“This $6 bottle of wine tastes awful.” “What did you expect – you get what you pay for.”

It’s true, in most circumstances, that the quality of products and services increases as the price increases. You get what you pay for. When you cheap out on something, be it a bottle of wine, pair of jeans, or a manicure, more often than not you’ll end up disappointed. You might even end up paying more in the long run, having to replace the item or fix the mess you made when you cheaped out the first time.

One of the most common examples is with clothing. In this age of fast-fashion it’s not unheard of to find a t-shirt, pants, and a pair of sneakers – all of it – for less than $20. Anyone who’s ever shopped at Old Navy or Walmart can attest to this. But then what happens? The thin material starts to unravel, it’s improperly stitched, and it quickly wears out. Or, just as likely, it just doesn’t fit properly in the first place and so you never wear it.

I hate the term ‘investment’ when it comes to something that doesn’t have the potential to earn you money, but ‘investing’ in more expensive clothes can pay off. A well-cut suit, a timeless pair of shoes, work-out gear that doesn’t fray or pill after a few washes. Most of us can agree that spending more on a high quality item that will last a long time is worth the money.

Do You Always Get What You Pay For?

Do you always get what you pay for?

But higher price = better product/service doesn’t always hold true. Take investing, for example. It’s widely accepted now that cost is the only reliable predictor of future returns. The higher the cost, the lower the expected return. The reverse is also true.

Canadian investors pay some of the highest mutual fund fees in the world and so it stands to reason that our expected returns will also diminish. We’re not getting what we pay for – our advisors get paid and investors get short-changed.

Yet I’ve heard advisors use this argument – you get what you pay for – when trying to persuade their clients that low cost indexing, or a robo-advisor, is an inferior solution to their actively managed model. Ridiculous!

Here are some other, hopefully, less controversial examples from my own personal experience where a higher price doesn’t always mean better quality.

Wine

Wine

The first time I took my girlfriend (now wife) out to dinner I ordered a bottle of Dr. Zenzen, thinking I was the most sophisticated man in the world. My wine palate has evolved since then, moving beyond the sickeningly sweet white zinfandels and moscatos to the more complex, structured, and powerful pinots, syrahs, and cabs.

I tried to go down the wine-snob road before, but then quickly realized that the bottles I enjoyed most landed somewhere in the $20 price-range. I can appreciate a good bottle of wine, but why spend $60 to $100 on a fancy bottle when I get the same amount of joy sharing an $18 bottle with my wife on a Saturday evening?

There are some great bottles of wine under $20 and it’s my mission in life to find them all.

Coffee

Coffee

I’m not a latte guy. Plain, black coffee for me. I do like a good cup of joe, but it pains me to pay a premium at a coffee shop when I don’t even get to see the barista make coffee art in my medium dark-roast, black.

We don’t grind our own beans, we don’t own a french press. We literally buy a can of west-coast blend dark roast coffee from Safeway or No Frills ($11.99 for 910 grams). Compare that with Kona Coffee, tabbed as “one of the world’s most sought-after beans by coffee connoisseurs.” It retails for $13.99 for a seven-ounce bag. That’s more than 5 times the cost of my no-name coffee!

I’ve had a cup of Kona – it’s not 5 times better – believe me. Maybe my heathen palate cannot discern the rich difference between the $50/pound Kona coffee and my regular west-coast blend, but I’ll take my plain old coffee and pocket the difference.

Birthday cards

Birthday CardMaybe it’s because our kids go to so many birthday parties these days, but I’ve always loathed paying $5 or more for a birthday card (especially when you forget to buy a gift and you’re late for the party and so you stop by Toys R Us to get some lego but then remember you MUST get a card or you’ll be thrown out of the party so you’re forced to spend $7 on a birthday card from the toy store).

Enter the Dollar Store. Folks, if you’re not buying your birthday cards at the Dollar Store you’re missing out. Cards there cost $1. They have the same lame jokes and sappy sentiment that the other Hallmark cards have at grocery stores and drug stores, but they cost $1 instead of $7.

