Would you like a diamond ring?

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Or would you rather have a bottle of water?  On the face of it, this seems like a simple choice.  Sitting at home or in your office, the choice actually seems ludicrous.  This simple question highlights the paradox of value.

There is no doubt that the diamond has more financial value and is more desirable.  It shouldn’t be.  If we look at the purpose a diamond ring serves it’s desperately unimportant when compared to water.  Water sustains life.  Diamonds look pretty.  So why isn’t the water of more value?

We can argue that it’s to do with scarcity, or the labour theory of value, or even the utility.

Let’s change the situation now.  You’re now in the desert and have no food or drink.  Which would you choose now?  The water, or the diamond ring?  The offering hasn’t changed, but suddenly the value you place on each has.

The paradox of value.

This is one important reason why when we have one price for our service it tends to be the wrong one.  If we don’t know the buyer’s situation, how can we price our services effectively?  The value that two people place on a VAT return can be vastly different depending on the person and the circumstances.

If you still provide prospective clients just one price, you really need to watch the video on this page: click