Steals. Splurges. Rip-offs. Bargains. A framework for measuring value.
Last week I overpaid for a Christmas tree.
The tree looks great but buying it sucked.
There are a lot of things in life like that — things we like but hate paying for, like movie theater popcorn and artisanal cocktails.
The behavioral economist Richard Thaler once distinguished acquisition value (the value of the product) and transaction value (the perceived quality of ‘the deal’).
I visualized his insight in a simple 2x2 grid, with my Christmas tree in the “Good Product, Bad Deal” quadrant. (You can download the grid as a blank JPG here—so you can embed it in a survey—or an editable Keynote slide for presentations here.)
I’m going on about my Christmas tree because I think Thaler’s framework is missing a third variable: value over time.
Had I bought the tree in late November I would have gotten more value from it – simply by owning it longer.
To incorporate “value over time,” I asked a sample of 304 Americans in a survey I conducted last week to estimate the number of days (between 0 and 5,000) they’d need to use 12 products for them to feel like they got a good deal, before needing a replacement.
The intervals are set at every 100 days, with each interval beginning at the start of a hundred-day mark. A respondent typing '100 days' is counted in the '0-100' interval.
You can see the results below.
I arranged the products by lifespan, from shortest to longest, converting the average number of days into years, which is displayed in the far right column. The 12oz bottle of Purell tops the list with the shortest expected lifespan of 0.6 years, while the Casper mattress anchors it with the longest at 8.4 years.
The obvious insight is the correlation between price and expected lifespan — the most expensive the item, the longer it’s expected to last.
(Except for the pack of 750 paper clips, which will surely last longer than you iPhone.)
The other thing I noticed is that the long lifespan of pricier items suggests that what seems like a splurge could actually be a good long-term investment. For instance, the large upfront cost of a new iPhone pays off over years of daily use.
A few other ways you could use this analysis…
Compare a product’s perceived lifespan to its’ actual lifespan
Imagine discovering that a product lasts longer than what shoppers expect.
Rory Sutherland talks about a poll showing that Brits estimated their postal service’s first class deliveries were on time only 50-60% of the time, while the actual rate was 98%. His point is that instead of improving the on-time rate, it’s more effective to correct the misperception.
The opposite scenario is also possible — discovering the lifespan of a product is shorter than the perceived lifespan.
Use “Cost per Hour” to reframe expensive items
I once met a personal stylist who advised calculating the value of clothing by dividing the price by the number of times worn. For example, wearing a $230 North Face jacket 40 times a year over five years amounts to about a dollar “per wear.”
If you applied this calculation across all the items in the survey, the Dell XPS 15 Laptop would emerge as the most expensive at about $0.51 per day.
However, I’d use a custom denominator for each item — cost per wear for clothing, hours slept for a mattress, and so forth.
The value of good and bad memories
The Christmas tree will exist as a nice memory long after I throw it away – unlike the movie theater popcorn, which I’d simply forget, and the artisanal cocktail, which I’d regret.
I once heard an interesting distinction between psychedelics and uppers like cocaine: the former creates lasting impressions, the latter temporary stimulation.
It’s hard to measure the lasting pleasure or pain a product imprints on the mind. But it’s an real dimension that you could use the next time you need to say something interesting about value.
Steal-This Resources
• You can get an editable version of the table here (you’ll need a free account to Data Wrapper).
• Link to the survey I used to collect the data. It’s still live, so you can see how I phrased the questions.
• Link to the spreadsheet I used to analyze the data with formulas.
Next Steps
If you’re considering creating a survey, but you’re unsure about your approach, then consider getting a Survey Roast.
Send me your survey draft, and for $145, I’ll make a 10-15 minute Loom video with copy-and-paste edits and suggestions.
I’d love to help.