Why are we paying for things?

How taste economics works

There’s a number of ways to assign value to something. On the most basic, economic, level, products perform and are priced based on their properties (materials, labor). Their value is a combination of this performance and price.

There’s also a number of ways to evaluate something, from looking only at an item’s price to knowing about its unique history and heritage. Some forms of evaluation are obvious, others are predicated on taste, knowledge, cultural savvy, or time and money investment, or belonging to a community.

In the framework that goes from products to services that accompany products to brand experiences and stories, I call out four different ways of creating, distributing and capturing value. The criteria range from purely economic to entirely intangible and symbolic, where the narrative that surrounds products is deemed more valuable than products themselves.

Ideally, a brand would have its products-service-experience-story figured out, as well as all four evaluative criteria mixed in their strategy. Success is in playing confidently across different value logics. Important to note here is that having multiple logics at play simultaneously yields multiple business and operational models: the social, cultural and economic side operates according to the logic of networks and increasing returns, and the economic side operates according to the logic of diminishing returns, cost reduction and economies of scale.

Read the rest of this analysis on The Sociology of Business.