What Is Value?

It’s a slippery issue: what is value? By this I mean, what is the value that a customer is willing to pay for? In my MBA’s marketing class, the term “value” is thrown around an awful lot, but it’s always left in intangible terms. Then again, is there really such a thing as tangible value?

When I go shopping, what are the tangible properties of an item I buy? The physical form of the product itself. Embodied in this physical form are explicit attributes, such as the function the product performs or how well it performs that function. But there are also a number of implicit attributes of the product that I’m also paying for: the “quality” of the product, the prestige of the product, and the convenience of where I bought the item.

The value of some of these explicit and implicit attributes can be measured quantifiably. For example, I can measure the item’s performance and then value that performance based on how much I might save in time or money by buying the item versus not buying it. I might value the item’s “convenience” value by determining the cost to me to buy a comparable item in another location.

But what about prestige? How do I value prestige? Prestige value is related to the way people’s impression of me is altered by me buying the item. But what is the value of other people’s opinion of me? If the item causes me to gain access to a new job, I suppose I could value it in terms of how my income changes. But that’s a tenuous link, one that hardly might only apply to an Armani suit, but not a pair of Converse canvas sneakers. So what’s left?

The issue that prompted this line of consideration was a business case we studied last term. In the case, BC Packers, a local salmon and tuna cannery, was considering entering the canned cat food industry. It had to determine whether to enter the low-priced segment, the national brand segment, or the premium-priced segment. What disturbed me was the fact that we could apply different values to exactly the same product. It didn’t seem reasonable to me that we should be able to, for example, charge twice the price for a premium brand as for a price brand, just because our advertising campaign tickled some endorphins from some single female in her mid-thirties who views her cat as a child substitute. Sure, we have extra costs incurred in the form of advertising, but was it worth that much?

Then I realized that the attributes I had deemed “quantifiable” weren’t quantifiable at all! Sure, they could be quantified in terms of money and time, but how could you value those things? If time is money, then the reverse is true, hence I’ve only quantified tings in terms of time. What is my time but a human perception of its surroundings; and what is my value of prestige but my perception of other’s value of me?

It would seem that “value” is a shorthand for perception and time. Our time is finite and hence so is our opportunity for perception. That leads me to believe that no matter what product we’re purchasing, the finite length of our lives means that we’re ultimately buying more time. Time to live. Time to experience. Time to earn an income. And, of course, time enough to buy more time. Hence, “value” ends up being a balance between our ability to pay and our desire to live our life more fully.

There is no logic to value. We pay what we’re willing and able to pay and no less.

Don’t Write, Link!

Now that my book‘s done and available for sale on Amazon.com, I’m starting to consider how much (or how little) I might actually make off the book. Writing the book made me realize just how difficult writing a book can be even if it’s a technical book rather than a work of fiction. But for all my hard work, I was shocked to realize this week that I make more money selling my book through an Amazon Associates link than I make in royalties as author of the book! Whaaaaat?

Let’s examine the terms of my agreement with New Riders:

  • New Riders pays me 10% of net receipts from United States sales or licenses of the work, in English, for the first 10,000 copies, and 12% for any amount over 10,000 copies.
  • New Riders pays me 5% of net receipts on sales in foreign languages.
  • New Riders pays me 5% of net receipts on sales of the book offered at a discount of 55% off the Suggested List or Single Copy Price.

Amazon, on the other hand, offers me the following referral fee percentages when someone buys a book via an Amazon Associates link off my web site:

  • 15% of Qualifying Revenues from the sale of each individually linked book that, on the date of order, is listed at 10% to 30% off the publisher’s list price.
  • 5% of Qualifying Revenues for all other Qualifying Products sold by Amazon.com.

Though my book has a retail price of $45.00 (all figures in US Dollars) Amazon.com is currently offering it at a 30% discount ($31.50). This means I make $4.50 on direct sales (10% royalty) as an author, but on sales via Amazon (5% royalty due to discounts offered by New Riders) I make about only $2.25. However, for a copy of my book that I sell via my Amazon Associates link, I make $6.98 ($4.73 referral fee from Amazon + $2.25 royalty from New Riders).

What this means is that I, as an author, make roughly twice as much via a referral link as I make by my royalty from New Riders! Wow. Even if the book isn’t discounted by Amazon, I still make a 5% referral fee…the same amount I make from my royalty! Amazon also has the added advantage that they pay out their referral fees quarterly, whereas New Riders pays royalities biannually in September and March.

The message is clear: if you want to make money in books, stop writing, and start linking!