Value in Use
“Value in Use” is an economic concept that refers to the utility or benefit derived from the consumption, utilization, or possession of a good or service. In other words, it’s the actual worth of a product or service to a consumer in real-life usage, as opposed to its market price or other theoretical measures of value.
Value in use can be subjective and may vary from person to person, depending on their specific needs, preferences, or circumstances. For example, the value in use of a smartphone could be significantly higher for someone whose work depends on constant communication and access to various applications, compared to someone who just uses it for basic calls and texts.
Factors Influencing Value in Use:
- Functional Benefits: Does the product do what it is supposed to do effectively?
- Emotional Benefits: Does using the product make the consumer feel good?
- Social Benefits: Does the product provide any social status or acceptability?
- Economic Benefits: Does the product offer value for money in terms of durability, quality, or utility?
- Convenience: Is the product easy to use, or does it make life simpler in some way?
- Personal Preferences: Personal tastes and needs can significantly influence the value in use.
Understanding the “value in use” can be critical for businesses in product development, pricing strategies, and marketing campaigns. It can also help consumers make more informed decisions about purchases, ensuring that they get the most value for their money.
Example of Value in Use
Let’s use the example of a subscription to a video streaming service like Netflix to illustrate the concept of “Value in Use.”
Imagine two individuals, Alice and Bob, both of whom decide to subscribe to the same video streaming service that costs $15 per month. The service offers a wide range of movies, TV shows, documentaries, and original content. However, the “Value in Use” of this subscription is different for each of them.
- Functional Benefits: Alice is a film enthusiast and loves the range of international and indie movies that the service offers. She watches at least one movie a day.
- Emotional Benefits: Watching movies and TV series is her way to relax and unwind, adding emotional value to her subscription.
- Social Benefits: She enjoys discussing the shows and movies with her friends, which enhances her social interactions.
- Economic Benefits: She used to spend around $30 per month buying or renting movies. With the subscription, she has cut that cost in half and has access to a broader range of content.
- Convenience: Alice loves the convenience of being able to watch on different devices and not having to go to a cinema or store to rent a movie.
- Functional Benefits: Bob is not a huge movie buff but subscribes for the few action movies and TV shows that interest him. He watches maybe 2-3 movies a month.
- Emotional Benefits: For Bob, watching movies is just a way to kill time; it doesn’t particularly add to his emotional well-being.
- Social Benefits: He doesn’t discuss the content he watches, so there are no social benefits for him.
- Economic Benefits: Bob doesn’t feel like he gets his money’s worth but subscribes to have the option to watch something when he feels like it.
- Convenience: Convenience is not a significant factor for him since he doesn’t watch content frequently.
“Value in Use” Analysis:
For Alice, the “Value in Use” of the $15 monthly subscription is very high. She gets emotional, social, and economic benefits along with functional utility and convenience. For her, the subscription might even seem cheap given the value she derives from it.
In contrast, for Bob, the “Value in Use” is relatively low. He doesn’t watch much, doesn’t share or discuss what he watches, and doesn’t feel he is getting economic benefits from it.
The same service, priced identically, has different “Value in Use” for Alice and Bob due to their individual preferences, behaviors, and expectations. Businesses can analyze such varying “Value in Use” among their customer base to better tailor their offerings, improve customer satisfaction, and optimize pricing strategies.