Assigning Value

How do you assign value to something? To a product, service, task?

When we buy something, either a product or a service, we are seldom given the choice to pay exactly what “we” want to pay. We are rather given the choice to decide if it is worth it for us, or not. So take it or leave it.

When we walk into the supermarket, we are shown the price of a product, and then we can choose to purchase it, or leave it on the shelf. There is no, “talk to someone about the price” option available. An attempt to talk to someone about the price would also quickly be laughed off.

When we take our car for a service, or ask the plumber to come and repair a leak. We again are presented with the price of the service, and more often than not, that is the price for the service. Often we are not given the option of having the price adjusted. Of course sometimes the services to be rendered can be adjusted, making the price change, but that falls more under changing what you are getting rather than choosing what to pay.

Everything from rent, to insurance, to electricity, to gas, to petrol, to groceries, to security services, everything is more often than not, a set price and we can choose which package or products we will be willing to purchase for the price. We then decide if the value of the product or service is worth the price being charged for it, based on this we decide if we will spend the money on it or not.

So that part is simple enough, but now what do we do when we are the ones who have to put a value on something? When we are deciding what we are willing to pay for a product or service?

Here is an example, I was with some friends the other day and one friend was saying he was willing to pay R1000 for someone to do a task of laying down PVC flooring tiles, there’s no skill required it is just labor intensive. I suggested he do it himself and save the money, he replied that he was willing to pay that to not have to do it himself. I said I would be happy to do it for him for the R1000, at which point he replied that if I was to do it he’d pay R500.

So therefore to have some random stranger do the job for him, he would value that at twice what he values the service of a friend, who he can definitely get back should he need to, and who he knows. Now in this situation the only two considerations are that firstly he is saying my worth is only half that of someone else, or secondly he knows I’m a loyal friend and he can screw me over and I won’t blink twice.

Either of those are not a good sign for me, so I have chosen to take it as humor and not let it bother me. But it did inspire this writing, how should we assign value to a service or product? If we are willing to pay someone an amount to do something, should that amount change if the quality of the service is to remain the same? If you are willing to pay R100 for a hole to be dug, should that amount change depending on who it is that is going to dig the hole? If it is a friend, R50, if its a stranger R100, if its a disabled friend, R10, if its a disabled, blind stranger, R500. If its family R0. Or actually get them to pay you for the privilege of you letting them dig the hole.

Or as I would think, if its a friend, pay them more than you would be willing to pay a stranger, if its family, pay them more than you would a friend. At the end of the day would you not be happier seeing your friends and family doing better in life than you would someone you don’t know, and have no feelings towards?

Assigning Value

When you assign value to something, you follow a formula depending on what it is that you are valuing. If you are in retail, you take your cost price, you add your expenses, add the percentage profit you would like to make, and that will give you your selling price. Sometimes your expenses may be factored into your percentage markup, everyone does it differently. But you will say, right the markup is 25% before expenses, or after expenses. 

If you are a wholesaler, you may offer variable prices depending on the customers purchasing level, the more they purchase, the lower the markup because they are turning over volume.

If you are in manufacturing, again you work out your costs, add on the profit you would like to make, account for losses, research and development, and as long as it is a market friendly price, you’re good to go.

When you are choosing what to pay someone to provide a service to you, then the calculation becomes a little more difficult. If you want to hire a receptionist, you can’t really say I would like to pay x and that is final. Well you could but you might be paying way under or way over the market cost of a receptionist. This means you may not be able to get a good receptionist, or you may get one and your business becomes unprofitable because you are using all your profits to pay your receptionist. Or your other staff may not be earning as much as the receptionist and then demand a raise and suddenly your wage bill triples.

So you therefore have to look at what average salaries are for the position you wish to fill, and then work out how it fits into your business. Of course you can offer an extremely low salary and you will most likely get someone to fill the position, but they will not be there because they want to, and they will not put all of their energy into the position, so you will get terrible quality service because you have undervalued the person filling the position. Trust me, people looking for jobs know what the average pay is.

The reason there is average salaries for positions is because people put a certain amount of cost & effort into learning what they need to in order to fill the position, and then they expect the position to provide them with a certain lifestyle.

As a website and graphic designer, I would expect to be able to look after myself. I would expect that if I have a job I would be able to rent my own apartment and cover the cost of electricity, water, internet, food, insurance and other basic expenses. If I cannot then I am either no good at my job, or working for the wrong company. One of those two have to be the answer.

It is very easy to get into the wrong company. For example a startup or small company could decide they want an in-house website designer. They may think it will look good to other companies if they create their own website, their own ads, and have someone on hand. But it may not earn the company additional profit, or very little additional profit, this will then mean the position is of little value to the company and therefore they are only willing to pay a very low salary. They will then end up with someone who takes the position well they try and find a decent job, or someone who is not good and cannot hold down any other jobs, either way that company will not get good service from the person filling the position which will mean they would actually be better off taking that money and purchasing specific packages from a company that offers the exact services they need rather than trying to employ a full time person on a low salary.

Often people will go out of their way to make a good impression to a stranger yet overlook or undervalue family and friends, this needs to not be the case as it forms unhealthy relationships that are long lasting. Your friends and family are the people who will be in your life for the long term, a customer is going to come and go, no matter how good they are while they are there, they don’t care about you, or for you, they just want the product or service you provide and then they are gone. Friends and family will be there to help you in anything, and support you in everything, unless they have value issues, or you have value issues.

So keep in mind that everything has a value, and when you undervalue someone in life, their value of you decreases too.