I recently spent $900 each on two totally different purchases and it got me thinking about the value relative to payment. Essentially both complied with Law of Value (The Go-Giver by Bob Burg and John David Mann) but for seemingly different reasons.
The Gravel Drive
The first purchase was three big dump truck loads of gravel; roughly 30 cubic yards for our 200 yard long driveway. It was ¾ inch crush which means it had to be what is the word for it? Yes… crushed. Then the gravel had to be screened so that no stone was bigger than ¾ of an inch. Well that is not entirely true, no stone that cannot fit through the ¾ inch opening is permitted (some can be long and skinny).
The gravel had to be loaded on a truck and the driver had to deliver it and spread it on our driveway.
I used this company based on a referral from a neighbor. I had absolutely no complaints and would be happy to use them again.
- 30 cubic yards of crushed gravel delivered and spread
- Gravel eventually wears of the drive so if I didn’t get it done, I risked our driveway becoming soft mud in the spring and possibly getting stuck in the mud.
- The driver (Smokey) was friendly and courteous.
- Show up pretty much on time.
- A practical problem solved with no entertainment or other soft value other than avoiding a potential future problem.
- Gravel is pretty much a commodity and prices are competitive.
- Proximity plays a role as part of the cost is delivery.
- The gravel company needs a source of gravel and expensive equipment to process and deliver it.
- Labor and fuel costs
- Back-end office and support costs.
- Total bill: $900
I went to the dentist and had my teeth cleaned and got a filling for a cavity. The cleaning was first and performed by a dental hygienist. Then I was moved to another room and chair and had the filling done by a dentist and a dental assistant.
I chose this dentist based on a referral. We happened to know one of the dental assistants who work there.
- Preventative work on my teeth to hopefully prevent future cavities and gum disease.
- Filling of a cavity to prevent future pain and potential tooth loss.
- They run an efficient and friendly practice.
- Unlike most doctor’s offices, I never have to wait more than 5-10 minutes to see the person I am scheduled for.
- Note: When you really need them, you will pay anything.
- A practical problem solved. You definitely don’t visit the dentist for entertainment.
- The actual dental work is pretty much perceived as a commodity once they are competent, even at that location I’ve had three different dentists and they are all comparable.
- However, unlike gravel where prices are determined solely by competition, the insurance industry publishes what they will pay under covered dental work. I’ve never seen a dentist charge less.
- Dentists are free to charge more than the published rates and most do. Patients pay the difference. They have to balance how much extra to charge versus losing patients.
- There is a lot of expensive equipment and technology. This dentist seems to be keen on staying current with equipment.
- Advanced education and training is required.
- Additional costs for front office reception and record keeping.
- Total bill: $900
Comparison and Lessons
At first stab many of you might be thinking yeah but the dentist makes more money. Or that running a dental practice is better because it is less industrial.
I have no idea how much the owners of the gravel company make. I assume it is enough to justify staying in business for over 25 years. The dental practice is newer.
But consider that as a dentist you have to look in people’s mouths all day and they are not really happy to be seeing you. Dentists are apparently a fairly depressed group of people.
I walked away from the dentist with a sore mouth.
There was no discomfort or pain involved with the gravel.
I would actually rather get more gravel than visit the dentist again.
The real lesson here is that value is created in many different ways. Yet in a free market, competitive situation, the Law of Value must always apply or there will be no customers.
The question is not what business you are in but how you deliver value, how it is communicated and how it is perceived.