Guest Blogger… Lisbeth Calandrino chimes in…

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. I love Warren and have been a fan for years, but he book is over 500 pages, value samalu!

Value has changed over the years. In the old days, whenever people exchanged money for something you never even heard the word “value.” It was more like an even exchange.  When did the word value become important? Value was getting the product, and “you get what you pay for” was a common retail theme. What business doesn’t say they give value, what a crock! If you’ve got it you better flaunt it.

Value is getting more than what you paid for period. If you feel like you stole the product that’s value.  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/or want  it. Simply, the  value of anything is determined by the supply and demand of the product. Sometimes it’s hard to find what something is worth without trying different price points. How do you know what to charge if you’re a business.  Notice the price of technology, when it’s new it has high value to some people. Buying the product means I’m smart or I’m on top of my game.

Many businesses  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 nor build the value of their product. Why? Some products are worth 3X because the customer will pay three X.

If prices are similar, customers can’t tell the difference between the products. We don’t expect the Mercedes to be the same price as a Ford, Mercedes has different value in the market place. Even if the Mercedes is as cheap to build as a Ford, it would lose its value if the price were reduced. Also  Mercedes begins to look like they don’t know what they’re doing. Consider Lexus and their recent quality control issues. They haven’t reduced the prices because of the problems. It would be interesting to find out if people that own  Lexus cars think they’re worth less because of the problems. My hunch is they don’t.

You either have the right customers to keep you in business or you don’t. Best you find the right ones and pay attention to them.

Do you have too many similarly-looking products with similar prices? This is just confusing.

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  value mean to you and your customer? If you undervalue yourself you can be sure your customers won’t pay your prices.