To many people who are strangers to the dynamics of price and value selling, the two terms mean practically the same thing. People who practice fundamental analysis in stock trading maintain that the terms are totally different. They argue that stock price is set by the buying and selling of traders while stock value is intrinsically embedded in the cash flows and assets of the stock. Technical analysts on the other hand believe that the value of a stock is already embodied in its price. Whatever differences we accord them, there is no doubt that both are pivotal points in buying and selling. It’s simply where buyer and seller meet to agree or disagree on both, but let’s have a closer look.
The Difference between Price and Value
The price of any item offered for sale by a seller to a buyer represents the amount of money that actually costs the seller to buy a commodity from the seller. So if you had an old artefact to sell, its price would be the amount your artefact will sell on the open market. The price is also known as its retail price. This price is determined by many factors like the artifact’s quality, rarity and the demand it can attract from potential buyers. The value on the other hand is how much you can sell your artifact for now, today without the price tag. It is what a buyer is willing to pay for your artifact just by looking at its intrinsic qualities. It’s a bit like going to the pawnbroker to sell your grandfather’s gold locket watch.
Which One to Use for Selling?
Normally, price is controlled by the forces of supply and demand and will fluctuate in response to the influence of these forces. Price can also be deliberately manipulated so suit a seller’s purpose in which case a price war may materialize. When this happens, the seller with bigger cash savings is more likely to survive the war than a seller who has meagre savings. The point here is that price has a short term life span. By contrast, value has a more lasting influence on the ultimate price reached after negotiations. If for example you had a bottle full of ordinary water in your posh restaurant but you tout it as being water transported from pristine, fresh and clean mountain streams worldwide and you put a price tag on it of $10 (it in fact costs about $1 on the tap), there is every chance customers will buy it. If they do, your brand of water will automatically be accepted as having special value (which it in fact doesn’t have}, a brand is created and will be sold at that price. In terms of sustainable bigger profits over the long term, value selling appears the better selling option.
When is the best time for value selling?
As long as you have a very enticing product for value selling, it makes very little difference when you actually try to sell it. If you are an airline business, the best time to engage in value selling would be during the peak holiday season when travellers are more carefree, have lots of cash to spend. This is the perfect time to tout all the enticing qualities of your service (at seemingly lower, standard or higher prices), and rake in the profits. If you own a top class restaurant, value selling is the perfect approach for the “special” dishes and beverage drinks of the day. One of the best times for value selling your antiquated or traditional home furniture collection is during local auctions.