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Monday, 18 January 2010

Understanding Value part 1

Quite a lot of people have asked me about the concept of value. So I thought I'll pen down some of my thoughts. I'm actually in New York now helping my sister with her new baby and it's 9am, poor parents are exhausted and sleeping and I've got an infant sleeping on my chest as I type this on my iPhone. I mean, if you can't blog on your iPhone with a baby on your chest, what's an iPhone for right?

Back to value. I see the world in terms of value. Value drives everything we do. We buy stuff because we value them, we collaborate because there is value in the collaboration. We marry, have kids, do smart things and stupid things because at that point in time, we felt there was value in doing them. If you subscribe to the views of Richard Dawkins book (selfish gene), we even sympathize and empathize because we see value in them. I don't subscribe to it because I think it's internally inconsistent but that's another story.

There have been many scholars researching into value. Woodruff, Zeithaml, Payne, Haglund - a simple google scholar search will give you loads. What I hope to pen here is a condense version of many years of work in value. I have to stress, that I am not attempting to discuss value according to the meaning, interpretation and how it's constructed Internally - I leave it to the social constructionists and structuralists for that. Rather, I shall be crass and state that, as a business economist, I am interested in value the way it can be captured in an exchange, monetarily or otherwise. This does not mean I believe in value as exchange value. Value to me is always value-in-use. But I am interested in how use value translate to exchange value. There is a subtle, but important difference.

Value is contextual (state dependent) both in terms of when we consume it and when evaluate it (to buy). This means it depends on the state of the world at the point of use. I value the USE of this iPhone right now in this context because I would be bored to death lying here with baby on chest otherwise. Between 10 to 6 last night when i was asleep, I did not value the functional use of the iPhone but I valued it's AVAILABILITY for functional use, which is a use-value as well, but an emotional use. I know I'm tied to my phone. How sad is that.

But when I BOUGHT this phone, I might not have envisaged this particular context or all contexts where I would have valued the use of my phone. Indeed, the context in which I purchased my phone would have influenced the price i was willing to pay for it at that time. It also means that I have to imagine the future use value contexts to develop a present value of the phone. My book covers this in more detail and the latest Journal of product and brand management paper where i modelled advanced demand goes into more theoretical and mathematical detail on how firms price for such value.

Up next (baby stirring): Value has emotional, practical and logical dimensions; Value is perceived on use, expected on purchase and evaluated on recommendation or repurchase

Location:Lefferts Ave,Brooklyn,United States

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