How Do You Perceive Value?

I've often been told no matter how long the meetings you attend are you will likely take 2-3 things home from them.  When I attended a training a couple weeks ago one story was something I took home and dissected.  The presenter talked about a story of buying gloves at a store when they were on sale for 50% off.  When he took them to the register the woman behind it said he should have been there last week when they were buy one get one free, it was a "better deal".  While most logical people would understand that if you buy one and get the other free essentially buying two at 50% off is exactly the same "deal", this cashier didn't see it that way.

The question here is really how do you or your customers perceive value.  While something may be a deal to one the other may not see it that way.  Agriculture is full of these "deals" and often they are the same or if you run the numbers maybe one that doesn't appear to be a deal is in fact a better deal.  We are often distracted by price and don't look at the "value" in products we are buying.  I was routinely frustrated growing up with a father who valued price over quality.  In one instance we were looking at brake pads for my car when I was a teenager and I remember him buying the cheapest ones we could find only to have to replace them a year later, swearing as we did it a second time.  I think the cheap organic ones were something like $25 while the better longer lasting ceramic pads were $50.  Just think about how much time it took to replace them along with the added trip to the store and the swearing that ensued.  In reality, we likely didn't break even on the fact we replaced the pads twice in one year with all the added work.  These stories remind me why I often take out a calculator (open the app on my phone), or pull out a pen and paper and do the math on the alternatives.  At the time it was frustrating but as I get older these "lessons" taught me to look at all the facts and think with a business mindset about decisions.

In Ag, we see these situations present themselves more often than not.  In a previous life I sold potash that had a 62% analysis at a $10 higher price/ton.  When you actually did the math at current prices it made financial sense that even at a higher price we were in fact cheaper per unit of K.  Believe it or not that was a tough sell a lot of times.  Farmers perceived that it was the same product and it was hard to see past a difference in price.  We did get an additional margin on selling the higher analysis, but was that worth losing sales over perceived value?

I've also been part of the seed financing debate and a lot of that was perceived value as well.  Many companies offer financing at different interest rates, with some having 0% financing and charging more for the seed up front, others advertising 0% financing but in the fine print it's 0% over prime, and others just regular financing at a certain interest rate based on the prime interest rate.  Which one would draw most peoples attention?  A lot of farms gravitated towards anyone offering 0% financing with the perception they got a deal when they in fact often paid 3-5% more for seed to cover the financing. 

So what is the moral of all this?  When you are making purchase or business decisions weigh out the actual cost of products over what the perceived costs are.  Most people or companies are not trying to pull wool over your eyes with deals, they are merely trying to create programs that are appealing to a broad group.  When asked they should explain all the programs or "deals" to you in detail, if they don't want to that's another blog post... 

With lower commodity prices and potentially higher input costs it's important to weigh your options and think long term not just about saving a dollar today.  Spending time analyzing farm expenses and purchases is something you should regularly be doing.  It makes good fiscal sense and will help you in the long term to continue to be a viable business.