Understanding Market Value

Few people think about the phrase market value, but it is important to every consumer interaction that happens in the world. People decide how much they are willing to spend on a product, depending on their personal factors, while the store, manufacturer, or trades person decides what they can sell their product for, also depending on several factors. While there are some goods and services that have no real competition, most do, which means there has to be a price that can make a profit, while also low enough for people to want it.

Spending Power

Many products cross economic status lines, which means quality counts for the price charged by specific companies. A burger bought at McDonald’s does not have the same market value as one purchased at Red Robin. People who are looking for something that will last, but is not considered higher end, will want to spend accordingly. This means that manufacturers and stores have to balance this with being able to bring profit from what they offer. The same is taken into account by electricians, lawyers, and others with a skilled trade, which helps them control who becomes their client.

Hidden Costs

Most people do not pay attention to the factors that cause prices to be what they are when they are shopping. Some companies are trying to hold true to their values, such as those who keep their manufacturing in the nation they started in or use their profits to help others. Inflation, government regulations, and certain types of insurance have to be factored in, though people never realize this. Doctors and lawyers have to have malpractice insurance, which can run six figures a year depending on the area, which raises these prices.

Company Stocks

Companies that answer to stockholders have a different way to look at costs versus those companies that are privately owned. The modern manner of companies that offer stock is to do as the investors want, even if it does not make the customer entirely happy. Private companies usually pay more attention to the customers and their needs. While not always the case, private companies normally offer a better price per quality, while publicly traded ones normally focus on price only to satisfy the investors. This takes some research, but is something for consumers looking into products and services with the right market value.

Inflation Issues

Any number of market issues can cause prices to rise, which can make people rethink what they are able or willing to spend. Almost everyone needs fuel for their vehicles, or at least have to count that cost into what products they buy. Severe weather issues can affect the price of food prices, as drought or other problems can cause problems for crops. Once one industry starts raising prices, it leads to other ones having to do the same. It may go unnoticed at first, but it can lead to people buying fewer items considered luxuries.

Industry Cartels

Something few people pay attention to is when companies in an industry band together, such as the AAA software gaming companies. All the top games, other than Minecraft, are all at the same price point because the companies got together and decided on a set price. This has happened in other industries, once they determine what the market value is for what they offer. The products are similar enough that they can do this and it keeps one company from trying to milk everything they can out of the price for the most anticipated coming releases.

Captive Audiences

Some industries do not need to worry about what the traditional market value should be, which comes from their dominance of a specific product. This has been shown in the pharmaceutical industry via the controversy over EpiPen pricing, as it has been sharply rising since 2009. People need these devices and the medicine they hold for emergencies because of their allergies to specific things. The medicine expires, which means that new ones have to be bought on a regular basis. The rising prices have brought about Congressional hearings and lawsuits, but the price still rises to where people have to decide what is important to them.

Real Estate

Real estate pricing can affect other industries in ways people may not be aware of, which can affect anywhere from a local area to the entire economy. The housing bubble bursting is said to be one of the primary factors of the 2008 recession. Former President Clinton opening an office in Harlem caused the area to clean itself up and allowed for better market value for the area. Both of those affect an economic area, which shows why people need to pay attention to the industry to see what can happen.

Research Matters

One of the ways that some companies distort market value is by claiming a quality for their product that it does not have. That is one of the great things about the internet, as people can find out what others think about specific companies and their offerings. This availability of information helps companies face what the true market value of their offerings is, along with being able to charge more if what they have goes viral because some big star likes it. Doing due diligence helps everyone in keeping the market honest, fare better than marketing.

When someone goes to buy any goods or services, they will have to decide if the price they are told is worth their want for it. This can be raised or lowered because of many factors, as was discussed here. A person needs to consider what they want and need, which means this will help them in what they will consider buying. That is the true definition of market value.