Price vs quality

Price vs. quality — How to decide?

(Estimated Reading Time: 2 min, 16 sec)

Conference by Magalì Fia. Faculty of Social Sciences of the University of Trent. October 13, 2018. “Common Mistakes in Daily Decisions — from Misunderstandings to Reality.” Part 2: Price vs. Quality.

In the previous part entitled “Economics and introspection”, we have highlighted that the study of economics allows us to check the convenience of our decisions.

If applied to individual decisions, it helps to decide the price to pay for the quality we get, and to bring us back to our goal.

How does economics help in purchasing decisions (buyer’s decision process)?

It helps find a balance in the choice of price vs. quality; and not to give too much importance to appearance.

But let’s see how economics can help us in purchasing decisions (buyer’s decision process). We highlight how, if we don’t find a balance between price and quality, we risk giving too much importance to appearance and acting absurdly.

Eye-catching products

Let’s see some techniques of marketing/promotion of products and how the package and position of the product catch the customer.

Many companies master these skills and the others remain disadvantaged.

These techniques make the product more attractive, but not always a beautiful aesthetic corresponds to an outstanding quality.

When the appearance of the product catches you, and you look more at its packaging than at its quality, you can have an unpleasant experience.

This happened to me last year during Christmastime. I went out to buy chocolate to eat with friends and family during the holidays. I bought an elegant chocolate composition, paying a high price for it.

But when I got home, I tasted it and realized it was not tasting good. I was angry because I wanted some good chocolate to eat with friends and I got something that looked more like a “wooden sculpture”. It was edible, but not of quality.

How could I have avoided such a mistake?

What is my goal?

I could have stopped for a second, looked inside, and asked myself, “What is my goal?” Buy a quality product or one that catches the eye? The goal I had was to buy chocolate to eat with friends and enjoy with them. I would rather not enjoy the beauty of a chocolate composition with them. The “lack of introspection” in purchasing decisions — not realizing one’s goal — has a cost: looking only at the form can cause an awful experience.

You may ask yourself: is my goal to buy something good or get a nice product package?

People who choose quality follow an economic principle.

They evaluate the relationship between price and quality based on the goal they want to achieve.

Purchasing decisions in business.

Entrepreneurs who don’t look at the balance between price and quality may have difficulties to sell their products.

If I am an entrepreneur and have a restaurant — that serves wonderful food at an average price. — I should make my purchase choices following this goal: to provide an excellent product at an honest price.

If my supplier offers me a high-quality product — for example, a special type of meat — at an unreasonable price, I know my customers wouldn’t pick it.

Entrepreneurs should make their purchase choices following their goals. A product with a too low or too high quality might be difficult to sell.

Magalì Fia

[1] This part refers to the abstract definition of economy as the rational use of money (or other scarce resource), which aims to get the maximum profit for the same cost.

[2] On the “price to pay in individual decisions”, see also the introspective economy page by Luis Pisoni on this website.