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More Expensive Isn’t Necessarily Better

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My wife, Cynthia, and I decided to take a trip together early next year. So I jumped onto the Amex travel site to see about booking a place to stay.

I found a hotel that seemed about right and started looking through the room options. There were several choices, including two that offered what we wanted: “a king bed in a standard room.”

But, for reasons I still don’t understand, some of these rooms were priced five dollars a night more than others — despite appearing to share identical features with the lower-priced rooms.

Given the small price differential, I took a chance and booked a more expensive room. Why? Because I assume there must be something better about it.

Higher Price Suggests Higher Quality

When making a buying decision — of any kind — it’s not illogical to assume, “you get what you pay for.” This often turns out to be true and, especially in situations where there is little additional information to go on, price becomes a stand-in for quality.

Sometimes, however, this rule of thumb does not apply…

For the past 20+ years, we have sold a brand of security and networking equipment called SonicWall. Over time, it became a somewhat significant part of our business and we worked hard to become a high-level partner, something that afforded us larger discounts, better access to SonicWall resources, and client leads.

But about a year ago we cut ties with SonicWall and moved to a company called Ubiquiti.

Why? Because Ubiquiti sells functionally comparable products at a significantly lower price than SonicWall and similar competitors (Cisco’s well-known Meraki product line among them).

That’s significant. For example, we have a new client that needed an entire network upgrade. By the time we spoke with them, they had already received a proposal for a Cisco system in the $140k range. Our price, using Ubiquiti, was $50k.

Too Good to Be True?

So, what’s going on? How can Ubiquiti charge so much less? Further, if the quality is comparable, why are people still buying from its much higher-priced competitors?

The answer to the first question isn’t entirely clear. But I believe it has to do with cost structure.

While Ubiquiti has been around for nearly 25 years, they are smaller and leaner than the other guys. Sales and marketing overhead is lower, and likely R&D as well. They may also have a different internal definition of what constitutes an acceptable profit margin.

As for the second question — Why are people buying higher-priced options? — I think this is partly because Ubiquiti’s low price scares away those who don’t know enough to make an informed, side-by-side comparison. Again, under those circumstances, people default to using price as a meaningful indicator of quality.

Also, it may feel less risky to go with SonicWall, Cisco, and other more established brands. As the old saying goes, “Nobody gets fired for choosing IBM.”

All that aside, in this case, price is a distraction, not a valid gauge of quality. In fact, when the new client I mentioned earlier brought one of its IT-knowledgeable board members onto a Zoom call with us — to validate our recommendations — he quickly said, “Why don’t you just do it with Ubiquiti?” (Before he knew that’s what we were recommending!)

Rules of Thumb Don’t Always Apply

Rules of thumb are useful. In most instances they do what they are supposed to do, saving us time and resources by helping us shortcut decisions in both our personal and professional lives.

Sometimes, however, a thorough analysis, done either internally or by a trusted expert who understands the tradeoffs, can uncover savings that might otherwise be overlooked.

Andrew Cohen

Andrew Cohen

Having a reliable strategic partner in the realm of IT services and solutions is essential for achieving sustained growth through effective technological strategies. Our CEO, Andrew Cohen, is dedicated to helping clients optimize their technology to gain a competitive edge in their industries. At SMR, Andrew leads a team of highly dedicated professionals who are fully committed to providing exceptional IT services and solutions. With his extensive expertise and practical experience, Andrew ensures that clients receive unparalleled support and guidance for their IT projects. You can trust SMR to elevate your business systems and stay ahead in today's fiercely competitive business environment.