7/24/2015

Why You Spend More Shopping for Less: Buying Tech Online


We all know that we can get great pricing on our own if we shop online long enough. What we all don't know is that many times this turns out to actually cost us more. Why is it not worth it to chase down that best deal?

Many internet companies use pricing as a marketing tool. They publish lower than cost pricing to get you to their site; once you are there, they earn money through advertising. This may be a good thing for you, as you get something at a lower cost than you would normally through your technology partner or some other sites online. This is also a good thing for that site since they make money by getting you to their site and showing you ads. So what's wrong with this? Nothing, if you have the time to do it. The most overlooked area of cost, however, is your time. You may think you have the time, but consider how much you are getting paid for what you do. Is it really worth it for you to spend an hour trying to save $10 or $20, when your time is worth much more than that?

Here's an example. In the diagram up top, the yellow arrows represent your time and the red arrows the time it takes for your technology partner to do the installation side of the task. If you are making a six figure salary of $100K, your effective hourly rate based on 40 hours per week (who are we kidding, we all work longer, but humor me) is $49, rounded up. So if you spend 2 hours of research to save yourself some money, it starts adding up fast. If you research for 1 hour, you place the order and receive the item. You may even have a conversation with the customer support line to discuss the proper part. That could easily add up to 3 hours or $49 x 3 = $147. This was all to save yourself a little compared to what your technology partner's price, which is typically below or near the manufacturer's suggested retail price.

And we're just getting started! Technology is technology and there are times, more often than not, that the parts arrive with problems. Maybe it's not working (DOA) or it's the wrong part. So now you have to work with customer service to resolve this. Will this be you too? If so, keep adding up all the time that you are spending to get a full appreciation for the amount of money you are paying yourself to buy a part to save money. Now you decide to offload this to your technology partner to deal with, you are way too busy to get involved. Besides, you already did your duty for your company, you saved them a few bucks (or so you thought). Now your technology partner, because they did not sell you the product, will be billing you hourly to resolve the issue with the bad or wrong part. Assuming that your technology partner is charging $150 per hour, industry average, and it takes them 3 hours to resolve the issues with this and customer service, you have now effectively, spent $147 or your time, $450 of your technology partner's time for a grand total of $597. And you didn't even get the part installed yet! Ouch!

The cost keeps going up. The most overlooked gem in this calculation though, is not your hourly rate to the company, but what you are worth to the company per hour. Meaning, if you are a CFO, you are not worth $49 per hour, you are worth more like $1000 per hour or more. If you are in sales and have a technical background, why would you waste your valuable time NOT selling? That could mean the difference between a successful month or year for you. How much is your time really worth? Are you really saving money? NO WAY!

Technology partners have relationships with distributors. When they order parts, they have value built in that can easily be overlooked. Because of their relationships, they can get assurances that the parts are correct, they spent time before quoting it to you to get the right part and many distributors that work with partners provide the level of guaranty that if the part is not right, they will replace it at no cost. So when you place an order with a technology partner that has great distributors behind them, you are assured to get the right part and if it is not, that is resolved with no added cost to you. If the part is defective, again, this can be returned quickly and easily with no loss of time to you and your company. Additionally, all warranty and support is provided by the manufacturer because this was most likely purchased through the proper channels. Buying from a partner is the best method to ensure that you grow and take care of what you are doing for your company while spending the least amount of your valuable time on low level activity. 

Many business consultants preach about time saving tips and practicing 80/20 principles. Do what brings you the most money and delegate the small stuff. Technology procurement is a waste of your time when you independently shop online for your company. Help your company make more money and do what you do best! Bill for your time at the company's going rate!

Keep in mind, the above is only an example of when you buy from sites that are legitimate. We didn't even go into fraudulent sites, used equipment, off the truck sales type of sites. That just adds to your costs and potentially causes trouble for you.

This article was originally posted by Guy Baroan on LinkedIn Pulse. Follow Guy for more.

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