Comments on: Pay More for Quality Service http://thefinancebuff.com/pay-more-for-quality-service.html like a friend telling you about money ... Wed, 23 May 2012 21:42:04 +0000 hourly 1 http://wordpress.org/?v=3.1.2 By: David http://thefinancebuff.com/pay-more-for-quality-service.html#comment-4900 David Sun, 10 Oct 2010 09:05:30 +0000 http://thefinancebuff.com/2010/05/pay-more-for-quality-service.html#comment-4900 One area where businesses have shown that people will pay more for better service is the airlines. For example, several airlines now will sell you coach seats with a few more inches of legroom for a fare that is $50-$100 more than the regular coach fare. Its a popular option. And the progressive unbundling of services (eg checked baggage fees) allow people to make choices about the level of service they want to pay for. One area where businesses have shown that people will pay more for better service is the airlines. For example, several airlines now will sell you coach seats with a few more inches of legroom for a fare that is $50-$100 more than the regular coach fare. Its a popular option. And the progressive unbundling of services (eg checked baggage fees) allow people to make choices about the level of service they want to pay for.

]]> By: Personal finance http://thefinancebuff.com/pay-more-for-quality-service.html#comment-4099 Personal finance Mon, 07 Jun 2010 07:29:13 +0000 http://thefinancebuff.com/2010/05/pay-more-for-quality-service.html#comment-4099 In general, it depends from person to person. I personally would not pay very high for quality on most of the electronics. Having said that, I am a music freak and like hi-fi sound systems. So spending in that field will not bother me much. In general, it depends from person to person. I personally would not pay very high for quality on most of the electronics. Having said that, I am a music freak and like hi-fi sound systems. So spending in that field will not bother me much.

]]> By: J http://thefinancebuff.com/pay-more-for-quality-service.html#comment-4080 J Sun, 30 May 2010 20:10:12 +0000 http://thefinancebuff.com/2010/05/pay-more-for-quality-service.html#comment-4080 I build and maintain my own PC computers. Although I do not buy the most expensive possible parts, I *never* buy the cheapest components. I'm willing to pay more for better quality, less hassle, less noise, greater reliability and lower power consumption. For example, I recently paid $170 for a SeaSonic X650 Gold 650W power supply -- over three times as much as the cheapest $50 650W power supply. However, I do not regret the purchase. The SeaSonic is silent, cool, stable, clean and efficient. I also do most of my computer shopping at Newegg these days. They're not the bottom-of-the-barrel in price, but they do offer good prices and excellent service. I build and maintain my own PC computers. Although I do not buy the most expensive possible parts, I *never* buy the cheapest components. I’m willing to pay more for better quality, less hassle, less noise, greater reliability and lower power consumption. For example, I recently paid $170 for a SeaSonic X650 Gold 650W power supply — over three times as much as the cheapest $50 650W power supply. However, I do not regret the purchase. The SeaSonic is silent, cool, stable, clean and efficient.

I also do most of my computer shopping at Newegg these days. They’re not the bottom-of-the-barrel in price, but they do offer good prices and excellent service.

]]> By: Tom Shillock http://thefinancebuff.com/pay-more-for-quality-service.html#comment-4078 Tom Shillock Sun, 30 May 2010 15:30:37 +0000 http://thefinancebuff.com/2010/05/pay-more-for-quality-service.html#comment-4078 One reason we are willing to pay more for higher quality products as opposed to higher quality service is that we can see what we are getting before we buy it. Whereas it’s not as clear what better quality service for various services amounts to, or when it is clear how assured we are of getting it. Even with high tech products such as the Mac it’s not usually better quality that people pay for as more or cuter features whether they use them or not. They are paying for their potential value. In the case of NPR it’s not clear what better service amounts to. When a service has deteriorated (e.g., credit cards, airlines) and then people are asked to pay more for its improvement, it is easy to feel extorted. That provides a natural reluctance to pay for better service. Again, in the case of NPR (and PBS) the quality of the programming has deteriorated so far that it’s not clear whether those running it understand what better programming (service) would be, and so for that reason alone it would be irrational to support them in the hope of improvement. The major impediment to quality as a business strategy, whether product or service (nearly everything is a mixture of these), is that we consumers either cannot determine the quality by inspection or it takes too long (or costs too much) to determine it given the value of the good or service. Another problem is located in asymmetries of information between buyers and sellers. The unfortunate consequences of this for quality were pointed out by George Akerlof in his famous paper ‘The Market for Lemons’ (1970). This is also similar to Gresham’s Law, which basically states that the bad money drives out good. The default decision procedure is price. That’s a good part of why “companies quickly learn it doesn’t pay to invest in good service.” Medical care and legal help are two cases where asymmetries of information are deliberately maintained by sellers in order to preserve their rents (i.e., exploitation of buyers). One reason we are willing to pay more for higher quality products as opposed to higher quality service is that we can see what we are getting before we buy it. Whereas it’s not as clear what better quality service for various services amounts to, or when it is clear how assured we are of getting it.

