Price, Quality, or Service: Pick Two

John Tabita
Tweet

There are some advantages about living in a less-populous section of the country. My California relatives complain about the two to three hour wait when renewing their driver’s license. My total wait time … in and out in 20 minutes.

Or like shopping at the warehouse discount stores. When I lived in California, a trip to Costco or Sam’s Club was like negotiating lanes in rush-hour traffic. (Another thing I no longer have to deal with.) No matter which direction you turn, there was another shopper, a small child to avoid, or a shopping cart parked center aisle, obstructing traffic. During every trip, I would ask myself, “Is it really worth all this to save money?”

You may have heard the saying, “Price, quality, or service. Pick two.” My shopping experience merely demonstrates the fact that no business—not even the Costcos or Sam’s Clubs of the world—can successfully or consistently provide the best service and the highest quality at the lowest price. Saving money is great, but the trade-off is that low prices drive in crowds of shoppers which severely diminishes the quality of the shopping experience.

Or compare the difference between going to Home Depot verses your local hardware store. Since I lack the home improvement gene, a trip to Home Depot is always an exercise in frustration. Why? Because the chances of getting any customer service help in one of the aisles is slim to none. Quality products at great prices … but lousy customer service.

And because the motor vehicles is a government-run monopoly (at least here in the U.S.) they’re not required to provide price, quality, or service. No wondered everyone hates going there.

Most of us in the web consultancy business tend to focus on providing quality and service. For me, “service” meant the consultative process I would take clients through to determine the goals, objectives, and results they want from their website. I see “quality” as both the end-product I provided as well as the quality of the experience, i.e., how easy it was to work with me.

This works well when dealing with a relational buyer, one who values having an expert he can trust more than getting the lowest price. But what about the transactional buyer? This is the person who drives back and forth between two different Toyota dealerships and plays each salesman against one another to get the best possible deal on the car he wants. Most of us disdain this type of buyer as a cheapskate and a “pain in the rear.” But is that always the best reaction?

Suppose, in addition to targeting relational buyers with quality and service, you could also target transactional buyers by removing either quality or service from your sales process and competing on price? Don’t misunderstand—selling on price alone is a losing proposition. But what about selling on price and quality ? Or price and service? Could you capture a portion of the mid- to lower end of the market and drive in additional revenue, profit, and perhaps some residual income? In my next article, I’ll explore some of these questions and give you some ideas how this might be done.

How about you? Do you consciously compete on two of the three? Or are you frustrated trying to be all things to all people? Have you given any thought to the other types of buyers you’re not reaching? Or has your approach brought in a consistent clientele to pay the bills? Post your thoughts in the comments below.

Free book: Jump Start HTML5 Basics

Grab a free copy of one our latest ebooks! Packed with hints and tips on HTML5's most powerful new features.

  • wizonesolutions

    I personally have been burned somewhat by the transactional type of client and so I tend to compete and quality and service. I’m not sure if competing on price in a first-world economy is really sustainable in the service industry (I’m a Web Developer). In the product sphere, sure…there are plenty of examples of that, and I’d dare to say that many maintain *reasonable* quality or service while competing on the other two (e.g. DNS Made Easy, T-Mobile, etc.).

    I’d be interested in hearing about your thoughts on the sustainability of this in the service industry. What kind of companies *can* compete on price? Can freelancers do it? How? Is it even worth trying, since time comes at a premium?

  • Group/team shopping taobao agent Online shopping in china http://www.agentstaobao.com

    I’d be interested in hearing about your thoughts on the sustainability of this in the service industry. What kind of companies *can* compete on price? Can freelancers do it? How? Is it even worth trying, since time comes at a premium?Reply

  • http://smallbusinessmarketingsucks.blogspot.com/ John Tabita

    I’ll be talking more about this in my next post. I’ll discuss things I tried, things I considered but didn’t, and things I’ve seen other companies do.

    As far as sustainability, I think anyone can compete on price (even freelancers) if they choose. It means adopting the model that other companies are using. But, ultimately, you’ll have to decide if you think the ideas I’m going to suggest have any merit.

  • Gordon Currie

    I think in the good old days, we thought of the model PRICE, QUALITY and SERVICE as the model for evaluating the options. We couldn’t have all three, only two. But as the business models are adapting, part of innovative approaches means not using the old models.

    When we look at digital media and social networking, we new models develop. We start to see relationship building, we see value, we see technology driven models and relationships.

    I sell web design / graphic design services. I don’t compete on price, quality or service. I work to redefine each of those and talk in a language with consumers that focuses more on the final outcomes. I don’t think its possible to focus on the standard 3. Consider the fact that when I started building webpages years ago, I was in an industry that didn’t exist 5 years earlier. Our old business models need to adjust. And change. Dynamically.

    I believe that certain industries selling regular everyday products are limited to a certain degree. We all want prices to drop, we all want quality to be high (but not pay) and we all want awesome service (with great quality and service). We want it all. But there are new products and services that break that mold everyday. And you can even compare them anymore. Thats where the focus needs to be. Not on succeeding in all 3, but building a new playground and set of standards. You will pleasantly surprised.

    Cheers

    Gordon Currie

    • http://smallbusinessmarketingsucks.blogspot.com/ John Tabita

      Gordon,

      I agree with that you, when working with clients, you should focus on the final outcome. (And my article title is not something you should verbalize to clients.) Yet, I believe that the client’s desired outcome still forces you into this “business model,” as you put it, much like gravity forces you to the ground if you jump off a building.

      I say that because I don’t consider the concept of price, quality, or service to be a “business model” any more than I consider gravity to be a “physics model.” Like gravity, I think it’s a principle or law that can’t be violated without unfortunate consequences.

  • johans

    This is similar to “Discipline of Market Leaders” (1995) in which Treacy and Wiersema argue that to be a market leader a company must excel in 1 discipline and meet industry standards in the other 2:

    Operational Excellence: the best price with the most convenience
    Customer Intimacy: the best service for a particular market sector
    Product Leadership: the best product through innovation

    They propose to dominate you you choose your customers (niche) and narrow your focus (discipline).

  • Daquan Wright

    This is interesting, only 2 out of three?

    Service is a definite for me, my process of building a website is so transparent and I enjoy that for the time being. I keep my client in the know and show them works in progress.

    I guess, I’d pick quality and service. Why? I’m overly critical of my work, I can’t stand work that isn’t well done. As long as you build up a quality portfolio and testimonials, you’ll be able to charge your dream rates. So in the beginning, price need not be a concern. I place value in understanding my clients goals and clear communication, and delivering the best work I can get out. The money will be there, in time.

    Of course a business needs to be stricter on price. They have overhead, I do not. A store needs to be cut and dry, such as Home Depot.