business provide a good shopping experience? I like to call this the Aldi factor. If I feel uncomfortable going to a particular store, I won’t go there, even if there are great bargains to be had. On the other hand, if one store is much cleaner than another store, I’ll go to the cleaner store even if the prices are slightly higher. Are the salespeople pushy? That pushes me away. Can I find a salesperson if I need one, though? That’ll bring me in. Is there plenty of room, or are we pushed in there like rats in a maze?

In the race to always get the lowest price, many of the above factors are tossed out the window. The lowest prices often come from companies that don’t have the strongest ethical standards and don’t pay their employees well and don’t participate in the community.

In other words, there’s often an extra hidden cost in always seeking the lowest price. Is that an extra cost you’re happy paying?

I can’t give you an answer to that question, because this is one of those points where personal values and personal finance intersect. The things that you find to be “right” in your life are likely different than mine.

However, I can say that in my own life, I place a significant extra value on buying local produce and dairy products versus buying items that are shipped in. I place a slight premium on the ethics of the business, but I often find that companies with questionable practices often have many competitors and it’s trivial to simply use more ethical businesses. I have something of a minimal standard for customer service and shopping experience – if a company doesn’t meet that standard, I just don’t give them my business, regardless of price, but above that level, I view all competitors roughly equally.

Where do you stand? What additional factors are important to you when making a purchase?

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49 thoughts on “The Variables of a Purchase: Is Price the Ultimate Bottom Line?

  1. Suzie says:

    Good customer service will always encourage me to shop somewhere, especially if it’s somewhere I go regularly.

  2. Keith says:

    How would you apply this to working with an Internet business? This is a great premise for local businesses, and I like to support them as much as possible, but I find that lots of things I don’t need right away get purchased from websites.

  3. @Suzie: I pay particular attention to what would happen if something goes wrong. E.g. can I return something? If I discover a problem, will the staff be helpful or will they refuse to admit there’s an issue? It’s when things are bad that you discover what shop staff are really like!

  4. Diane B says:

    I am very willing to pay more for a quality, local product than a cheaper product sold by a chain store. I like buying from local farmers and butchers because they actually CARE about what they are selling.

    I also choose to avoid stores that I know have a high social cost – Wal-mart is a case in point. They have a horrible record in regards to abusing and discriminating against their staff, forcing producers to lower quality in order to lower price, forcing small guys out of business, etc).

    However, don’t assume that just because someone is at a farmers market, they are selling local food. There are lots of “resellers” who are just selling the same wholesale crap the grocery stores do. Ask questions.

  5. Alison says:

    Yes! Thank you Trent! This is the one MAJOR thought that I have the most trouble articulating when it comes to weighing most any purchase.

    I also think this list encompasses most of the values people juggle when defining how their finances fit into their life, weather they are conscious of their spending in dollars and values.

    I see myself as a frugal consumer, but I have always seen the value in paying for customer service (home contractors) or product quality (car/appliances)or ethical business practices (diamonds/food).

  6. JS says:

    I agree Trent. Also, I can vouch from personal experience as well that Dell has exceptionally bad customer service.

  7. Chris says:

    Value, not price.. ‘Nuff said. Good article.

  8. Buying local is something I’m trying to get into. This wasn’t something I cared about for a very long time. But as my fiancee plans our wedding, we’ve found how great it is to be involved with the community. Of course all vendors are local, but our food is also going to be organic and grown locally.

  9. kara says:

    I definitely agree with these points. As Chris said above, there’s value and then there’s price. For me, “value” has other intangibles that need to be taken into consideration. The lowest price isn’t always the BEST price.

  10. Johanna says:

    Some good points, but what do you do when these criteria contradict each other? For example, you say you get books from Amazon for the convenience, but that’s not supporting a local business, is it?

    I’ve been thinking about this lately because a bookstore in my neighborhood closed up shop over the weekend. I had shopped there sometimes, but not very often – they were only open until 8:00 in the evening, which limited the time I could spend browsing there, and their selection wasn’t very good at all. They would always offer to order any book for you if they didn’t have it in stock, but I never saw the point in ordering something through them if I could just order it myself. It always makes me sad to see a local business get gobbled up by the giant chains, but this particular local business just wasn’t very good.

  11. Nowooski says:

    I find that the personality of the salesman can often be the deciding factor for me. I know it is part of their job to “sell me” on something. But I find a good sales person who puts a lot of effort into and tells me their opinion refreshing.

