Price and Context

Thursday, February 15, 2018

What do travel expense audits and smart phone apps have in common? Both offer excellent examples of how meaningless price can be when that number is yanked from all context.

The first example comes to us from Allison Green's excellent Ask a Manager blog, where a reader has run afoul of an accountant with a myopic concern with airline ticket prices:

He may have lost two hours of sleep and can't get any real work done today, but he saved the company fifty bucks. (Photo by Harry Knight on Unsplash)
I replied that the added expense of ground transport to farther-flung airports would routinely add at least $100 to each round-trip, which always makes flying from my preferred airport a wash, and that my status on American means an additional $25-35 savings each way on checked baggage that I'd have to pay on other airlines.

The accounting rep then said that I should use the alternative airports and use public transit, which takes far longer to use (even though our employee manual specifically says the organization reimburses for cabs). The accounting rep said I could also save money by taking flights that leave at 5 a.m. and return after 10 p.m., even though my business needs often call for spending the morning in the office and taking an afternoon flight. As part of the "audit follow up," he instructed me to send accounting screenshots of all flights on Kayak available ANYTIME ON THE SAME DAY to ensure I am choosing the cheapest option regardless of time of day.
The above passage doesn't even mention further costs, such as lost productivity to the business that such a selection process would entail, although that does come up. Obviously, it's harder to cut costs than just looking at a bunch of numbers for just one of the costs.

In a similar vein, a software developer tackles a lament common among those involved in smart phone software, urging his compatriots to "Stop using the cup of coffee vs. $0.99 app analogy":
Fact: Your $1 App is a Total Gamble

Now, contrast this with your app, Mr. Developer. I don't know you from Adam. You're pitching digital Instant Refresher Juice 1.0 to me in the form of a new app. The return I'm going to get is questionable at best. I already have 30 games on my phone, some of them very good. Do I need another one? I don't play the 30 I have. The experience I'm going to get from adding one more game is not trustable. I'm assured of nothing. Last week I bought a game for 99 cents and it was terrible. I played it once, for 15 seconds. I could be shoving $1 straight down the toilet again for all I know. Your app, good sir, is a total gamble. Sure, it's only a $1 gamble ... but it's a gamble and that fact matters more than any price you might place on it. [format edits]
Offering a lower dollar price for something is pointless if doing so fails to solve other, greater costs that exist whether or not they, too, are priced in dollars.

Numbers may not lie, but they cannot contain the full truth, as both of these examples attest.

-- CAV


Dinwar said...

I too have been on the receiving end of those airline ticket audit calls. Something that has never been brought up by the accountants: Getting through TSA takes time, and the amount of time can vary dramatically throughout the day. Unlike the person quoted, I usually try to leave early--5 or 6 am--because my flights tend to be cross-country, and this allows me to land while there's still daylight. It also means that I don't spend much time waiting in line for TSA's security theater. If I waited, as the accountants "recommend", until the start of business hours, I could find myself waiting in line for the security clearance for an hour or more.

There is also the issue of transportation. I've flown into several airports during busy times, and there simply wasn't transportation. The cabs were full, and no rental cars were available (despite making a reservation). Knowing this, I tend to schedule flights to arrive at times that aren't as crowded.

I could go on, but these simply serve to illustrate the point you brought up: Price is not the only consideration. It's a good start, but you have to factor in ALL the variables, including person-hours in each option, lost productivity, and factors that can't be quantified as easily, such as frustration. Any sane business person knows it's sometimes better to take a loss now, in order to build for the future.

Snedcat said...

Yo, Gus, I'll add that that story had a great follow up. Never get on the CEO's Executive Assistant's bad side. Ever.

Gus Van Horn said...


I live near DC and could, conceivably, use any of three airports for a trip, but the idea of using anything but BWI (with or without public transit) would be ludicrous for me.


Ah, yes. The extra guacamole. I saw that, too, and got a good laugh out of it.