Cost Versus Price. What's the difference?

Cost Versus Price

You’re probably reading this headline saying “cost verse price? Huh? What’s the difference?” I’ll start this off with a personal story. After getting out of the Marines, I started a career in construction, specifically installing office furniture (way back in 2004). I got paid a decent amount for just starting out in this career. At the time I had absolutely no bills, except a car payment. No mortgage, no cell phone bill, no nothing. However, the one thing I did like to do was party! I was out of the Marines, as much as I enjoyed my time there, I was thrilled to experience a new sense of freedom. At the time, my career was not at the top of my priority list. It was a paycheck, something to give me enough income to support my partying ways.

In my job, I was responsible for buying my own tools. Drill guns, screwdrivers, ratchets, wrenches, hammers. I remember going to the nearest Home Depot to look for these items. My one thought when looking for these items was “crap, I have to spend money to get all these things.” So I made a decision to buy the cheapest items I could. The cheaper the items I bought, the more money I would have to support my partying lifestyle.

Well, after a couple months and really learning my job, I realized my tools were crap. It wasn’t long before my tools would end up breaking or going bad. So what did I do? I bought some more cheap tools! My mind was so focused on price. To me, a screwdriver is a screwdriver, a drill gun is a drill gun. They weren’t exactly items that excited me. I used them to get the job done.

When I matured and concentrated more on my career, I finally learned how important it is to have good quality tools. I made the decision to spend a little more money so I can have tools that last. Here is the lesson I learned….

I was so focused on price that it ended up costing me more. Let me explain, when I finally invested in good quality tools, I had gone through many sets of “cheap” tools. I didn’t keep track, but I’m willing to bet I spent at least $1,000 on replacing these cheap tools throughout the years. Not a ton of money but remember I was buying cheap stuff! If I would have invested in good quality tools from the very beginning, I would have saved that $1,000. I was so focused on price that it ended up costing me $1,000!

Another example of price verse cost is when I sold water filtration systems. In really hard water areas a water softener was essential. I gave a presentation to a gentleman that had such hard water he would go through a water softener once every couple years. The product I was offering had a lifetime warranty. I thought to myself, “This is a for sure sale, I’m going to save him money, how can he not say yes?”

Well, at the end of my presentation, I asked for the order and his response shocked me. He said “the price is too high.” He was so focused on the current price that he wasn’t looking at the cost of his present situation. It wasn’t until I could show him that his present situation is costing him more money that he agreed to fix his water once and for all.

In marketing your real estate business, are you focused on price or cost? Are you saving a few pennies on your direct mail piece or are you spending a little more to get a piece that will result in better ROI. If your focus is on price (i.e. trying to get the cheapest product), it could be costing you thousands. When implementing any marketing plan, focus on cost, not price.