    The same thing goes with waiters. If I ask what is good, and they say everything the tip is going to be small. Put some personality into it. Tell me the baked chicken is nasty and I will value your candor and personality with a bigger tip.

  12. Anne says:

    One of the factors you mentioned was how businesses treat their employees. There is a mega-retailer in my community. I can save quite a bit money by shopping there in part because they pay most of their employees minimum wage or slightly more and keep many of them part-time. Most employees are ineligible for or cannot afford the benefits. These same employees have Medicaid for their children and sometimes themselves, need assistance to put groceries on the table and I don’t even know what all else. My point is that all of these other services are ultimately paid for by the taxpayer’s. Please don’t misunderstand. I’m not trying to say that we shouldn’t provide assistance to people. But I AM saying that I would rather patronize a business that provides a living wage and benefits to their employees, even when it costs me more money out-of-pocket.

  13. chef says:

    How often do you use customer service for a computer? Fix it yourself instead of paying a ridiculous premium from Apple. You don’t buy an extended warranty for your car, why pay upwards of $500 for hardware? I agree that Dell service isn’t the best, but I’ll take the savings and fix my own box.

  14. Rob says:

    Good post. Bottom line for me is, if I can go to the store, find what I want with ease, sales people are nice, fast checkout line……they will get repeat buisness. I would rather pay a little more for better, faster service, than going somewhere and having to deal with aggravation.

  15. If I can afford it easily, then CONVENIENCE. If its an expensive thing, then PRICE.

  16. Jared Spurbeck says:

    How about Fair Trade certification? http://en.wikipedia.org/wiki/Fair_trade

    I also pay a premium for organic produce and animal products, so that I can be assured that no chemical pesticides were used on the foods (or the poor migrant farmworkers’ hands).

    I am kind of skeptical of buying locally. Perhaps it’s because I buy, sell, and am commissioned for work online, and it doesn’t matter to me where people come from. I don’t think that the people in my community are better than those in another, and I hope that my living outside of others’ hometowns won’t be an issue for them when they choose to pay me for one of my stories.

    Having said that, I don’t like the idea of paying a mega-retailer so they can ship all the money back to their owners. And I think that they have a number of unfair advantages, because they’re allowed to shift their costs of doing business onto other people (like their workers and the government), while local businesses either can’t or won’t.

  17. Kevin says:

    Price has never been the biggest criterion. Value is. And many things factor into the price/quality/value equation. Buying on price alone is cheap; buying value is frugal.

  18. George says:

    Living a bit far from stores and dreading the mall experience, we tend to buy from web vendors for computers, books, DVDs, and organic seeds. On the occasions that we’re in town, we’ll make a point of browsing the local super bookstore (who also maintain a web presence… if you live in Portland, Oregon, you’ll know which store I speak of).

    Vegetables and milk and some baked goods are weekly purchased from a fruit stand that’s only 2.5 miles from home (Alice’s Country Market), usually while I’m commuting home from work. Quality and price on a consistent basis from them. Wife does the rest of the grocery shopping at one of two chain stores within 5 miles.

  19. Joey says:

    On a different forum I frequent, several members tried to capitalize on a low price from one of Amazon’s sellers on a pair of prized headphones. Shortly thereafter, pretty much everyone received the wrong set of headphones.

    The early bird gets the worm, but the second mouse gets the cheese.

  20. Daniella says:

    Great article. I was once introduced to the concept of ‘buying time’. You touched upon it briefly. In essence, life is time. The less time you have to spend shopping for groceries, the more time you have to spend with the ones you love.

    My mother loves buying in bulk at a cheap discount store about 4 suburbs from where we live. She never considers time costs, petrol costs to get there and storage costs.

  21. Good customer service can go a long way. I would much rather pay a little more and buy from a company who is known to be good and loyal to its customers, rather than a company with poor customer care. I like to think that the nice guy doesn’t always have to finish last.

  22. Kelly says:

    I agree completely.
    I try to weigh the value versus the price, and where and how an item was produced before I make a purchase.

    Using my values is often a good way to keep me from buying anything since I have to put so much thought into my purchases.

  23. Bob says:

    Trent,

    What percentage of the clothes in your closet were made in America? And for those which weren’t, can you honestly say you know those factories treated their workers ethically?

  24. Oskar says:

    I agree with this, there are serveral items other than price that are key when buying products. It is only a good bargain if you actualy get more than you pay for. However on the opposite side you should also be very aware that sometimes (e.g. when buying produce from a local farmer) the cheepesed option is also the best quality………

  25. Carmen says:

    Agree; value not price. Which is exactly why we have just bought another Dell, instead of the much wanted Apple computer. The Apple was more than 3 times the price! Admittedly the Apple products are far more appealing in terms of their aesthetics and handling, possibly with a couple of features the Dell doesn’t have, but they both fulfilled exactly the same purpose, so we sadly couldn’t justify the price.

