Value is the satisfaction of requirements at the best combined cost of acquisition, ownership, and use.
“Requirements” are need and for some kinds of transactions even wants or desires. The importance of properly identifying requirements is they provide the basis for being satisfied or not satisfied.
Next is “best total cost of acquisition, ownership, and use”. Price is the cost of acquisition. What complicates consideration of total cost in assessing Value is the fact that cost is largely incurred after acquisition. With the exception of price, most costs associated with owning and using what is acquired, are incurred after it is acquired.
Costs of ownership are insuring, protecting, repairing, maintaining, replacing or disposing of what was acquired. For example when we purchase a home we invariably consider the costs of mortgage payments because it is directly related to the price; but was the cost of fire, burglary, or flood insurance, costs for lawn, electrical and mechanical maintenance considered? Can we anticipate a cost when the furnace breaks down, or the house needs repainting? And at the time of purchase, do we consider resale price? These are all costs of home ownership, but rarely do they influence our notions of our home value.
Costs of use are costs of operating whatever we acquired, as well as the costs of maintaining it to operate as we intended. When it proves defective or resources are being used in excess, there are costs for repair or replacement. We pay a price for what we acquire, but do we get Value when the cost of its use exceeds what we expected? Or unfortunately more likely do we really consider those costs when we pay the price initially? And remember, the concept of Value entails best total cost.
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