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April 05, 2006

More than costs

When most people consider business costs, they think of labor and material expenses and conclude that those businesses with the lowest costs on these components will be the most effective competitors. But Mike Walden, an economist with N.C. State University, says this isn't always true.

“Well, it is often the case. I mean, I think WalMart is the probably the best example there,” says Dr. Walden, a specialist with North Carolina Cooperative Extension. “But it’s not always the case because there are other factors that people consider and may be willing to pay for.

“Service after the sale: That’s very important for many durable goods, so a company with an excellent service record may be able to actually charge more and consumers are willing to pay that. Other important considerations are things like time of delivery -- people may be willing to pay more to get that product faster; product quality; the availability of replacement parts; take-back policy; the level of personalized service.

“So there are a lot of things here that really go into a consumer’s evaluation of how good a product is, and not just whether it is cheap because of cheap labor and cheap material.”

Posted by deeshore at April 5, 2006 08:00 AM