    You pay for the brand with Apple.

  26. TeresaA says:

    I think one of the biggest reasons we spend so much money and acquire so much stuff is our desire to find a bargain and the mistake of settling for something we don’t really want.

  27. This is a great post, but by the title I thought you were going a different way. I like your discussion– it is the total value proposition!

    However, my original thought was you were going to do the price vs. cost debate. Sometimes people focus too much on price and don’t see that the cost of ownership of the “low priced” purchase is actually more than the “high priced” purchase.

    Frugality and the Price vs. Cost Debate http://divorceddadfrugaldad.com/2008/08/28/frugality-and-the-price-vs-cost-debate.aspx

  28. jc says:

    location is also a price issue if you’re driving there, but it’s hidden. very few people take account of the actual cost of driving–the federal rate of ~55 cents barely covers the costs of a late model compact import, let alone tooling around in a larger vehicle.

  29. Harrison says:

    Well, for me, I will consider the the reliability of the products and the customer service. I’m a person who hate hassle so the 2 factors are very important for me to consider.

  30. Shelly says:

    I agree wholeheartedly with this article; sometimes it’s not just about price. The ethical part is really important to me. My husband and I refuse to shop at Walmart because of the way they treat their employees and the way they take over communities.

    Our supermarket chain was founded in our area, and has been ranked in the top 10 for employee satisfaction for the past several years now. Their prices are very close to the Super Walmart, but occasionally a little higher — and I’ll pay it in a heartbeat to know that I’m supporting a company that actually cares about the people who make it run.

    The “Aldi Factor” made me laugh, but I will say that at least in my area, all the Aldi stores are extremely clean. I still don’t shop there very often because I don’t like how they don’t sell any local items (lots of unnecessary food miles), but I’ll stick up for them on the cleanliness. :)

  31. I live in a very small town so we don’t have many local businesses. I do try to support them as much as I can. Even if their services are more expensive, I feel good about helping the local community. It also saves me gas by not driving an extra 10-12 miles to the bigger town.

  32. Battra92 says:

    I’m saving to someday buy a good rangefinder system. I’ve spend hundreds on cheaper 35mm systems in the past and now I really want to get something that will last me the rest of my life.

    I’ve been debating on Voigtlander vs Leica for a while and hopefully someday I can make up my mind to commit. Of course, once I do that most every other camera I own will need to be sold. I’m not sure I can commit to that.

    Sometimes, if you REALLY care about it, it pays to buy the best regardless of price. Not always (most of the time it’s fine to be super cheap on nearly everything) but once in a while it just makes sense.

  33. kat says:

    I also refuse to shop at Wal Mart because of their employee treatment, anti union activities and censorship policies on music and books. I also avoid buying goods made in China as much as I possibly can. I live in a rural area, and the local Wal Mart has squeezed out a K Mart Duckworth and several other small stores. I try to shop local as much as I can. the local grocery store has many items as cheap as and better quality than the Wal Mart.

  34. Value over price is the way to go. You can buy one good pair of shoes that will last for many years versus a somewhat cheaper pair that will last perhaps one year. No sense repeatedly buying crap only to imagine that you’re saving money.

    Customer service is not meaningful when you’re buying wood or hardware (a commodity) where the quality is the same all over town. Who cares?

    I avoid Wal Mart simply because they added TVs to their stores. I’m there to buy and you have to keep me entertained and sell to me with TVs all over the store? It’s insulting and annoying, and because of it, they’ve lost me permanently as a customer.

    My preference is to buy locally and patronize the small shops that will take better care of their customers. If I get a fair price on specialty products and services, and I’m treated like a valued customer, then that shop gets my business forever.

    It’s a big plus for me if the place also allows me and my dog to come in and shop:-)

    Clair

  35. Bill in Houston says:

    I use Price, Time, and Distance as my variables when contemplating a purchase. That’s about it. Anything else is a bonus. Quite often, though, it turns out that I’m buying from Costco, who do act ethically and have great customer service.

  36. prodgod says:

    This presumes our financial situation affords us such a choice. Often, we HAVE to choose the cheapest option, sacrificing a bit of quality in the process. Just the way it is for some people these days.

