CPV – Cost, Price, Value

The terms of Costs, Price and Value are not interchangeable. They relate to three separate, definded concepts. Although each of theses three items has an independent meaning, there is still a certain amount of connection between them. Let´s have a look on an example, to show some definitions:

A young man goes to a furniture shop, because he is looking for a new chair for his renovated new flat. A green chair with a flexible armrest is priced for 100 €. Because the chair is comfortable and he likes the green colour, he decides to buy it.

In general terms a price is the result of an exchange or transaction that takes place between two parties and refers to what must be given up by one party (i.e., young man) in order to obtain something offered by another party (i.e., furniture shop)

At home he realizes, that the chair is mainly made of plastics. He thinks about how much the manufacturerers costs could be??

In general terms the costs are the prime costs of a product, such as material costs, direct labour and any other indirect considered costs like overheads. The price by contrast consists of the costs and the manufacturerers and the retailers profit. (costs + profit = price)

One evening the young man is on his way home from an exhausting soccer game. As he arrives at the bus station, he has to wait a lot of minutes for the bus. Normally he waits for the bus standing, but this time he is really glad to sit down on the bench. The importance or in other words the value of the bus stations benches has changed in case of his changed conditions.

In general terms the value always depends on the customers needs. It is not static but flexible and could change in case of changing conditions. (a glass of cold water in the desert normally has a higher value, than in the cold winter season)


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