Even with high tech products such as the Mac it’s not usually better quality that people pay for as more or cuter features whether they use them or not. They are paying for their potential value. In the case of NPR it’s not clear what better service amounts to. When a service has deteriorated (e.g., credit cards, airlines) and then people are asked to pay more for its improvement, it is easy to feel extorted. That provides a natural reluctance to pay for better service. Again, in the case of NPR (and PBS) the quality of the programming has deteriorated so far that it’s not clear whether those running it understand what better programming (service) would be, and so for that reason alone it would be irrational to support them in the hope of improvement.

The major impediment to quality as a business strategy, whether product or service (nearly everything is a mixture of these), is that we consumers either cannot determine the quality by inspection or it takes too long (or costs too much) to determine it given the value of the good or service. Another problem is located in asymmetries of information between buyers and sellers. The unfortunate consequences of this for quality were pointed out by George Akerlof in his famous paper ‘The Market for Lemons’ (1970). This is also similar to Gresham’s Law, which basically states that the bad money drives out good. The default decision procedure is price. That’s a good part of why “companies quickly learn it doesn’t pay to invest in good service.”

Medical care and legal help are two cases where asymmetries of information are deliberately maintained by sellers in order to preserve their rents (i.e., exploitation of buyers).

]]> By: dsowa http://thefinancebuff.com/pay-more-for-quality-service.html#comment-4075 dsowa Thu, 27 May 2010 17:47:56 +0000 http://thefinancebuff.com/2010/05/pay-more-for-quality-service.html#comment-4075 I think that PBS is an odd lead in for this article as that is a perfect example where no amount of extra money spent changes the quality of the service. If I pledge I still have to listen to the pledge drive, there is no actual value for the money spent at all. One place I am happy to spend money on better service is Amazon Prime, it totally changes your view of buying stuff online. I'm sure I don't "save" money by having it but my life is better by not wandering around stores not finding the things I need. The freedom from thinking about buying $25 of stuff to get free shipping means you buy just what you are looking for. The convenience is worth the price to me. I think that PBS is an odd lead in for this article as that is a perfect example where no amount of extra money spent changes the quality of the service. If I pledge I still have to listen to the pledge drive, there is no actual value for the money spent at all. One place I am happy to spend money on better service is Amazon Prime, it totally changes your view of buying stuff online. I’m sure I don’t “save” money by having it but my life is better by not wandering around stores not finding the things I need. The freedom from thinking about buying $25 of stuff to get free shipping means you buy just what you are looking for. The convenience is worth the price to me.

]]> By: Ted Valentine http://thefinancebuff.com/pay-more-for-quality-service.html#comment-4070 Ted Valentine Thu, 27 May 2010 02:34:01 +0000 http://thefinancebuff.com/2010/05/pay-more-for-quality-service.html#comment-4070 Interesting topic. When you talk of "hidden fees" and "headline prices" I'm immediately thinking of phone, TV, mobile, internet. The obfuscation of the pricing for these services is outlandish. I will share an example where I believe I am paying a little, but not a lot, more than I could for a service: telecommunications. The company is one you might think has poor service: ATT. Surprisingly, I have found the opposite to be true in my case. At least 3 times I have had an unexpected issue pop up with my bill due to changes in one member of my household's communication practices. I'm not naming names, but I think we know its, uhem, my wife. Anyway, each time I called to disucss the problem with ATT, the CSR was quick to understand my problem, offer an economical solution and then backdate the change in my service to wipe out (and credit back) the high charges. Without extending my "contract." The last time I called, they actually lowered my overall bill. Now I know I could probably save $20-$30 per month on mobile and perhaps dump the land line by switching to a lower cost carrier. However, I never have a service issue (and I travel all over the country) and when I have a problem they fix it and, most important, they don't screw me. Begrudingly I've become a little loyal to a huge company. Unexpected. Interesting topic. When you talk of “hidden fees” and “headline prices” I’m immediately thinking of phone, TV, mobile, internet. The obfuscation of the pricing for these services is outlandish.

I will share an example where I believe I am paying a little, but not a lot, more than I could for a service: telecommunications. The company is one you might think has poor service: ATT. Surprisingly, I have found the opposite to be true in my case. At least 3 times I have had an unexpected issue pop up with my bill due to changes in one member of my household’s communication practices. I’m not naming names, but I think we know its, uhem, my wife.

Anyway, each time I called to disucss the problem with ATT, the CSR was quick to understand my problem, offer an economical solution and then backdate the change in my service to wipe out (and credit back) the high charges. Without extending my “contract.” The last time I called, they actually lowered my overall bill.

Now I know I could probably save $20-$30 per month on mobile and perhaps dump the land line by switching to a lower cost carrier. However, I never have a service issue (and I travel all over the country) and when I have a problem they fix it and, most important, they don’t screw me. Begrudingly I’ve become a little loyal to a huge company. Unexpected.

]]>