< Tim Pollard | 06.08.2015 |

Cost versus value

Cost versus value

Persuading people to make decisions now based on what is likely to happen in the future is not easy. But it’s a message installers must get better at delivering – for the sake of all our wallets.

Hindsight is easy; I’m really good at it. The rather more difficult task is seeing into the future. We try to gather the best information available. We look at historical trends; we try to look at a wide range of influencing factors; we test different scenarios. But if we’re being honest, all predictions are a guess. It may be – and hopefully is – an educated guess, but nonetheless it is a guess. Unless we have access to a crystal ball or are gifted with a superpower, then forecasts will always be subject to elements of doubt.

There are those who make a living out of predicting all manner of things – from forecasting which horse will win the 2.30 at Haymarket to enormously complex economic forecasts or, even more difficult, the weather. There is an old saying, attributed to George Bernard Shaw, that if all the economists were laid end to end, they’d never reach a conclusion. And I seem to remember that the old BBC television programme Tomorrow’s World told us that by now we should all be travelling around using our personal jet packs.

When people try to forecast business trends and technology changes, it has to come with a big health warning. Like all bets, there are indications of likelihood, or odds. So when I forecast that energy bills are going to rise consistently every year from now on, on what do I base my belief? Well, energy bills have risen, on average, by 11 per cent per annum since 2004. While all markets rise and fall – and it is true that the cost of wholesale gas has fallen this year – any market that is dealing in a finite resource will rise as access to that resource becomes more limited.

The point of understanding future trends is to affect the decisions we make today, when we are investing our hard-earned cash. Some decisions are going to affect our wallets for longer than others. For example, purchasing a heating appliance replacement is potentially a 15-year decision, or even longer.

No one is arguing with the economic sense of the decision made on today’s circumstances. The problem is that those circumstances are going to change. The problem is further exacerbated by the fact that in the vast majority of cases we are seeking the fastest solution because we are replacing a broken product.

Perhaps I shouldn’t be surprised; after all, we make really large purchasing decisions with minimal information. We bought our current house after two half-hour visits, some estate agent details (always a reliable source) and a building society survey. Cars are often purchased because we like the colour or the shape or the brand. Holidays are mostly bought on the strength of some pictures in a brochure or online. Has anyone actually stayed in those rooms pictured on hotel websites?

Very often, we are buying on the basis of the price. However, the purchase figure for many items is often dwarfed by the ongoing running and maintenance costs, sometimes called the “lifetime cost”. What seems like a bargain at the time of purchase can become really poor value with the addition of time and experience.

This is why it is so hard to make the case for renewables and energy-efficient products. These can make really good commercial sense but people are unable to understand the savings because they occur in the future. This is also why quality standards in all products have a value way in excess of the premium paid at purchase and why Plumb and Parts Center always recommends products from reputable sources.

I’ll leave you with this little gem I saw in a store in the USA some years ago: “Good equipment isn’t cheap, and cheap equipment isn’t good.”

Share

Related articles

Speaking In Riddles

Speaking In Riddles

The use of acronyms is rife in the modern world, and the plumbing and heating sector is no exception to this trend. The problem comes when we are talking to people outside the sector, such as our customers

Those Pesky Humans – Illogical Thinking

Those Pesky Humans – Illogical Thinking

One of the issues currently testing the great and good of the industry is known as the ‘performance gap’.

Stop, thieves!

Stop, thieves!

The theft of tools from vans is a growing problem for the sector.