Business consultant and motivational speaker Lloyd Princeton explains the difference between cost and price and how this revelation can change your financial world…
In his seminal work Selling Retail, John Lawhon talks about the different approaches to working with the retail consumer and ultimately selling them something. One of my favorite things he discusses is the difference between the price and cost of something. This sounds like the same thing, just “semantic fencing” as we used to say back in school, doesn’t it? Well, according to Mr. Lawhon, there is a huge difference.
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Here’s an example: if you buy a sport coat for $300, the price of the coat is $300. Let’s assume it is not that great a piece either because of style or craftsmanship, but it serves a need right now and lasts for two years. The cost of the coat is $150 per year, the cost is the price amortized over the lifetime of its use. If you extrapolate this to more expensive products, say a $1,200 sport coat, one that you may keep for eight to ten years, then the cost of that item is $150-$120/year respectively. So, you have a lower cost than the cheaper jacket plus a major added benefit: the pride of ownership that comes with having a more luxurious product to enjoy and wear for many years.
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Lloyd Princeton
This same example applies to any other product from cars to homes and the home furnishings that go into them. This is where I come in since the architecture and design field is my domain!
I’m observing many people who are on the fence about proceeding with design projects for their homes or offices or if they do, they are selecting much less expensive products (and services) instead of buying the better or best product that they can afford. This same price versus cost rule applies here and more importantly, I can add yet another benefit: in most circumstances, money invested into a home does not depreciate, but can in fact increase the value of it as an improvement to the property and/or aid in the more expedient selling if that is the objective. Moreover, exceptionally crafted furniture is often not replaced, just updated over the years with different fabrics or finishes, lasting much longer than product bought off the shelf at a mass retailer.
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There is no certainty in the world and we don’t know what 2012 will bring, particularly for the things over which we have no control. But we do know that our lives will move forward, that we will still raise our families, entertain our friends and colleagues, and that we need to “live” and enjoy our environments. If you provide yourself with the best environment you can afford, then you know that at least you will have that to enjoy—and that is something in your control!
Related: Make 2012 About Your Wallet
Cheers!
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