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Price doesn’t matter!

A friend was in town on a business visit – we decided to catch up over lunch at a conveniently located hotel.

He was driving a Toyota Qualis and the car had done more than 300 kilometers since morning. After a hearty lunch and enjoyable conversation we decided to go our respective ways. I walked him to the car to catch a few extra moments since we were meeting after a long time – he got in, slotted in the ignition key and turned it … the car wouldn’t start!

We tried push-starting, but it was dead – something had gone wrong in the electrical circuit. We called Toyota Service and they promised to come over in 15 minutes – in the meantime they’d told us to check the battery. The 2-member service team arrived in a Qualis in 10 minutes and had the car’s engine humming again within a few minutes.

The technician gave us a bill for Rs. 370 for the job done. He told us to stop at a regular battery sales outlet to get the battery checked again because my friend had another 500 kilometers of running before he reached home.

I took him a Car Electricals technician and they charged us just Rs. 30 for the check up and minor reset!

It may seem that the Toyota guys had over charged us for the service – because the 2nd outlet had done more work at 1/12 th of their price.

But if you analyze the elements of Service you realize the reason; service is priced on:

–          Cost of material

–          Cost of labor

–          Overheads

–          Skill levels / Experience

–          Market demand

–          Service Standards

–          Perceived value

–          Competition

The Toyota Service Standards and Skill levels are obviously higher, but more than that they were available on demand. The other shop gave us the same service but was not able to provide us the convenience of Service where we wanted and when it was desperately needed.

We don’t haggle with a Specialist on the price of a Heart Transplant, we don’t ask for a discount at a 5-Star Hotel …. It’s logically possible to negotiate these prices, because there is some leverage always built into pricing (otherwise hotels wouldn’t give Agency Commission and Bulk Discounts)

However, price ceases to be a major factor when customers see value in your offering.

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  1. G.Venu Gopal
    January 29, 2012 at 8:29 am

    the Toyota example was classic . you got the service , when you called for it, within the time promised and more importantly your friend was able to move ahead with his days plan . you just cannot afford to negotiate after getting what was important at the moment a break down service call.

    • JayadevM
      January 29, 2012 at 11:21 am

      That’s right, Venu! No room for negotiations or questions after such a response.

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