VALUE AND PRICE.

LEARN TO TELL THEM APART

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Value and price are two terms that are often used together in the business world, but have important differences. The value is the A customer's or user's perception of a product or good or service in relation to their expectations and needs. The value is subjective y can vary from person to person. On the other hand, the price is the The amount of money required to purchase a product or service. It is a measure objective and can be calculate in a concrete way.

In short, value refers to the customer's perception of what they will receive compared to what they will pay, while price refers to the actual cost of the product or service.

A SIMPLE EXAMPLE TO CLARIFY:

For a bottle of water in the city we pay 1 euro, but if we are in the desert about to get dehydrated, the same bottle brings us a lot of value and we would be willing to pay much more. Therefore, the price of the same product depends on the value it brings at that moment to the customer.

An umbrella sold in the desert is worthless and therefore nobody pays you, but the same umbrella sold just when it starts raining becomes much more valuable and therefore more expensive.

Differences between Value and Price

NATURE

• Value: is subjective and varies from person to person depending on their needs, desires and circumstances. 
• Price: is objective and quantifiable, usually set by the seller or the market.

DETERMINATION

• Value: is determined through customer perception, and is based on variables such as quality, brand, customer service, etc.
• Price: is determined by factors such as cost of production, desired profit margin, supply, demand, and other market factors.

FLEXIBILITY

• Value: can change rapidly depending on the situation, as in the example of water in the desert.
• Price: can be more stable and only change due to strategic decisions, inflation, or significant changes in supply and demand.

FOCUS

• Value: customer-focused.
• Price: focused on the product or service.

Similarities between Value and Price

INTERDEPENDENCE

• Although different, value and price are closely related. High perceived value can justify a higher price.

IMPORTANCE IN THE PURCHASING DECISION

• Both are key factors in a customer's purchasing decision. A low price may be attractive, but if the perceived value is low, the customer may not make the purchase.

COMPETITIVE FACTOR

• Both value and price are tools that companies use to gain a competitive advantage in the marketplace.

SIMPLE EXAMPLE TO CLARIFY

As your example of water in the desert illustrates, value and price can vary greatly depending on the context. 

• In the City: the price of a bottle of water could be 1 euro, and the perceived value could be relatively low because there are many alternatives available.
• In the Desert: the perceived value of that same bottle of water would be extremely high due to scarcity and immediate need. In this context, most people would be willing to pay a much higher price for the same bottle of water.

This change in perceived value illustrates how value and price are interrelated but not identical. Price may remain constant, but perceived value can change dramatically depending on factors such as urgency, scarcity and personal relevance. ¡Value plays a fundamental role in the pricing of a product or service!

HERE ARE SOME WAYS IN WHICH VALUE INFLUENCES PRICE DETERMINATION:

CUSTOMER VALUE ORIENTATION

1. Perception of Quality: If customers perceive a product to be of high quality, they will be willing to pay a higher price for it. 
2. Value Added: additional services, exclusivity or unique features of a product can add value in the consumer's mind, allowing a higher price to be set.

VALUE-BASED PRICING STRATEGIES

1. Premium prices: when a product offers unique or superior value, companies can set higher prices, which consumers will be willing to pay because of the perceived high value.
2. Penetration Pricing: if the perceived value is equal to that of competitors but at a lower price, this can be an effective strategy to gain market share.

ADAPTABILITY AND CONTEXT

1. Emergency or Shortage Situations: as in the example of water in the desert, the perceived value can change in different contexts, allowing the price to be adjusted accordingly.
2. Temporary offers: promotions or discounts may temporarily reduce the price, but if the perceived value is high, customers may continue to buy even when the price returns to its original level.

BENCHMARKING AND COMPETITION

• Price Comparison: Consumers often compare the value and price of similar products before making a decision. A higher price may communicate greater value, but only if the customer perceives that there are justifiable reasons for the additional cost.

PRICE SENSITIVITY

• Elasticity: products that are highly valued tend to be less price sensitive, which means that demand does not decrease significantly even if prices rise.

DYNAMIC PRICING

• Adaptation to the market: Modern companies often use algorithms to adjust prices in real time according to perceived value, demand and other market factors.

In short, value is a critical component that companies must carefully consider when setting prices. Ignoring the customer's perception of value can result in prices that are too high to generate sales or too low to generate profits.

In markets such as souks or flea markets where bargaining is common, the concept of value and price takes on a more fluid and dynamic dimension. Here, both the seller and the buyer have greater flexibility in determining the final price of the product, and this can vary significantly depending on a number of factors.

THE FOLLOWING DESCRIBES SOME OF THE WAYS IN WHICH VALUE AND PRICE WORK IN SUCH MARKETS:

BUYER'S PERSPECTIVE:

• Subjective Value: the buyer assesses the value of the product based on its usefulness, quality and exclusivity. This subjective value becomes the starting point for negotiation.
• Research and Comparison: Buyers often explore several stalls to get a general idea of the price range and value offered by different sellers before deciding to negotiate.

SELLER'S PERSPECTIVE

• Cost and Margin: the seller has a cost base and seeks to make a profit margin. However, this margin can be flexible depending on various factors, such as the need to make quick sales.
• Buyer's assessment: Sellers often assess the buyer's willingness to pay, which may include factors such as body language, attitude and questions asked by the buyer.

NEGOTIATION DYNAMICS

• Negotiation Tactics: Both sides can employ a variety of tactics, such as silence, withdrawal or the granting of small "extras" to close the sale.
• Emotional and Psychological Factors: need, urgency, desire and other emotional factors can influence both the seller and the buyer, altering their perception of value and thus of fair price.

SPECIFIC SITUATIONS

• Seller's need: As you pointed out, a seller who has had a bad day and urgently needs cash may be willing to sell even below cost. Here, the "value" to the seller is immediate liquidity rather than profit margin.
• Opportunity for the Buyer: A buyer aware of the seller's situation can negotiate a significantly lower price in these circumstances.

TEMPORARY VALUE

• Timetable: During the early hours, sellers may be less flexible with prices, while towards the end of the day they may be more willing to discount in order not to return with unsold merchandise.

In a nutshell, in souk and flea markets, value and price are much more fluid concepts and are strongly influenced by the direct interaction between buyer and seller, as well as by the specific circumstances surrounding the transaction.