RELATIONS BETWEEN PRICE; VALUE AND COSTS

March 6, 2010

SHORT DESCRIPTION OF THE TERMS

PRICE: The ability to charge for a product/ service dependent on supply and demand. One of several variables a customer considers in his or her purchasing decision. Furthermore the price is not only financial, it also contains e.g. the time a customer needs to learn to use a product.

COSTS: How much it costs you to produce a product or to execute a service. Costs can be divided into variable and fixed costs.

VALUE: Extent to which a good or service is perceived by its customer to meet his or her needs/wants. It is measured by customer’s readiness to pay for it. The dominant influencing factor is the customer’s perception of the product’s worth, and not the intrinsic value itself. Therefore perceived values can differ between customers. (Marketing view)

–> I’ve chosen a definition out of marketing as in my mind it fits the most to logistics. Read the rest of this entry »