What Does Value Mean to You?

Warren Buffet once said, "Price is what you pay and value is what you get."

Actually that's a pretty open-ended statement, and my hunch is the definition of value is different for all people. What Warren considers value is certainly different than what others consider value. From all that I've read, Warren eats meatloaf in his local diner and buys companies which he defines as having "built-in moats."  In the book "The Snowball: Warren Buffett and the Business of Life" we find out that Warren has both a wife and a live-in girlfriend, more than I wanted to know about Warren, but it says something about Warren and of course what he values.

Value has changed over the years. In the old days, whenever people exchanged money for something you never even heard the word "value." When did the word value become important? It was more like an even exchange.  Value was getting the product, and "you get what you pay for" was a common retail theme.

Value is getting more than what you paid for. Customers are no longer interested in an even exchange.

When we buy products we will spend a lot of money if we feel we really need something. The retail price is a value that a seller thinks they can get for a product. The value of anything is determined by the supply and demand of that product. Sometimes it's hard to find what something is worth without trying to sell it for a lot of different prices. How do you know what to charge?

Many retailers undervalue what they offer; they also do standard mark ups on their products. They buy it for X and sell it for 2X. All of their prices are determined the same way. This doesn't help the consumer make decisions. Why? Because many of the prices are so similar that the customer can't tell the difference between the products. We don't expect the Mercedes to be the same price as a Ford; if the prices are similar Mercedes begins to look like they don't know what they're doing.

You either have the right customers to keep you in business or you don't.

Do you have too many similarly-priced products?

Do you undervalue your products?

Do you know what price your competitors are selling similar product for; do you think you have to undercut their prices to get sales?

The question is: what does retail value mean to you and your customer? If you undervalue yourself you can be sure your customers won't pay your prices.

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