Concept of Value

I have been thinking about the concept of "Value". What makes a Value purchase? And what constitute a waste of money.


Income, will first determine whether a purchase is a value one. If a person monthly income is $1000, then it will be fair that a purchase of a $100 watch will be be significant to him given that it is 10% of his income. Value to him is a watch that provides the function of time monitoring with minimal cost. Afterall a $100 digital watch will tell time as good as a watch that is $1000. There is no luxury content in the purchase of the $100 watch. It is also likely that the watch has no resale value once it leave the shop premises.

Value purchase should also be across boundary. For a pen purchased in country X should cost the same in country Y. With the advance in technology, pricing information should be available that enable comparison to take place. Substantial price difference is a cause of concern for the consumer. A reduction in transportation cost would significantly encourage more price equalisation.


In my opinion, depreciation and value are intertwined. A purchase which offers appreciate in value is considered a smart purchase. An asset that depreciates in value within a short period of time is least preferred. At least, an asset must maintain its value when it is put up for sale as a second hand product. Someone ever said this, if one is to purchase a Japanese watch at $300, it would possibly cost less than $100 in 20 years time. But if one is to purchase a Rolex watch at $10,000, it might still be worth $10,000 in 20 years time even though the $10,000 in future may not be worth $10,000 due to compounded interest.

Technological products may be another value trap, given that time will dilute the advantage or convenience that the product may give. Imagine looking retrospectively what early technological adopters lost when they paid more than $3000 for a LCD TV which now costs less than $1000. I wonder how iphone, ipad supporters would feel when they look retrospectively the hours they spent lining up for purchase.

In economics study, the concept of price has correlation with satisfaction or what economists call utility. Whether an apple is worth $0.50 will depend his judgment of utility. Whether he will buy another apple at $0.5o will depend on whether the extra utility will be justifiable by the money that the consumer had to give up (Concept of Marginal Utility). When it comes to luxury goods, the utility that the goods create may be superficially high to the extend it justifies for the price that it demands, especially so when all basic needs are already met. While it explains human nature, the discipline involve in getting a value purchase cannot be emphasized enough.


Consumer is always affected by other environmental factors such as advertisement, association with an admirer/hero/person of authority etc.. Purchase may be irrational and sometimes passion comes into play. So many times, we heard purchase base on impulse and found something useless after a purchase was made. Marketeer always tries to associate branding, product unique feature as compared to a value product. Branding may also be linked to quality, whether such link is substantiated is another matter. Nonetheless, association (especially wealth) affects buying decision.

Whether a person chooses to be frugal or spendthrift is his/her perogative. However, choosing the extreme end would not be wise nor reasonable.