Value is a word that is thrown around a lot these days. Especially with the economy the way it is, everyone is looking for the best value whenever they purchase something.
Retailers have latched on to this idea and try to position themselves as the “value leader” in their market. Usually they do so by offering the cheapest prices possible. Think of McDonald’s dollar menu as an example.
What’s the real meaning of value?
But I think the real meaning of value has been lost as a result. As I determine the value of something I purchase, I think of two things: how much am I paying, and what am I getting for that amount. All the discount retailers seem like they want you to forget about the second part of the equation. We are told their products are the most valuable simply because they are the cheapest.
Price, however, is only one part of the value equation.
The Mac Example
I recently purchased a second computer as I’ve been spending more and more time working on various online projects. I’d been looking at Macs for a while but was having difficulty taking the plunge. I had never used the Mac OS, and more so was a little turned off by their higher prices.
But the more I researched the more I became convinced the Mac was the better deal. There were two main reasons I ended up going with a Mac:
- Customer satisfaction. In general I found that most people were very satisfied with making the switch from PC to Mac.
- Resale value. This was the biggest decision maker for me. I was amazed at how well Macs hold their value compared to PC’s.
Now, the point of this example is not to get into a heated Mac vs. PC debate, but rather to illustrate that even though the Mac was more expensive, I still felt it was a better value. Even though I’ve got my family on a tight budget and could have gotten a $300 PC, I went with what gave me the most for my money, not with what was the cheapest.
Consider product longevity!
The importance of this is that I believe if in my purchases I go with what is most valuable but not necessarily the cheapest, in the long run I will spend less money. Think about it, would you rather buy 1 pair of $75 shoes every 3 years or 1 pair of $15 shoes every 6 months? Retail would tell us that the $15 pair is the best value because it’s the cheapest. But math tells us the $75 pair is really the best value.
Of course there are times when the cheapest item really is the best value. For me, shampoo is a great example. If you’ll scroll down and look at my author bio, you’ll understand why I couldn’t care less about the quality of my shampoo . . . . I get the absolute cheapest shampoo I can find, because I get no added value from buying the more expensive stuff.
When cheapest makes sense . . .
For items where resale value, depreciation, and quality aren’t a factor, it will usually make sense to go with the cheapest price possible in these situations. These are usually highly consumable items such as toiletries, cleaning products, some food items etc . . . .
So remember as you make your purchase decisions to look at the overall value of the product you are considering. Remember that price is just one part of that value equation. Oftentimes items with the cheapest initial purchase price will end up costing you more in the long run.
What do you think? What are some things that you have purchased where it made more sense to go with the best value, but not necessarily the cheapest? What are some other things for you where the cheapest price really is the best deal? Meet us in the comments!
{ 9 comments… read them below or add one }
We need to make the same distinctions when we invest. I believe in value investing, but just because something is cheap doesn’t make it a good value. Some of the cheapest stocks are because of fundamental problems with the company or industry. Value means finding those companies that are selling for a low price relative to there prospects or potential rewards. That means doing your home work (research) and picking those investments that will provide long term value.
Thank you.
Great comparison here and so true…it’s good to measure worth and value and also to not just set our hearts & minds to that which “moth & rust doth corrupt.”
Within the last year a big purchase we made was on Bosch front loader washer/dryer. Even with that we found a place that gives discount and so although they are high quality and new, we still got a good deal on it.
On the other hand, when we bought our family vehicle, we didn’t buy the top product or newest model. It was around 5 years old when we bought it, but it is now payed off. I wouldn’t call it a cheap purchase, but I think it goes along these same lines. Vehicles are one of those things we have a hard time paying top price for, because they do depreciate and so we want to try and work it smart.
I believe this firmly. Dave Ramsey talks about handling money they way your grandparents do. My grandfather is the one who taught me that inexpensive isn’t always better, because many times inexpensive is cheap. He would rather spend an extra few bucks on something that will last three times as long.
I have recently decided that I would personally make an exception at this specific point in my life. I want a new MacBook Pro (I have an older MacBook – best decision I ever made computer-wise). By some freak of nature, if my MB dies on me, I *won’t* take the opportunity to buy that MBP I want. I don’t want to pay for a computer on credit, and I would be able to buy a laptop for $400. The difference is that this laptop would just be temporary until I had enough money for the MBP (I need a computer to work).