  37. Lisa says:

    Shops are closing up. I LOVE the fact that in my community (let’s say, within 1 mile from home) there is a brick & mortar retail for just about anything I need (hair cut, grocery, vacuum sweeper dealer, chiropractor, fish shop, camera shop, bike shop, etc.) It is a joy to see these businesses open and vibrant. I am doing my best to shop very local (even if the stuff is made overseas) to help my community.
    I could, like Trent, buy vacuum cleaner bags from Amazon, but I am having my local guy order them for me. Someday I am going to be pleased that he is there it fix my vacuum. New bike helmet, etc. the first thing I do is look local.
    A sense of community is extremely important to me. I want to do my part to keep from having a main street of boarded up vacant buildings.

    I moved from sprawlville (eastern Kansas) to a Buffalo, NY suburb. I can’t believe the number of mom & pop businesses and I absolutely love it.

  38. Helix says:

    Adding on to other folks’ great comments, next time you’re in the market for computer repair or even a new computer, please don’t overlook your local computer shop. You’re pretty much guaranteed they’ll beat any repair price from a big box store, and for the most part they can compete with them on new computer prices too. No, they won’t beat the Dell $299 special, but I’m pretty sure Dell doesn’t sell very many of those anyway. Plus they’re customizable if you get from a local shop.

    Amusing side anecdote – when my boyfriend ran a computer repair store in Michigan, the local big box retailer called him to come in and upgrade their servers… even when they had their “squad” on staff.

  39. I would have to say price is sometimes is the bottom line, but its only not when you see the value in a product. Lets say for example you see a product somewhere that you think will make you tons of money and see the value you wont care what the price is you will buy it to start making tons of money I would think.

  40. IRG says:

    One of the difficulties of shopping by “conscience” as it applies to companies such as Wal-Mart is the actual impact it has on the local market and individuals, and NOT the company as a whole. (They WILL remain in business no matter how many local outlets they close.)

    There is no Wal-Mart in our big city, but when I visit friends out of town, I do end up going with them to a local Wal-Mart. They, too, have major issues with Wal-Mart for all the reasons stated.

    however, they know virtually everyone who works in the local store personally. (Their work and children bring them into contact with a lot of people in their community.)

    NOT shopping there would put a lot of people out of work, with few, if any, opportunities, for work elsewhere. Not shopping there is NOT supporting their friends and neighbors.

    So…this is the real-life conundrum for them.

    Meanwhile, back in our big city. We shopped and supported many locally owned shops for years. Alas, there was nothing the owners could do to stay in biz given the greedy rent increases by the landlords. (The shops were well run and managed and well-priced. It WAS the rent increases they could not make up for, because they did not jack up prices.)

    The only satisfaction, if you can call it that, over the years, has been to see national chain after chain fail in these same locations where they usurped the little guys. The greedy landlords now have vacant buildings due to their greed–but we miss the wonderful people and stores that used to make this a real “community” even though we are part of a huge city.

    Again, it’s all about the greed on someone’s part. (Not the shop owners, that’s for sure.)

    I miss the people behind the shops and stores as much, if not more, than the stores themselves.

    I don’t know when we will see the end of this insanity with overpriced retail real estate that really is the end of “communities” in a very real sense.

    Personally, I prefer dealing with real people not big brands and conglomerates.Would that it were easier to do so. (We wanted to join a food co-op, for example. It was a futile attempt since it is SOO far away from us and required volunteering that we could not possibly do given our work and location. No other one available to us.)

    The “big” companies that I buy from, I do so because of customer service…not just price. (Drugstore.com is great for example.) And this is important because for whatever reason when stuff is shipped, there can be issues.

    I’ve learned the hard way over the years that it’s not just the price on the initial sales, but what happens afterwards. Good value is NOT saving a few bucks here and there when it costs you more in time, return shippping, etc. if there is a problem.

    We order online when we possibly can rather than deal with some of the big box stores because they have lousy customer service and cutthroat-competitive sales people who will tell you anything–including outright lies– to get you to buy big-ticket items.

    And when we have issues with how a company treats its employees, we do communicate our concerns to them. It may make NO difference, but we do it anyway.

    In a perfect world, each community would have the people and the wherewithal to provide the basics (for food at least)within the community. We’re in a far from perfect world.

    The ability to get stuff from all over the world is great on one hand. But we’ve paid a horrific price for it at the local, and real, level in terms of lost jobs.

  41. grammaticaster says:

    “My biggest *criterion* for most of my purchases is simply price.” Criteria is plural.

