Cheaper and the Cost Corollary

Seth Godin gave much more that he was paid, really, and his comments reminded me of a broadcast engineering truism.

[…] Cheaper is the last refuge of the person who’s not a very good marketer. Cheaper is easy and cheaper is fast and cheaper is linear and cheaper is easy to do properly, at least at first. But cheaper doesn’t spread the word (unless you are much cheaper, but to be much cheaper, you need to be organized from the ground up, like Walmart or JetBlue, to be cheaper). They are, you’re not.

Cheaper is a short term hit, not a long term advantage. Cheaper doesn’t create loyalty, because the other guy can always figure out how to be cheaper still, at least in the short run.

And my corollary?

Sometimes, things cost how much they cost.

A successful price point isn’t really “what people will pay”, it’s what the item is valued at in the marketplace. If you want to be “cheaper”, you may end up actually being “cheap” in several senses of the word. Be careful about how you think you are covering your input costs by altering your sale price.

In the greater, competitive marketplace, prices will stablise and possibly equalise. This is when Things Costs How Much They Cost, and you really get what you paid for.

Similarly, if you want to be cheaper, consider the total cost of ownership proposition as the customer sees it: are you really selling the customer a $1000 piece of consumer electronics, or are they buying 2 years’ worth of platform and usage via an initial capital equipment outlay?

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