Budget Island…the true cost of the lowest price

Ever had a few vendors bid out the same project just to have one come in WAY lower than the rest?

Often times this is the result of a “loss leader” bid. The vendor hopes they can secure/retain your business and use your property as a jumping-off point to get the rest of your company’s business. Sometimes, it’s just an honest mistake that happens to be in your favor. Other times, they’re just cutting critical corners to show you a low price. In every case, you should be wary.

If you base your budgets on loss leader pricing, you end up stranded on an islandwith that low cost vendor, since other vendors probably won’t want to perform the work for little to no profit. You may temporarily look like a hero for discovering this mystical vendor with magically low prices…but let’s just play that out a little.

What if your new “cheap” vendor’s services or products don’t quite perform as advertised, making your work life a complete nightmare? You basically have no recourse with your client/boss to offload the cheap vendor and get your budget raised back up to a realistic level… at least not without looking really bad in the process. Thus, you get backed into a corner… stranded on budget Island.

I used to know a business owner that would tell me, on the subject of customer service and value to the customer, “Kenneth, let me tell you something about business, if you’re cheap, you don’t have to be good”. Thinking this wasn’t a very fare position to put a customer in, I would usually retort with, “Yeah, but if you’re good then you don’t have to be cheap, and everybody wins”.

Look… I know how much pressure is on you to keep your costs low, and you should, cause that’s kinda your job. It’s also your job to protect your company and client’s best interests, because the “best deal” and the “lowest price”, are not mutually exclusive terms.

Moral of the story: If it seems too good to be true… well, you know the rest.

Love, Kenneth

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