    (Great article nonetheless. :P)

  42. Christopher says:

    Not to be one of those irritating fault-finding people, but I think you mean “other businesses couldn’t care less” rather than “other businesses could care less”.

  43. Donna says:

    I don’t shop at Walmart, for the reasons mentioned in posts 7, 18 and 21.

    I feel you can still big box shop at Costco or Target without helping Walmart to take advantage of it’s employees.I’d rather pay a couple of bucks more for an item than shop there.

  44. tammy says:

    I was just thinking about this today! I need a few things from the market, but if i go to the market, a few things will turn into $20 of needful items (I need to buy food!) However, I can get by with just some cheese until Friday—-so I’ll pick up JUST CHEESE at the local convenience store just to keep from spending a bundle at this moment. I’m a freelance gal and am waiting on client checks, so money is tight!
    Sometimes, convenience actually saves money!
    Great post Trent!!!!

  45. k2000k says:

    I agree with comment # 31. Having used apple products before and having to take their products in because of malfunction, I will state that their computers are not worth the price that they charge. And though the customer service may be better than dells, its still rather poor. For computers you can easily build one yourself. You get the enjoyment of making it, and the comfort of knowing what is going into your computer. However, there is the fact that if something goes kaput you are on your own. In which case you can go to the middle ground and find a local business that builds computers. We have one in Seattle which is an excellent company, that has customer service that puts others to shame.

  46. Pat says:

    I try to buy all my groceries at our locally owned store. And their prices are as good if not better than the big box stores in town. I also do not shop WalMart for the same reasons stated above Target’s customer service is second to none! Last year I purchased a power washer from them and it quit working after only the 2nd time. I had thrown away the receipt (not realizing that this item would break so soon) and they actually went through a week’s worth of store receipts to find my purchase! They promptly refunded my money. I also try to be more conscience of where the products I purchase are produced. Clothing is tough since I haven’t seen an American-made shirt or slacks in a long, long time. Maybe I’m not shopping in the right places so I’ll keep trying.

  47. Georgia says:

    I guess I’m in the minority here. I shop at Walmart and love it. There are at least 6-7 within 25-90 miles from me and are in places I have to frequent, so it’s not out of my way. I have never been in a dirty Walmart, had bad customer service, or met disgruntled employees. I talk to plenty of them and they are grateful for the work. Walmart does have employee benefits and they are appreciated. I have had employees go all the way acroos the super store to help me find what I wanted and even miss their break time.

    As to unions, thank God they don’t have them. Can you imagine how the prices would skyrocket if a union were allowed in? My husband discovered in the 60′s that unions were not there for the employees benefit, but to line their pockets with the dues.

    As to the small mom and pop grocery stores. Are any of you old enough to remember them before Walmart? I can and they were not cheap and all of them were not good. Not where we shopped anyway. And a lot of mom & pop’s closed in small towns because Jr. did not want to take over the family business when mom & pop got too old to manage.

    Nostalgia can lead up to all kinds of wrong conclusions. We old folks remember when items were very cheap as opposed to now. However, what we often forget is how much we were making.

    I went to college in 1956-58 and my entire two years of college cost me $1800 for tuition, room, and books. I worked my way and I was earning about $.75 – 1.00 an hour. Just took 2 classes at a community college (much cheaper) and the tuition and books ran me $860. If I’d went to a 4 year college, the minimum tuition would have been $325-350 an hour and room would be about $6000.

    I buy food, clothes, etc. by price (on sale) and if it does not suit, I just do not buy that brand again.

  48. Bill in Houston says:

    To continue off of what Georgia said, Wal-Mart is one of the reasons American consumers have enjoyed low inflation for the past decade and a half. Wal-Mart was the model for many “big box” stores.

    I also remember Mom and Pop stores. Even the local “supermarkets” of the 60s (A&P in my home town) had limited variety and high prices due to a lack of competition. The local Mom and Pop was where we kids bought a soda and gum. My mother once practically screamed at me when she found out the quarter she gave me for gum didn’t yield change.

    That being said, I don’t shop Wal-Mart except at Christmas. The ones in my area are dirty.

  49. Spot on Trent… not always is the lowest price also the best bargain.

    I was listening to a Zig Ziglar podcast just yesterday and he was talking about a sales technique he uses when the customer balks on price… ask the question –

    Would you rather pay a little more than you expected today or later realize that you had spent a little less than you should have?

    That’s a loaded question… sometimes the answer still takes us to lower price and thats ok… but it does force us to consider price in the context of our other motivations.

    Thanks for sharing!
    Dave

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