Price VS Cost and the role value plays

Most of us think as price and cost as the same thing and in technical terms, they can be. However, there is actually a difference. Price is the amount of money we pay for a product. Cost is the amount of money needed to produce that product.

Price. The amount of money we pay for a product. It is one of the first things we look at when we are buying, comparing, or making a product. The sole focus is the dollar amount when we think of price.

Cost. The amount of money needed to produce a product. This can include supplies, manufacturing, labor, overhead, shipping, packaging, and the list goes on and on. Then we add in the value of that item to get the selling price. Let me explain why value is important.

If we only consider the price of an item, we don't take into consideration the value that item holds. Maybe it is something we need to survive such as food or clothing. Maybe it is something we want like a gift or a nice, relaxing, vacation. Maybe it is something useful like a tool, furniture, or a car. Someone who has access to public transportation or able to walk to work, the grocery store, or the bank may not place as much value on a car as someone who lives in the middle of nowhere and has to drive to get where they are going. Someone who places little value on looks may not feel makeup is worth purchasing or may feel that clothes can be plain and no name brands as long as they are clean and comfy, while someone who values appearance may want name brands, makeup, jewelry, handbags, etc. Some people may place value on a more expensive item dependent on the longevity of a product.

When my son was much younger, I purchased his socks at Walmart because they were just socks. Walmart was close buy, they were inexpensive, and who cares what they looked like because they were just socks. As he started to get a little older though, he could wear holes in them faster than I could buy them. So my package of $10 socks now became a bimonthly purchase because they just didn't withstand the wear at that point in his life. So I started purchasing Nike socks. Even though one pair of Nike socks was the same price as the whole package from Walmart, the Nike socks would last years compared to weeks. So the cheap socks in the long run were actually more expensive.

The reason custom or personalized items cost more than standard items, is because of the extra time it takes to make and the value that items holds. It is now a one of the kind item, made or customized to the needs of the customer or for the recipient that no one or few others will have. Some people are perfectly ok with purchasing an item from a big box store, knowing it was mass produced and has little uniqueness. Others love having something hand made or hand painted because of the uniqueness it contains or the fact that they know it was made or designed by the hands of people they know vs a machine doing all of the work. Where we place value is typically the factor in where we shop and how much we spend.

We are more likely to spend more money on a jacket that we can wear the next 5 years than we are on a bar of soap that will last a month. We are more likely to spend more money on a pair of shoes that are comfortable and put less strain on our body than we are a pair of dress shoes we will need for a day.

What is valuable to one person won't be to another. It should play an important role in making your decision on the price you are willing to pay for an item.