Value can be defined as the perceived quality of a tangible or intangible thing which enables it to be used for satisfying a need or purpose.
The above definition uses 5 important words, perceived, quality, tangible, intangible, and need, each of which has been defined below, and their inclusion in the definition is clarified.
- Perceived: The value of something is dependent on the person analyzing it and also on his perspective.
- Quality: The use of the word, quality, in the definition makes value an adjective, the property of a thing. Value is the property or attribute of a need-satisfying thing.
- Tangible/Intangible: The thing possessing value can be tangible or intangible. This can easily be understood from many daily life situations. Today, firms are increasingly providing their customers with a mix of intangible and intangible values. This is clear from the literature on service firms which points out that today there are hardly any firms that provide only tangible products to their customers and no intangible services. For e.g. advice from a law firm is a valuable service to a client and an intangible thing. Also, as stated above, value is a theoretical concept.
- Need/Purpose: It is the source of value. One important aspect to note here is that the needy (person or firm having a need) might not be aware of it. For e.g. the customer base of Apple’s IPad was not aware of his need for a tablet before IPad was launched. In the more general sense, the person having the need is also aware of it.
The Concept of Value
Owing to its wide usage in day-to-day life the word value can be used to specify many different concepts. Its intended meaning can easily be misunderstood if the context or its usage is not specified. Value can be used for a number of varied concepts like brand value, investment value, share value, customer value, etc. In whichever way it is used, it is meant to indicate the worth of a tangible or intangible thing.
Effort on defining value and its nature has been continuously on for a long time, and scholars have been perplexed in understanding its true nature. As Vargo, Maglio, & Akaka (2008) stated “the nature of value has been discussed and debated since Aristotle. Part of its elusiveness stems from the oblique – if not orthogonal – meanings of value that have been embedded in the foundations of economics and the study of market exchange”. Efforts to understand the nature of value are still being pursued by researchers. In the words of O'Cass & Ngo, (2011) “understanding what value is and how it is created has attracted significant attention over the past decade”. There is a lot of literature on the nature of value including the works of Marx. An extensive study about the nature of value requires diving deep into philosophy and is beyond the scope of this research. Still, based on the literature which was consulted for this research, the following points can be deduced.
- Value is a manifestation of need.
- Need is the sufficient and necessary condition for value to exist.
- Value is a theoretical concept. (Carr, et. al., 2003)
Features of value
As mentioned above, for understanding value, first the context in which it is used should be understood. Generally, to make the context of a particular value more explicit and clear, a modifier is added in front of the term value, like market value, brand value, liquidation value, stock value, taxable value, current market value, face value, etc.
Moreover, value can be understood as a manifestation of need. Since needs can vary from person to person (Vargo, et. al., 2008) and from situation to situation, therefore the value of a thing can is dependent on the person and the situation/context (Allee, 2008). This makes the concept of value a very subjective and theoretical concept. Value has a different meaning for different stakeholders”. (Pombinho, et. al., 2012) (Lepak, et. al., 2007) (Bowman & Ambrosini, What does value mean and how it is created, maintained, and destroyed ? 2003)
To show the dependence of value on the context, let’s consider an example. A bottle of water has a certain worth to a thirsty person at home. The worth of the same bottle of water would increase dramatically if the person is stranded in a desert.
Kinds of value
What is the true nature of value? This question has puzzled scholars from ancient times. Aristotle was the first to distinguish between the two meanings of value – use value and exchange value. Although he was able to explain use-value, he had difficulty specifically identifying exchange value. (Vargo, et. al. 2008)
Properties of things that are attributed to them because of their very existence or because of their property of satisfying a purpose are use values.
The division of value into “use value” and “exchange value” is not new and is found in many articles on value creation and value flows. “Use value” is the value that things have by virtue of use or utility. (Bowman & Ambrosini, What does value mean and how it is created, maintained and destroyed? 2003)
For example, an automobile has use value for a person who can drive it.
The “Exchange value” of things is realized during a transaction. It is the value that things have by virtue of their power to barter things in a value exchange between two parties. The same automobile has exchange value for the seller when sold off to a secondhand garage.
Value and Price: Price should not be confused with value. While value relates to the worth of the commodity, a service, or an object, price is the actual money it brings when it is sold. (Carr, et. al.,2003).