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Press Start: Lead an Empowered Life as a Clinical Laboratorian

Know the Difference Between Cost and Value

Published December 31, 2014 2:38 PM by Glen McDaniel

In casual conversation we use the terms cost, price and value almost interchangeably. That might seem to be just semantics, but I think we send mixed messages or act inappropriately when we start believing these concepts are identical.

 

Anyone who has a teenager probably knows all too well how they are guided by peer pressure. All the girls tend to wear the same fashion. Young people of both genders hanker for the latest “trendy” shoes, gadget or new toy. To many the cost does not matter and the sellers (knowing the demand) over-charge accordingly.

 

A friend of mine told me his  son who is unemployed borrowed $200 to acquire a pair of sneakers because they were the “it” shoes of his generation. I have driven a luxury car for the past few years but as it aged the repairs became never-ending and very expensive. So I traded it in for a sturdy, dependable Japanese car and am shocked at the many comments I have received. You would think condolences are in order because I have been “reduced” to a non-luxury car with much less status.

 

OK, so that gets me back to the various terms I started this blog with. I am writing this not only because of recent experiences, but because I believe they have significance to all our personal lives and also our professional lives. How do you value yourself, your colleagues and your profession?

 

Let’s just define those key terms simply, instead of using the formal economic definitions.

 

Cost: is whatever is spent to produce goods and services. So it might be what Toyota spends to make a car, how much Apple pays a worker in Asia to make an i-phone, or how much your employer is out of pocket to have you work for them (recruitment, salary, benefits etc).

 

Price:  is the what is charged or received by a seller. Again, using the car/employer analogy, it’s what someone pays the dealer for a Camry, or what your employer pays you to do a job as a phlebotomist, MLT or MLS  for them.

 

Value: is whatever the customer believes a certain good or service is worth. Value is a much more subjective quality, but it is what really drives the price.  The perceived value of "it" sneakers or an I-phone have very little to do with their respective cost of production. You can look at various professionals and realize that pay is not commensurate with education, work ethic, competence, service provided and so on.

 

My teenaged neighbor was willing to go into debt and pay hundreds of dollars for a pair of sneakers because of the value he assigned to those shoes. Employers will pay certain employees more because of their perceived value in the organization.

 

We tend to regard anything with a high price tag as being valuable, or more significant and important. The converse is also true: if we can convince a customer or employer that we are valuable, important, critical, crucial to their success, then our value increases.

 

These might appear to be subtle differences, but not knowing the difference often results in being undervalued and underpaid.

 

Here’s to recognizing and explaining your value (and fetching an appropriate price) as you move into the New Year

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