Delivering Customer Value; Understanding ‘Lowest Cost’

A local window company in the Salt Lake Valley is known for its motto, “The bitterness of poor quality remains long after the sweetness of low price is forgotten.”

Competing solely on price is generally a losing situation and buyers often end up paying more in the long run when price is the only factor. Author and social critic John Ruskin offered the following perspective: “There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey. It’s unwise to pay too little.”
Sales expert Tim Huffaker, president of The Business Performance Group, says he used to buy tools from a certain hardware store because it had the lowest prices. Several of the tools broke easily and had to be replaced. Huffaker soon realized the quality of those tools was vastly inferior to some of the more expensive brands, which had lifetime warranties.
“Having to buy the same item two or three times because I focused on the cheapest price cost me more in the long term,” he says.

The construction industry is notorious for focusing solely on price, according to Huffaker. “I see it often,” he says. “An estimator will say, ‘Give me your lowest price.’ Unfortunately, the lowest price probably doesn’t include the add-ons that drive the price up. At the end of the day the final cost is much more than the original bid and the buyer ends up paying a lot more.”
To move beyond competing solely on price and into the realm of customer value, Huffaker says businesses and salespeople need to focus on “lowest cost” or “total cost,” which factors in price, quality, service and reputation. Doing so may require educating the customers, but by providing goods or services at the “lowest cost” a company is providing long-term value.
Buyers may have preconceived ideas about what they want based upon price and may not clearly understand the total cost or the best solutions available to them. Huffaker says businesses can add value and build loyalty by listening to their customers, demonstrating that their products or services have the best long-term value and by providing solutions to meet their customers’ needs or solve their problems.

“There is no customer loyalty in the lowest price. Absolutely none,” he adds.
Delivering customer value and developing long-term buyer/seller relationships is much like a courtship. It involves the development of trust, consistency, asking the right questions and going the extra mile to meet the buyer’s needs. Huffaker says over time buyers generally gravitate toward salespeople or suppliers that have a combination of low total cost, knowledge about the markets and the goods or services they are selling and who will go the extra mile for their customers.
“As a buyer, I want to buy from someone imparting knowledge and understanding about the products and the market, someone who has the best long-term value, has my best interests at heart and will go the extra mile for me,” Huffaker says. “That’s customer value.”