The Price-Only Trap

Rod Sutton, Editor in Chief, ASBPE Regional Award Winner | September 28, 2010

Rod Sutton, Editor in Chief, ASBPE Regional Award Winner
Rod Sutton, Editor in Chief, ASBPE Regional Award Winner

It's an ageless question, perhaps, but the answer doesn't seem to have changed much over time: How important is price in the acquisition decision? Foundational economic theory says it's simply supply and demand. If supply outstrips demand, prices drop. Yet market research continues to reveal that price doesn't rank on top of the priority list.

Certainly in the current economy, price has become harder to ignore. Some have told us that the upheaval in the rental channel has made it possible to rent a machine at rates far below market, especially on more populous machines such as backhoe-loaders. But before an equipment manager forgets what's made his fleet efficient and effective in the past and acquires solely on price, he would do well to remember the other factors in the equation.

Brand, product support, and overall dependability and reliability of the machine and supplier render price meaningless if the task can't be completed with the acquired machine. Holes must be dug, roadways must be paved, material must be moved. An incapacitated machine loses money, often more than is saved in a price-only decision.

Managers know that the value of a brand and a supplier extends beyond the completed task. Successful businesses stand on performance and thrive on trust. The price tag on a consistently performing machine and a trustworthy business relationship demands as much consideration as the sticker price on the iron.

Of course, with all else being equal, equipment managers should search for the best deal out there. Now's a good time to evaluate potential new suppliers, and it's a less-threatening opportunity to take some chances with new players in the market.

But managers who do business with the distributors and rental houses that have provided dependable brands and support in the past ensure continued quality from those suppliers in terms of product development and machinery performance. Devalued brands and relationships result in a loss of innovation.

It's not bad management to pay a bit more to support successful relationships when price-only offers start popping up. In fact, it's shortsighted not to.

Author Information
Rod Sutton, Editor in Chief, ASBPE Regional Award Winner, 630-288-8130,