Sales 101: Price vs. Cost

If I were to break down the difference between price and cost, I would simply say that PRICE is what you pay for something at the register or during the point of the sale, while COST is how much that thing ends up costing you over time.

I remember years ago when my clutch started going out in a used Ford Fusion I had. I wanted to save some money because the shop down the street told me it would be about $800 dollars to fix. Well, since I consider myself a smart guy, I thought about all of the different ways I could save some cash. I called AutoZone, and found out the parts were less than $100 bucks! Look at that, making money already.

So, now I just need to find someone to pick up the parts and install them. The first guy I called came out, did an oil change, and a much needed suspension fix. Since he seemed trustworthy, I gave him some cash to go pick up the parts for the next job. And, of course, the dude disappeared.

The second guy I called out seemed very knowledgeable, and upset about the fact that the first guy ripped me off. He took the car apart, made a parts list, and collected my card to go pick up the parts. You see what I did there? I wasn’t going to make the same mistake of giving someone else cash to steal. I figured, absolute worst case scenario, if this guy decided to steal, at least I could get help from the bank. And wouldn’t you know it, that is exactly what the POS did.

He went on a shopping spree at Wal-Mart and bought himself a few hundred dollars of goods. He ate at least 3 meals. He even took the time to call his girlfriend, who was in jail, on a $5 dollar per minute collect call service. All of this was done within just a few hours, too.

After getting ripped off by lower-than-life humans, I finally ended up having the car towed to the shop that quoted me $800 dollars. Except now, the price was about $1,400 because of all the shit these two guys broke in the process of being dishonest. After paying the tow truck, losing money, and losing more money, the final COST of getting the clutch replaced was about $2,000 bucks. Keeping in mind, the original PRICE tag was $800 dollars.

So, the next time your customer makes a comment about your price being too high, just let them know what the cost could ultimately be by NOT investing in your product or service. If that thing is $100 dollars a month, but it could net them an extra $2,000 dollars a month in sales, that complaint about your $100 a month thing will ultimately cost them $24,000 dollars a year in new revenue.

Not to mention, you can just tell them that you guys figured it would make more sense to provide an exemplary product at a price of just $100 a month, rather than making a piss-poor product that would just end up costing them more in the long run.

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