Price vs. Cost

This morning I read an interesting article from Seth Godin’s blog. The subject, though not expressed in this way, is essentially was price vs. cost. Price as in the monetary commitment required to buy-in and cost as in the resources expended¬†over time to maintain said item. Sure, it’s not a revolutionary concept; but, it can always be helpful to reflect on concepts in a different light or hear someone else’s perspective. The same thing is supposed to happen when you read scripture, right? ūü§Ē

Here is Seth’s thought-provoking question: I know what the price tag says. But what does it cost?

Don’t just think of cost in terms of money. Cost can also be your time, stress, not doing something else (also known as opportunity cost).¬†Lifehacker¬†says, “More often than not, figuring out something‚Äôs cost is more important than figuring out its price.”

Here are a few examples:

  • You buy a dog that costs $500. The $500 price tag is a one-time expense, what it takes to buy-in. The cost, however is: dog food + doctor visits + dog-sitters + 15-minute walks each day over years, many years. The cost is on-going and can be more than 10 times the price.
  • You buy a luxury handbag that costs $500. The price tag is the same as the example above; however, the cost, in this case is nominal – maybe you need to clean it, have a few repairs, etc. but not very much in the grand scheme of things. The cost of the luxury handbag is less than the price.

Here’s the thing: as I am typing this post I am learning / acknowledging my own personal buying behavior and preference. I prefer high price, low-cost items. ūüí° Meaning, I’d rather spend money up front (higher price) and have minimal cost. Some people prefer the opposite approach. Or maybe more correctly stated, our attitudes are different depending on what the “thing” in question is: a house, a trip to Paris, a steak dinner, a vintage car, a membership in a club or group, golf lessons. I do think most people have a pattern. Sure, you can bring value into this discussion but that’s subjective. Cost and price are quantifiable, very easy to measure.

So what’s the takeaway? The next time you consider the pice tag (“buying in”), take 30-seconds and think about what type of price-cost arrangement you are getting yourself into. Whatever your choice is, enjoy!

Priceline for Medical Care

imagesWe¬†live in a Share &¬†Bid Economy: There’s Priceline for Cars/Hotel,¬†Shipping Wars on A&E for transporting goods and eBay for everything else. Well, now there’s a new service called Medibid and it works exactly like you’d expect: For $25, patients post¬†bids for out-patient medical treatment (i.e. knee surgery) and doctors submit bids. The doctor must provide their license number but after that you’re on your own when it comes to validating quality and the like. Washington Post¬†

The site is focusing on transparency: we should KNOW what a service will cost (in its entirety) before we¬†agree to have it performed. These days, doctors sometimes post full videos of their operation / work online. So between social media and the Internet, researching a medical professional’s history or even getting reviews is not as hard as it used to be. Take HealthGrades, for instance: the site allows people to rate doctors and post about their experiences. If this takes off, it will certainly squeeze the hospital establishment and will become a win for doctors ¬†because they can perform the operation in their offices and not pay typical hospital costs.

Even so, most medical professionals are referred, meaning word of mouth will prevail over an insurance company’s “in-network” list. If someone you trust has a great experience, it makes financial sense for you (considering insurance contribution) and the doctor is on Medibid, I say go for it!

The Zero Marginal Cost Society

UnknownI recently shared a snippet about the¬†sharing economy. While it may be good for consumers, Economist Jeremy Rifkin thinks, “the sharing economy is in the process of eclipsing capitalism, part of a trend towards products becoming essentially free.” Rifkin concludes that, “by 2050, [sharing] will likely settle in as the primary arbiter of economic life in most of the world.” (FastCompany)

His book, The Zero Marginal Cost Society,¬†explains that Zero marginal cost (ZMC) can¬†happen when consumers have the power to make their own products, becoming “prosumers.” Or, when consumers can share products for free, as with house- and car-sharing sites.”

Are you a prosumer? Have you noticed any shifts in your behavior to buy less? Do you trade items more often than you have in the past? If you’re into this sort of thing, check out the Rifkin’s book¬†review at GoodReads or take the plunge and starting reading it¬†on your Kindle.