What are you really paying for when you buy a product?
When you buy anything, a product or a service from a company, you are actually paying for much more than the product itself. We all know that companies must generate enough revenue with their sales to cover not only the cost of the goods sold, they must also cover the costs of their building, employees, heat, light and power. There are many costs incurred while running a business. Many of these costs are tracked and recorded on a company’s financial statement. Some costs however are not so clear or obvious.
Each cost of a company, recorded or not, can be defined in one of three ways. Every action or item is value added, incidental or waste.
Value-added costs represent items or services a customer would willingly pay for, this is what you want or desire, assuming they can deliver it right the first time.
There are also costs, both supplies and activities that are incidental, these supplies or activities are things a customer would not willingly pay for, if given a choice, but are deemed necessary by the company. Think about all the activities that happen behind the scenes; paperwork and reports that are run, meetings that are held and other activities necessary to manage the business.
Any activity that a customer would not willingly pay for, that is not truly necessary to conduct business is waste. We may not think about these costs consciously but they occur to often. Have you experienced a clerk or cashier taking a call or texting a friend when they should be helping you? Have you received a defective product or inferior service?
What are you really paying for when you buy a product? Are you paying for the services of a company that respect you and how hard you have worked for your money? Are they good stewards of your patronage, managing their business in an efficient manner, making an effort to control their costs?
What are you really paying for when you buy a product? Are you paying for the services of a company that is more focused on their own interests? Are they willing to waste your money, making poor management decisions, hiring associates that are inefficient and failing to provide you products and services that are of quality?
Every dollar you spend pays for value added products and or services, incidentals and waste. Choose the companies you do business with wisely and you will get products and or services that are worth more than the money you pay. Choose poorly and you will simply waste your money.