What Is Value and Why Is It So Difficult to Measure?
From a business perspective, value is represented by the benefits a buyer receives from an offering and its features. The definition is necessarily broad, because the concept of value does not have a universally accepted method or theory that prescribes a consistent approach for determining it. Measuring and understanding how customers value a particular product or service continues to be a challenge for many organizations today. And capturing that value through the mechanism of price can be an elusive science.
Why have companies continued to face this challenge? Several theoretical concepts on value have been posited over time, but economists have identified flaws in each. As a result, the concepts don't provide a practical, repeatable, and universal approach for calculating a precise value for a given offering. Consider the paradoxes associated with three example value theory concepts:
|Value Theory Concept||Definition||Paradox|
|Value defined by production inputs||Value is the sum of production and labor inputs||A DeLorean might require $1 million in labor and parts to build today, but would a rational buyer value it at $1 million?|
|Value defined by scarcity||Value determined by lack of resource availability||If luxury brand bags were produced in the same limited quantities, but sold in the center aisle of discount retailers, would they have the same value?(continued)|
|Value defined by benefits received||Value determined ...|