Just peel the little Dollar Store sticker off the back and nobody’s the wiser.

Final thoughts

You get what you pay for. It’s true in most cases, but not always. I’m happy to pay more for a higher quality item out of which I’ll get a lot of use. Replacing a cheap item, or fixing a crappy job that wasn’t done right in the first place will cost you more in the long run.

When we renovated our basement we hired a contractor that was recommended to us by our home builder. He was just a guy who knew some tradespeople – not an experienced contracting company with lots of resources. His quote was not cheap, but reasonable, however the job took twice as long as it should have and we had quite a few problems with the work – including the fact that he never completed some of the final details…he just disappeared.

Your turn: Do you always get what you pay for? What are some instances where high price doesn’t necessarily mean best quality?

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24 Comments

  1. Miguel @ The Rich Miser on August 13, 2017 at 6:28 pm

    I agree; generally, “buy cheap, buy twice”. As to wine, they do those blind taste tests every so often, and it generally turns out that even the experts can’t distinguish between the cheap and expensive stuff.

    For me, perhaps the best example of not getting what you pay for is fancy restaurants. I find that most of the time, the taste of the food is simply not that amazing, even if the ambiance is cool or trendy.

    On clothing, you’re right. However, I still can’t bring myself to spend a lot. I generally buy good-looking, brand-name clothes at outlet stores whey they have sales, and wash and dry on gentle cycles. I find that most items will last 6 months to a year that way. I do stay away from stuff that looks and feels really flimsy, though.

    • Echo on August 14, 2017 at 2:11 pm

      Hi Miguel, I love the saying – “buy cheap, buy twice”

      I’ve seen the results from those blind taste tests and it’s amazing that the experts can’t tell the difference. That says a lot.

      Definitely agree about the good quality clothing – still makes sense to buy it on sale.

  2. Frito Paws on August 13, 2017 at 9:07 pm

    Well when it comes to men’s suits, buy well but what you can afford because you can freakin’ wear that suit every day and no one will notice!!!
    http ://www.cbc.ca/beta/news/canada/british-columbia/coquitlam-richard-stewart-suit-1.3459469

    When it comes to things like paint, cheap paint is no bargain!

    • Echo on August 14, 2017 at 2:12 pm

      I don’t wear a suit to work every day like I used to so I did just that – bought one good one and wear it whenever I need to. Who notices a man’s suit?!?

  3. Mrs. Picky Pincher on August 14, 2017 at 7:17 am

    So true! I think it depends on what you value, though. For example, I can *totally* tell the difference between Kona coffee and a run-of-the-mill coffee; so for me, it’s worth it to pay extra for the nicer product. But I’m also just fine with drinking $5 box wine. 😉

    I do prefer to pay more money for higher quality clothes and appliances, since these are items that wear down over time. I do tend to buy nice clothes (ie. Calvin Klein) used from the thrift store to reduce the upfront cost. Since the clothes were built well from the beginning, they last me forever but I get a nice discount. 🙂

    • Echo on August 14, 2017 at 2:14 pm

      I know a few people who swear that Kona is just the best. No issues with that, whatever works for you. It just doesn’t do it for me.

      Buying nice clothes from the thrift store is a good compromise on quality vs. price. Well done!

  4. Fred Petrie on August 14, 2017 at 7:43 am

    In choosing between priorities in your spending, you can also make trade-offs related to quantity and/or quality. I might “want” a twenty dollar bottle of wine but my “need” for a glass of red with my dinner may be 90% satisfied with a ten dollar bottle. I make a game out of trying to find a $10 wine that is comparable to a $20 bottle. Most people select their wines by grape variety or country/region. I like to shop by foreign exchange. When the rand is in the tank, South African wines can be a deal. With the euro down, many French wines became more affordable, and when the Canadian dollar was high, I was even drinking Californian. (THE END OF WORK – financial planning for people with better things to do by Fredrick Petrie, navigatingfinance.com.)
    The economists call this approach marginal utility. For us, a great way to save more is to spend less!

