You get what you pay for

For two summers during university, I worked in landscaping construction. The job consisted of digging, heavy lifting and masonry work, all part of an effort to make patios, retaining walls, driveways and gardens. Hardest job I ever had. One day while digging a patio base, my boss told me to dig only 10 inches deep instead of the standard 12.

The 2 inches cut equals a few less hours of labour, less dirt disposal costs, less gravel base cost, and most importantly, the patio being more likely to sink in 2 years as opposed to the usual 3. Why then did my boss, a fair and hardworking near-perfectionist, trade away quality to save cost? Because "the tight-ass client penny pinched the price down a few hundred bucks." Did the client get a bargain?

NO INFORMATION – when not to bargain

Now this is a tough one. Remember in my second post I said reservation price depends on disposable income, substitutes, and information about the product. In other words, you're likely to pay more when you have a higher disposable income and when you have little information about the product and its substitutes. Further to this point, if you have little or no information about what you're buying, it's not a good idea to bargain at all.

The Patio

In the example above, the client was paying $30,000 for a new patio. He bargained it down to $28,000, and still got his patio. But he didn’t really save 2Gs. In the end he only sees the $28G patio, not what the 30G would have looked like. He can't compare the quality of work. In his mind, they would have been the same, but in reality, they’re not. Even more importantly, both patios would have probably still looked the same because their difference is beyond face value. The cheaper patio has a shorter supporting structure, making it less durable (but durable enough to outlast the warranty). The money saved undermined the quality of the purchase.

The Contractor

I've worked for a few different construction companies, and even sold and ran my own jobs. It’s a competitive business and contractors know any smart client will get quotes from different companies, so they in turn, generally, quote fairly and competitively. If you bargain that price down, they won't deduct their lost revenue from their profit, they will deduct their lost revenue from their cost. The money you think you’ve saved, they turn it around and take it back from you through lower quality of work.

Side note: Notice I said contractors generally quote fairly. You can come across sketchy ones, who will not only gouge you, but perform crappy work. You can be overcharged if they think you have lots of money to spend, know absolutely nothing about construction, or most importantly if they think they can get away with it (think game theory). I’ll mention a few tips to avoid this at the end.

The Mechanic

I don't own a car, nor drive regularly for that matter (Go Dabs!), but am relieved to have that inconvenience when I see the frustration in dealing with automobile maintenance. If you know nothing about cars, and your mechanic tells you it will cost 10,000yen to fix your leaking headlight fluid, what do you do? Pay? Walk out? Bargain? Have a temper tantrum? You might know a bit about headlights, but do you know if it really needs to be replaced. You don't even know if he quoted you an honest price. You either risk over paying or walk out and find a second opinion. Note that walking out won’t do much to improve your relationship. If you try to bargain, you run the risk of a shoddy repair and you know it's dangerous if your headlight fluid fails at night on the Kyushu Expressway!

You get what you pay for

In regards to quality, you have to be weary of two things. Did the quality decrease after the bargain, or was it crap to begin with. Look for the signs, chances are if it's being sold in a cheap area, around other cheap goods, and the price is cheap, then it's probably cheap quality.

Thai Merchant

No matter how much he insists, that belt is NOT real leather. Same goes for the trendy sunglasses. You must bargain! It's a good idea to bargain for 100% cotton Von Dutch hotpants, but if right before you pay, the salesman switches it with 100% polyester ones, was it worth the money you saved? You'd still look damn hot, but wouldn’t it be more comfortable to have something that breathes. You have to know the actual value (or quality) of the item before and after you negotiate the price. If it’s guaranteed to be the same, then bargain, if not, be careful.

Lisa’s favourite white shirt

I had a white dress shirt with thin blue crossed lines tailor made in Thailand. When the tailor quoted the price, I shot back with, truthfully, “the guy down the street will do if for half that much”. He replied “but this is good quality”. I went with the more expensive tailor. I easily could have been ripped off, but I wanted a better quality shirt so I had to trust him. If you can't sleep on trust alone, then ask a lot of questions – how is this shirt better quality, how do you make it, etc... Gage their reaction, and go with your gut feeling.

By the way ever time I've worn it I’ve always had wicked nights! Karma perhaps? Or maybe cause I was always out with Lisa!

Conclusion

When are price and quality related, and when not. If you can be sure of the end product in it's entirety, then bargain. And if possible, test it out before you buy - look for mishaps in the stiching, see if the instrument is tuned, listen if the engine rattles when you drive, etc...

When you don't know what the end result will look like, you don't have any leverage. Best thing to do is get a friend to refer you to someone. If your friend has worked with him, chances are he's fair. Plus, if he knows he has been recommended by a former client, it will remind him of the benefits of staying honest. Also get a few quotes, and if possible, look at past work. All construction contractors will have pictures of past jobs and a list of former clients you can use as references. Most countries have a government agency responsible for tracking crooked companies. Look them up! Understand what’s being done, and why it’s more expensive to do it that way.

And if you’re still screwed in the end, do something about it! Report them. Throw a brick through their window. I’ve reported a multi-million dollar construction company to the Better Business Bureau of Canada because they ran out on a $300 parking tab (wasn't worth my time to take them to court). I still can’t believe they ripped me off on that one.



Have you ever bargained down a price, ecstatic that you save some cash, only to find out you didn’t get what you wanted?