Perhaps the biggest consideration that everyone makes when making a purchasing decision is the balance between the cost of a good or service and the perceived value we are receiving for our money.
How much is it worth?
And how much are you willing to pay?
What are you getting for your money?
For certain items, cost may be the number one factor – maybe it’s a roll of paper towels and you just need the item to perform the bare minimum required of it. In this case, you won’t be brand specific, you won’t care much about overall value and performance, and you will likely buy whatever is most affordable. If you have young children at home, however, you may be cleaning up a lot of messes, and all of a sudden, you are going through several rolls a week of a low quality product. This is, of course, not cost efficient or convenient, and it may make sense to upgrade to a slightly more expensive product that you can use less of. Knowing that they will be quickly used, it may even be advantageous for you to purchase a higher quality product in bulk to save on your investment.
Finding a balance between value and price depends on many factors – such as what you will be using the product or service for, the amount of risk you are willing to take on, how often you plan to purchase, and of course, your budget constrictions. Purchasing a service can be even more complicated of a balancing act because it involves entering into a relationship agreement with a vendor. This means that the commitment you make when signing your contract will lock in the balance of value and price you have decided on for an extended period of time. If you prioritized saving money at the expense of quality, you will have to deal with a lower level of service regardless of what may come up.
What are you sacrificing for a low cost?
For example, if you selected the lowest priced bid for your snow removal without considering what is included in the bid, the vendor that will be selected to perform the work, and the priority level your contract will have with your partner, you may not be pleased when a huge snow event happens and you don’t receive prioritized service. Further, you are taking on considerable risk of potential slip and falls or other accidents on your property if you secured the bare minimum amount of snow and ice management to save money.
In terms of landscaping, you must decide how important curb appeal and the overall presentation of your property is to you and your investors. If you manage an apartment complex or healthcare facility where people live, this is likely a top priority to attract the kind of tenants you want living there. If your property doesn’t depend on this kind of investment from your customers, such as a gym or grocery store, you may have some wiggle room to save money and still look presentable and attractive. Finding the balance that works for your budget and for your overall goals is essential to ensuring you will be satisfied with the service you receive.
How can you use your buying power to your advantage?
Revisiting the analogy of paper towels, you can also use “bulk purchasing” to your advantage in securing your contracts. Your vendor partner will be able to secure you better pricing for a contract with longer terms, such as three years vs. one year, or for more properties. Using one vendor partner for your entire portfolio will allow your partner to utilize their buying power to negotiate better deals and pass those savings along to you. Further, by signing longer term contracts, you are saving money by not having to go out to bid every year, as well as allowing your vendor to become a true partner who intimately understands your business needs. This kind of partnership can help you pinpoint operational inefficiencies that will save you money over the course of the contract.
The old saying continues to ring true – you get what you pay for. By finding the right balance for your business between saving money and ensuring great service, you can secure a partner who can help you accomplish the goals of your contract and impact your bottom line.
What is most important to your business: saving money or ensuring the highest level of service? How do you strike the balance? Tell us in the comments!