    • Echo on August 14, 2017 at 2:16 pm

      Hi Fred, thanks for the thoughtful comment. I’m not sure that I want to study exchange rates before I hit up the liquor store but your point is taken.

  5. Mary Edwards on August 14, 2017 at 7:51 am

    Along with the birthday cards, buy the gift bags and tissue paper at the Dollar Store also!
    Hint: for chocolate lovers, (there are 4 in our household), buy good dark (Belgium) chocolate at the Dollar Store or purchase the bag of bite-sized individually wrapped chocolate bars (70 percent dark) from Costco. Don’t pay $3.69 for 100 grams at the supermarket any longer!

    • Echo on August 14, 2017 at 2:18 pm

      Hi Mary, you’re right – it’s a one-stop shop for those birthday cards, gift wrap, and bags. Good tip on the chocolate, too!

  6. David on August 14, 2017 at 9:44 am

    Price is NO guarantee of quality. Look in any so called trendy or upmarket store and you will see stuff at horrendous prices. Turn it over and it is made in guess where? China!!! So some poor downtrodden worker has slaved away for pennies just so some fat exploiting retailer and middleman can make big bucks off you. The worst thing is people are stupid or couldn’t care less.

    • Echo on August 14, 2017 at 2:41 pm

      Hi David, I can’t believe some of the crap sold out there. Gift shops in tourist towns have to be some of the worst offenders. Who would want some of this over-priced stuff?

  7. Penny @ She Picks Up Pennies on August 14, 2017 at 11:36 am

    No, I’ll NEVER give up my $4 bottle of Riesling from Aldi. (I’m such a bad wine drinker. Mostly, I just like sangria.)

    This post is wonderful. There are definitely certain things that I won’t skimp on, and there are others that I am happy to do so. I’m with you on dollar store cards!

    • Echo on August 14, 2017 at 2:46 pm

      Love cheap wine for sangria. Haven’t found a $4 bottle yet, but $7.99 also does the trick. Thanks for stopping by!

  8. The Luxe Strategist on August 14, 2017 at 1:51 pm

    I think too often people get tricked into believing that the more you spend, the higher the quality. It’s true…but to a certain point. After a certain threshold, you’re not really going to get more tangible benefit that the average person will care about, especially with clothes.

    A couple things where I see this as well:
    -Agree with someone who said restaurants. My husband and I once spent over $100 on a fancy meal. We left hungry. I’d never felt more ripped off.
    -Hotels. There are some hotels that cost over $1000 per night, but I don’t see the value for what you get. At the end of the day you’re just looking for a safe, quiet, clean space to sleep right?

    It’s always a case-by-case basis.

    Oh, and thanks for the shout out!

    • Echo on August 14, 2017 at 2:51 pm

      You’re right. There’s cheap, there’s ridiculously expensive, and there’s usually value found somewhere in-between.

      I used to work in a fine dining room and I have a bit of an appreciation (or soft spot, I guess) for a good dining experience. It was french service, table-side, and you could easily spend 2.5 hours and $150-$200 on a nice meal – but the experience was worth it. You can get carried away though, for sure.

      Hotels, too. I worked in hospitality for a decade and it took me years to come to grips with the fact that I could no longer get my $39/night friends and family discounts around the country. I will pay more to be in the right location (i.e. conference hotel rather than saving $40/night but you’re across the city).

      My pleasure – thanks for the comment.

  9. Keith Cowan on August 14, 2017 at 4:09 pm

    We have our standards. We buy Chilean red wine for our house wine (Frontera) which came out on top in a blind wine tasting party. 1.5 litres for $16 (Merlot and Cab).

    Otherwise we will fork out $18-22 for a special bottle to take to friends for dinner. It is slightly better if we choose carefully.

    Being retired, we will cheap out on the bedroom TV but go first class on the LR. Because the MBR gets little use for TV watching.

    I have had BMWs but got over that now that we drive so little. Take the bus whenever we can.

