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Dont think of price, think of cost per use

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Re: Dont think of price, think of cost per use

#31

Post by number6 »

XorNot wrote: post #26
Brajeshwar wrote: post #17

I got the gist of the article with a quick speed-read. I have kinda used this unknowingly for a very long time. I have also helped a lot of people make buying decisions, especially when they find the upfront cost high. My view is -- start from the cost of your use and buy it even if it is on the costlier side upfront. This is also akin to buying smaller number but of high quality item so they last longer and thus the…

Same for me: cost per use is helpful to get you thinking about total cost of ownership and product lifetimes. It's a really good way to evaluate how much you should pay for the second purchase of a tool - also whether the price is worth the warranty. My Bosch laser Level for example cost $150 more then the alternative, but came with a 6 year as opposed to 1 year warranty. At a total price of $600, I was buying it at…

And for tools: If you buy the inferior one and then break it or decide to get the upgrade, your cost will be $450 + $600. You will not overpay $150 but $450. Also better tools tend to give you better outcomes.

Re: Dont think of price, think of cost per use

#33

Post by l33t2328 »

BeetleB wrote: post #24

This is completely backwards. Always think in absolute dollars and not in rates. $1000 is $1000 whether the cost per use is pennies or tens of dollars. Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!) The other obvious problem is looking at cost absent of a market. It's not just how much it is worth it to you, bu…

You will use the computer for more than 400 days, so the rate is useful.

Re: Dont think of price, think of cost per use

#34

Post by [deleted] »

XorNot wrote: post #26
Brajeshwar wrote: post #17

I got the gist of the article with a quick speed-read. I have kinda used this unknowingly for a very long time. I have also helped a lot of people make buying decisions, especially when they find the upfront cost high. My view is -- start from the cost of your use and buy it even if it is on the costlier side upfront. This is also akin to buying smaller number but of high quality item so they last longer and thus the…

Same for me: cost per use is helpful to get you thinking about total cost of ownership and product lifetimes. It's a really good way to evaluate how much you should pay for the second purchase of a tool - also whether the price is worth the warranty. My Bosch laser Level for example cost $150 more then the alternative, but came with a 6 year as opposed to 1 year warranty. At a total price of $600, I was buying it at…

[deleted]

Re: Dont think of price, think of cost per use

#35

Post by r00fus »

I just amortize the cost over the useful period.

$2k bed / 10y = $200/y.

If that’s worth it for me to upgrade then it’s simple to make the call. We spend a third of our life sleeping so having a good bed is a worthwhile investment.

Re: Dont think of price, think of cost per use

#36

Post by yalogin »

This is going to absolute lead to price gouging because today you can only items in one segment. For example price of bread to other bread. But if you start using cost per use all of a sudden you will be forced to justify 50 bucks for a loaf of bread or 100 bucks for a peanut butter bottle, after all a jar of peanut butter lasts a long time. Yes supply and demand and competition will still exist but they will all learn and adapt.

Re: Dont think of price, think of cost per use

#37

Post by Void_ »

BeetleB wrote: post #24

This is completely backwards. Always think in absolute dollars and not in rates. $1000 is $1000 whether the cost per use is pennies or tens of dollars. Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!) The other obvious problem is looking at cost absent of a market. It's not just how much it is worth it to you, bu…

Actually the installments are a great way to think about purchases.

I have a budget of 500€ for sports per year. I use this on gyms, running shoes and what not.

I wanted to get into skiing so I bought some skis this year. It was about 700€.

Normally this doesn’t fit my budget. But I’m gonna keep these skis for at least 4 years.

Now the price is 175€/year. And I still have a bigger portion of my budget left for other sports.

Re: Dont think of price, think of cost per use

#38

Post by nGaR5zKE »

Don't think of price, think of return of investment (ROI).

The decision if I should buy a phone for $400 or $1000 should come after answering the question "Are the extra features for $600 worth something to me?" - for some people they'll be worth - e.g. having better quality photos of their family, or having better FPS on the high-end MMORPG. Others don't need that, they don't have a ROI on the extra $600, so should skip the more expensive one.

Now, going out with an old friend and spending $100 on a night out - it's a huge ROI for some, for others not, although I think the latter wouldn't have gone out at first place. The same is valid for holidays and any kind of experiences - people will have huge ROI and will go.

The one McD menu - that's where I personally will never find ROI, so can't speak about it. Even if I am starving, buying a loaf of bread, butter and some potatoes for less than $14 will give me much more ROI.

Re: Dont think of price, think of cost per use

#39

Post by gmadsen »

Void_ wrote: post #37
BeetleB wrote: post #24

This is completely backwards. Always think in absolute dollars and not in rates. $1000 is $1000 whether the cost per use is pennies or tens of dollars. Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!) The other obvious problem is looking at cost absent of a market. It's not just how much it is worth it to you, bu…

Actually the installments are a great way to think about purchases. I have a budget of 500€ for sports per year. I use this on gyms, running shoes and what not. I wanted to get into skiing so I bought some skis this year. It was about 700€. Normally this doesn’t fit my budget. But I’m gonna keep these skis for at least 4 years. Now the price is 175€/year. And I still have a bigger portion of my budget left for other…

i mean if you have trouble not staying in a budget, I suppose that helps, just seems weird to tout that as a great way, if you are overall spending more money...

Re: Dont think of price, think of cost per use

#40

Post by BeetleB »

bombcar wrote: post #29
BeetleB wrote: post #24

This is completely backwards. Always think in absolute dollars and not in rates. $1000 is $1000 whether the cost per use is pennies or tens of dollars. Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!) The other obvious problem is looking at cost absent of a market. It's not just how much it is worth it to you, bu…

For non-necessary payments I think of it in cheeseburgers. Would I rather have this five hundred dollar phone or eat a cheeseburger a hundred times?

What you're doing is considering opportunity costs, which is quite a good thing to do.
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