In a world where quality and innovation reign supreme, too often, we see companies, especially government entities, fall into the trap of valuing legacy contracts and the lowest prices over the inherent value of a product or service.
The age-old adage of “you get what you pay for” holds significant truth, especially with procurement decisions. In this article, I will delve deeper into the pitfalls of choosing the lowest price and the resulting impact on internal operations and the overall customer experience.
Look, I get it. The lure of the lowest price is attractive on paper.
Low prices are undeniably attractive. When I was a kid, the 5-5-5 deal at Domino’s seemed like the most incredible deal that I fell for way too often. But as I got older and wiser, I understood that choosing pizza, even if cheap, is not healthy fuel for performance, and I ultimately pay the price with my overall health due to the high saturated fats, sodium, salt, gluten, and other heavily processed ingredients a pizza can contain.
At Boomerang, we often sell into government entities who are tasked with allocating public funds wisely and often feel compelled to choose the cheapest option to demonstrate fiscal responsibility. However, while this approach might save money upfront, just like Domino’s 5-5-5 deal, it frequently leads to detrimental long-term effects that are much more costly than the price tag they initially side-stepped.
Opting for the lowest price can result in cutting corners, especially when building software. With technology, the caliber of the engineering and product team shines through in the product sophistication, scalability, and continued evolution to get better and better with age. As technology stacks mature, the modules are continuously learning from the past and making smarter and smarter decisions. In our space, we often see that platforms take technological shortcuts to offer a low price, e.g. not making the necessary security investments to protect themselves from breaches and more.
Selecting products solely based on cost can hinder the efficiency and effectiveness of operations. For instance, a government agency choosing the cheapest software solution might end up with a product lacking crucial features, resulting in time-consuming workarounds or even system failures. These inefficiencies can lead to delays, increased talent costs, and a frustrated workforce doing unnecessary tedious tasks.
Government entities exist to best serve their citizens/customers, and their operations impact the lives of those they serve. By prioritizing the lowest price over value, these entities inadvertently compromise the customer experience. Consider the case of a municipality choosing the cheapest road construction company to build a road. The result might be shoddy work, leading to frequent repairs, traffic congestion, and citizen dissatisfaction.
Recognizing the downsides of legacy contracts and the lowest price approach, some forward-thinking government entities and businesses are shifting their procurement strategies. They understand that the initial cost savings often pale in comparison to the long-term benefits of investing in quality, innovative products that enhance operations and customer experiences.
As the business landscape evolves and technology advances, the mantra of “products must sell themselves” becomes increasingly relevant. Legacy contracts and the lowest price might provide temporary financial relief, but they often result in compromised quality, stifled innovation, and a subpar customer experience.
In order to strive for excellence, businesses must continue to shift their focus and investments towards value-centric procurement decisions, ensuring that every single product and service they invest in positively contributes to their operations and the customers they serve. Happy customers equal returning customers.
After all, true value stands the test of time, making every penny spent a worthwhile investment.
Skyler Logsdon
CEO, Boomerang