  10. Lynda on August 14, 2017 at 7:37 pm

    Shoes. Never cheap out on shoes. You can get the end of season sales and save them for next year but cheap shoes with no support will cost you in more ways than one.

    • Ginette on August 15, 2017 at 7:57 pm

      Totally agree on shoes, have to be well built and comfortable, even if it means spending more money

    • KC on August 23, 2017 at 11:02 am

      Yes! I’ve bought $20 dress shoes from walmart and ended up having super sore feet, sore hamstrings (after 1-2 months of wearing them) and ultimately, sore back which resulted in countless chiro visits. After going a week without it and then wearing them, all my pain came back in one shot. Now, I buy $90-$120 well-dressed shoes (I try to buy during sales) and all my pain is gone.

  11. Bill S on August 15, 2017 at 10:36 am

    Just remember…cheap isn’t good, and good isn’t always cheap!

  12. Rorry Harding on August 19, 2017 at 7:20 am

    Another advantage to buying good quality clothing is that the manufacturer will typically stand behind their products. For example, I bought a ski parka made by Merrell at least 8 years ago, probably 10 years ago. The seams started to come apart although they showed no signs of wear. Merrell offered a free replacement coat of the same original value. I had a similar experience with a rain jacket.

  13. Keith Cowan on August 20, 2017 at 4:01 pm

    I have had problems with my left foot: plantar fasciitis, then a brown recluse spider bite in the leg, then ruptured achilles tendon in the right leg, then broke 3 bones in the left foot. I have Joyas x 2 at $600 total. Nothing is too much for that foot!

  14. Lana on July 31, 2020 at 5:58 am

    There is another aspect that you haven’t considered. What is the sense of spending $$$ on something because it’s “made better and will last longer” if you only intend to use it once or twice anyway? Years ago… many years ago, when $50 was a pretty expensive dress, my friend and I were in high end department store and saw a party dress that was really cute. I pulled out the tag and it was $300! I asked my friend why anyone would pay that much for a dress and she said, “it will last much better.” I looked at her and said, “I think you would probably wear that once a year, or maybe only once, period!” She had to agree.

    Another aspect is that more expensive doesn’t always equate to anything other than brand recognition. I was in an expensive store and found the perfect dress to wear to my daughter’s wedding. It was more than I had ever spent on a dress in my life and there were several months still remaining to look a bit longer. So I looked and looked and looked, and went back to the expensive dress with the idea that this was a very special occasion and nothing else came close to that dress in appeal. I was so pleased that it was, by then, on half price! I got it at what I would have expected to pay anywhere. I often joke that if the reception had gone on much longer, I would have been the indecent mother of the bride… the slight split skirt just kept splitting and splitting. It fit perfectly and I’m pretty reserved in my movement. My sister and I did a little repair on it before I ever wore it again and it has never ever had another problem. So it would have been a simple matter for them to get it right in the first place! I also once pulled out the tag on a little black dress. Simple, pretty, but nothing other than a normal dress. It was $1,500. Seriously?

    Also, I shop quite often at Aldi (would more often if it were closer). Most things, I have found to be just as good, and sometimes better, than what I could get elsewhere. Now, there are a few things I have tried and I prefer the name brand. But it cost me, what, 50 cents to find out it wasn’t great? If it HAD been, I would have saved the money many times over the years.

    Also, I believe there is a fallacy out there that name brands at cheaper stores are poorer quality than the same brand at a more expensive store. If you see that someone is wearing Levi’s (for example) and they look terrible, are you going to think “Walmart sells lousy Levi’s”, when you have no idea where they bought them, or are you going to think “Levi’s make lousy jeans.”It would certainly not benefit name brands to have lots of low quality products out there, without anybody associating them with anything except the brand! Walmart sells name brands cheaper because they have the bargaining power of buying huge quantities and the threat of discontinuing the brand if they don’t get their deal.

    In short, I am a big proponent of “you get what you shop for”. Pay attention to details and sometimes the cheaper is actually better.

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