If a book costs $50, is that good value?
Your first response might be “no way!” It seems like a lot of money for a bunch of pages bound together.
If a book costs $2, is that good value?
“Hell, yeah!” That’s a bargain-basement price.
The problem is, the price of those books doesn’t necessarily bear any relation to the value which the books have to you. A textbook packed with useful information for college might be well worth $50. On the other hand, a trashy, badly-written novel might not be worth even $2 – especially when you factor in the time cost of reading it.
“Cheap” Doesn’t Mean “Good Value”
Most of us find it hard to resist a bargain. Maybe we’ve got a coupon for a particular store, or we see something marked down to a great price. Of course, advertisers and marketers know just how to push our buttons too.
But just because something’s cheap doesn’t mean that it’s good value.
Perhaps it’s a shoddy product. You could pick up some cheap garden tools, but they might work badly and need replacing after a month – in the long term, you’d be better to invest in some quality tools which last for decades.
Perhaps it’s a perfectly good product at a very decent price, but it’s just not right for you. Sure, that sweater might be amazingly cheap, but if it’s not a color and style that you like, you’re just not going to wear it.
Be very wary of bargains, coupons and money-off deals. Marketers aren’t acting out of altruism – they’re trying to part you from your cash.
“Expensive” Doesn’t Mean “Bad Value”
Conversely, sometimes it’s worth spending more money than you might initially feel comfortable with.
Let’s say you’re setting up a new business. Paying $200 for an hour of consulting might sound like a massive expense – except, if that $200 results in $1000 of extra sales within your first month, it’s looking like a much better value proposition.
Try to look beyond the price of something to assess the value of a particular product, service or event. Maybe those conferences won’t come cheap – but the networking and learning you do there will be worth much more than the ticket price. Perhaps you’re investing quite a bit of cash in training materials – but once you’ve worked through these, you’ll be in a great position to raise your rates.
Value Isn’t the Same For Everyone
We often think that items and services have a particular market value, set by invisible yet powerful forces. Of course, this is the case to some extent, particularly with popular goods like groceries.
On a day-to-day level, though, in your personal life, this sort of “value” isn’t really too relevant. What matters is being clear about what you consider valuable.
Perhaps the easiest example is the price of a ticket to a big soccer game. You might be willing to pay hundreds of dollars to see your favorite team play – but your mate Bob, who hates soccer, wouldn’t pay a penny.
Any time you’re weighing up a purchasing decision (or secretly judging a friend’s choices), bear in mind that your “value” isn’t the same as everybody else’s.
The price might be high, low or somewhere in between. What matters is whether or not that particular product or service is going to be valuable to you.
To test for value, ask yourself:
- Will this help me to make more money – perhaps by saving me time or teaching me new skills?
- Will this enhance my life?
- In a year’s time, would I be more likely to regret buying this or regret not buying it?
Yes, it’s always going to be a subjective judgment, and sometimes you’ll get it wrong. But by recognizing that there’s a difference between the fixed price and the value that you’ll derive, you give yourself a much higher chance of getting it right.
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