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    Entries in value pack (1)

    Thursday
    Jan232014

    Price vs. Value

    The simple comparison is; Price is what you Pay, Value is what you Receive.

    The true goal is to find the equilibrium where they both meet.  I pay $10 and I receive $10 in value.  I guess to break it down to the simplest example, a gift card would be pure equilibrium.  You pay exactly what you receive.

    However, when you think of a gift card, you don't think of value.  You paid for what you receieved.  I've never heard anyone bragging or referring friends to buy the $20 Starbucks gift card because the $20 was stretched out into some magic way.

    In the service business, the goal SHOULD be to create value.  To maintain the quality and integrity of your product or service while widening the Price vs Value gap as far as possible.

    I love it when clients say, "I love paying my invoice, because I know that for what I have paid, I have received X multiples more in value."  That should be music to any business owner or entrepreneurs ears.

    Value cannot however be confused with Volume.  Although there are example of  Value and Volume colliding (like a Costco Value Pack of Chicken) that's not true value.  True value, as I define it is when the product or service, when compared with similar products or services costs the same or less, but delivers relatively more service or product to a customer.

    A value pack is more more than bulk pricing.  Retailers pass on savings to the customer to drive top line says while maintaining a realtively fixed (but low) gross margin.

    So enough technical speak.

    Everyone loves it when feel the value vs. price equilibrium slanted towards value.

    Equally, everyone hates it when it slants the other way.

    Can you think of an example when you paid $10 and received $1 of value?

    Can you think of an example when you paid $10 and received multiple times more in value?

    What you pay is generally a fixed amount, what you receive is dependant on who is providing it to you and how realistic your expectations are.