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What is behavioral economics? Why does it matter to you?

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Podcast Episodes

What is behavioral economics? Why does it matter to you?

234. What is Value? (Refreshed Episode)

Today’s episode is all about value — what it is, what it isn’t, and why it matters for businesses. Value is something you hear about a lot, but it isn’t necessarily something that we intuitively get or what drives our motivation to buy things. In today’s episode, (which originally aired as number 8 of the podcast way back in August 2018), I get into the difference between value, price, worth, and cost and how they all matter in business. 

I chose this episode for you today for a couple of reasons. First, Leigh Caldwell, the guest on last Friday’s episode, wrote a book called The Psychology of Price, which of course, brings value to the table. Whenever we talk about price, value is a key aspect. Also, in the episode this coming Friday, featuring Tessa Misiaszek, coauthor of Branding That Means Business, she will talk a lot about value vs. values, and what they mean in an organization and for its employees. That got me thinking about this episode.  It is one I really love but don’t end up talking about all that much, so it felt like it would be fun to bring it back to the forefront for a little moment in the sun.

As you listen today, think about the value you create in your work. Of course, there is the obvious in your products and services, but also think about the less obvious side of value for your employees and teams working within your business. And tune in to learn some crazy stories of what people are willing to pay for things – from kidney stones to grilled cheese sandwiches…

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IN A RUSH?

HERE'S A 2 MINUTE TIP.

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SHOW NOTES:

  • [00:38] Today’s episode is all about value — what it is, what it isn’t, and why it matters for businesses.
  • [02:41] What are your values as a company, and how is that different from the value you create? How can your values be informing value? And how does that tie into worth — both of the organization and the self-worth of everyone that is involved with the company?
  • [03:51] People tend to use the words value, price, and worth interchangeably, but they are not the same thing. They work together but they are actually quite different. 
  • [05:08] Price is what someone is willing to pay for a good or service.  
  • [06:12] Worth is the expected selling price of something. Things have worth even if they don’t have a selling price. 
  • [08:59] Value is the usefulness or desirability of a good or service, how much you love it, or what it is worth to you. Value is not a number, it is based on how much you love it. Value is subjective and personal. 
  • [11:11] Often items we value can be replaced, but we don’t usually value them the same even though it is worth the same.  
  • [12:35] Getting people to be realistic about their worth, price, and value is very important when you are trying to convince them to sell an item, especially one as sentimental as a home. 
  • [14:28] Herding, value, perceived ownership, and loss aversion work together in things like bidding wars. When you add scarcity into the mix…watch out! 
  • [16:00] Your brain might say, “If others are willing to pay for it now, it will likely rise in value over time and there might never be another one…I better jump on this and buy before it goes really crazy!” 
  • [18:41] The herd will catch on and people assume the value that was paid is a new value. 
  • [21:28] Brands are what give companies value. Brands give you loyal followers which creates herds.  
  • [22:21] Brands are a big reason why it is not about the price or the item itself. Brands bring value to companies. 
  • [24:33] Our brains get what they expect. If they are set up to believe something is amazing, they will often interpret the thing as amazing.  
  • [27:15] It is important to establish value and make people feel like your product or service is worth paying for. 
  • [28:08] Exclusivity is the celebrity factor and it has a large impact on value and price. 
  • [29:53] How much did the owner’s explanation and framing of the making of the sandwich and the high-quality ingredients have to do with the perceived value? He was confident in his explanation and said the price without hesitation which is also key to establishing value and justifying the price.
  • [32:54] Stories are memorable. Stories make brands.
  • [36:21] Our brains are trained to believe what they learned first until proven otherwise. Our brains believe what they are told and hold those things as facts – especially when it sounds really convincing or appealing. 
  • [38:46] No matter what you are selling, brand value matters. In business, establishing brand value is the key to loyal customers who are willing to pay premium prices. People get more value when they pay more. 
  • [40:12] Price and perceived value are linked in the human brain. A higher price means it must be better and have more value. 
  • [41:56] Value is subjective. Value is in our heads. Value changes. Value can be created and built up. To get the herd to accept the value, you only need a few passionate people who are willing to pay what you (or they!) think the item is worth.   
  • [42:45] Melina’s closing thoughts

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