So my point is that this is a great point. Just in case someone is tempted to do so, I want to point out that buying something more expensive on CREDIT just because it’s a better value is likely not your best option. I know that wasn’t in the scope of the article, but it’s the first thing that came to mind because I *am* currently working my way towards a new Mac.
-j
My wife and I had a negotiation a few weeks back about a wireless router. The price difference was $12, but the more expensive one had way better value than the cheaper model. Thanks for explaining value. When discussing with my wife, I couldn’t quite get my point across why I wanted the more expensive one. All I could think to say was that it was “so” much better…
Awesome article-There is another book called, “Cheap” by Ruppell Ellen Shell which discusses more elaborately about the “cheap culture” as well as how buying cheap not only widens the gap between rich and poor, but it lessens the craftsmanship in today’s world. Good read.
Searching for value also brings along with it the need for responsible full research and Apples to Apples comparisons, or as close as possible. I think that’s where your main anecdote fell a bit short. Leaving out as immaterial to the notion of value the personal feel ‘user differences’ between operating systems Mac, Win 7, and various Linux flavors. Software availability which is really reliant on what the user can and will do, and host of other things that are probably immaterial to a base value comparison.
On a basis of hardware wise Mac’s aren’t near a PCs value and they aren’t intended to be. It’s the price you pay for the marketing machine. Do a repair search (I’m an IT tech) and compare a Mac’s logic board prices to a PC motherboard that’s where you’ll find out why a used Mac costs so much. That and the fact a lot of Mac folks are cult like loyal (lines at every new phone release) there are a lot of units that are sold before they typicaly would be. Also resale isn’t much of a concern on PC’s since they are upgradeable much more than Mac counterparts and designed to be that way.
If we take a Mac mini as a comparison do a couple of upgrades so we can come close to a apples vs apples comparison (sorry Apple is still listing discontinued parts in the PC world on their base models) we come up with $949, a roughly equivalent PC hardware wise would be in the neighborhood of the mid $600 to low $700 range retail with no specials, if we were inclined to assemble the parts ourselves it would be $511 without doing any budget searching. So we already get to beef up the PC side of the equation with more hardware til we get to $949 neighborhood to bring things inline on our value o meter. Toss in upgradeability and I think really you justified your desire for a mac to yourself not necessarily searched out the best value in another computer.
Nothing inherently wrong with your choice as long as you are aware of your spending habits as such when it comes to bugeting for items and really needing value.
If I was shopping for a SUV and said hrmm the Porsche Cayenne has a much better resale price, probably higher reliability and customer satisfaction ratings (just guessing) than a stripped down Rav 4 I haven’t really made an honest value comparison of the SUV market have I? Mentioning throw aways (that’s what I call them) $300 PC’s that are less than the MSRP of even an IPhone makes it seem like that’s about how you approached the notion of purchasing a new computer.
You get what you pay for is true but we must apply it to all the choices available and find that comfortable line for ourselves between paying and overpaying.
Great article! The sentiment that the cheapest is the best is so frustrating to me! I would rather purchase a slightly more expensive, higher quality item from a small and/or locally owned business than the cheaper version that would be sold at Walmart. This same value holds true for food purchases, also, specifically produce, meats, etc.
The only place I disagree with the author is in regard to cleaning products. I feel the the value of my family’s health warrants the purchase of a cleaning product free of harmful chemicals. And honestly, as more of the mainline brands are introducing “eco-friendly” lines, the prices on these items are getting lower all the time.
Sometimes the “cheapest” items are constructed very much like DISPOSABLE items — and it shows. I almost never go for what’s bottom-line “cheapest.”
For a while, toilet paper seemed like it should be one thing you should buy when it’s cheapest. But if you HATE IT every day, and you USE IT ever day (which most people do!), then that’s a lot of bad feelings accumulating. So no, I don’t buy the cheapest — but I don’t go for the hype, either. It’s all about MARKET RESEARCH, whatever it is that you’re buying.
Good points. When making purchases, I think it also helps to think of your return on investment.
Whatever you purchase, whether shoes, car, laptop, or food, it can be considered a investment. The return can vary in form, such as product lifespan, physical well-being, or time and money saved, but all purchases generate a return benefit of some sort.