{"id":3373,"date":"2014-12-02T19:18:34","date_gmt":"2014-12-02T19:18:34","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/2014\/12\/02\/difference-between-price-total-cost-and-value\/"},"modified":"2021-07-08T10:21:01","modified_gmt":"2021-07-08T14:21:01","slug":"difference-price-total-cost-value","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/","title":{"rendered":"Difference Between Price, Total Cost, and Value"},"content":{"rendered":"

I hope that you have enjoyed the article, \u201cPrice vs. Total Cost vs. Value.\u201d<\/p>\n

Fill out our subscription form below to stay up to date with our helpful tips and topics from our blog.<\/p>\n

When I first entered the procurement workforce in the mid-1990\u2019s, the concept of total cost (sometimes called total cost of ownership or lifecycle cost) was foreign to most procurement professionals.\u00a0 Today, a good number of procurement professionals understand and can calculate total cost.\u00a0 However, the concept of value is as elusive today is the concept of total cost was \u201cback in the day.\u201d<\/p>\n

And even though calculating total cost has its challenges, value just may be even harder to estimate.\u00a0 Let me demonstrate this through an example.<\/p>\n

In this example, let\u2019s say that you\u2019ve been given the responsibility for purchasing a company car for your company\u2019s new vice president of sales.<\/p>\n

If you were buying based on price, you\u2019d pretty much look at the window stickers on a bunch of cars and simply select the cheapest one.<\/p>\n

Would that be the best decision?<\/p>\n

Of course not!<\/p>\n

If you took a total cost approach, you\u2019d compare the gas mileage of several vehicle models, estimate the average cost of gasoline during the time the car would be used, estimate the number of miles the VP would drive, compare prices of replacement tires among several vehicle models, look into maintenance histories of the vehicles, estimate maintenance costs for each model, and so on.\u00a0 You\u2019d add up all of your costs for each model to come up with a total cost for each model.<\/p>\n

Under 1990\u2019s procurement theory, you\u2019d simply select the model with the lowest total cost of ownership.<\/p>\n

But would something like the Chevrolet Spark be the right decision?<\/p>\n

The Chevrolet Spark is a nice car.\u00a0 Sometimes when I\u2019m struggling to squeeze into a city parking space, I wish I had a car like the Spark.<\/p>\n

But would it be the best car for the situation?<\/p>\n

If your company\u2019s CEO had the objective of motivating this new sales VP, if she wanted to build a sense of loyalty that would keep this star performer with the company for years, if she wanted the car to impress the VP\u2019s clients and make them feel like the company must be a successful and stable company, would the Spark achieve those objectives?<\/p>\n

Probably not.<\/p>\n

So that\u2019s where value comes in.<\/p>\n

Now, the tough part is distilling these benefits of a more expensive car into quantifiable financial benefit.\u00a0 What\u2019s the return on investment of a Chevy Spark versus the return on investment of a BMW 5 Series?<\/p>\n

It\u2019s hard to say.<\/p>\n

It might be impossible to say.<\/p>\n

And it may be unnecessary to say.<\/p>\n

But that\u2019s one of the challenges today\u2019s procurement professionals must deal with.\u00a0 Some decisions will be based on price.\u00a0 Some will be based on total cost.\u00a0 And some based on value.<\/p>\n

Knowing the difference between price, total cost, and value is the first step in making the right decision each time.\u00a0 And I have the faith that, a couple of decades from now (and hopefully much sooner), future procurement professionals will master value-based decisions the way today\u2019s procurement professionals have mastered total cost-based decisions. Check out NLPA Learning for Strategic Cost Reduction for Supply Chain Success.<\/p>\n

NLPA Learning<\/b><\/a><\/span>:<\/b> Looking for authoritative procurement templates, tools, webinars, and more? Stop trying to create resources from scratch and start taking advantage of having exactly what you need right at your fingertips in NLPA Learning<\/span><\/a>.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

I hope that you have enjoyed the article, \u201cPrice vs. […]<\/p>\n","protected":false},"author":12,"featured_media":4027,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3373","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"\nDifference Between Price, Total Cost, and Value - Next Level Purchasing Association (NLPA)<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Difference Between Price, Total Cost, and Value\" \/>\n<meta property=\"og:description\" content=\"I hope that you have enjoyed the article, \u201cPrice vs. […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/\" \/>\n<meta property=\"og:site_name\" content=\"Next Level Purchasing Association (NLPA)\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\" \/>\n<meta property=\"article:published_time\" content=\"2014-12-02T19:18:34+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-07-08T14:21:01+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/11\/nlpa-images-037.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1600\" \/>\n\t<meta property=\"og:image:height\" content=\"1067\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Galo Matagay\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:site\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Galo Matagay\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/\"},\"author\":{\"name\":\"Galo Matagay\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\"},\"headline\":\"Difference Between Price, Total Cost, and Value\",\"datePublished\":\"2014-12-02T19:18:34+00:00\",\"dateModified\":\"2021-07-08T14:21:01+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/\"},\"wordCount\":606,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\"},\"articleSection\":[\"Procurement\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/\",\"name\":\"Difference Between Price, Total Cost, and Value - Next Level Purchasing Association (NLPA)\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#website\"},\"datePublished\":\"2014-12-02T19:18:34+00:00\",\"dateModified\":\"2021-07-08T14:21:01+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.certitrek.com\/nlpa\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Difference Between Price, Total Cost, and Value\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#website\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/\",\"name\":\"Next Level Purchasing Association (NLPA)\",\"description\":\"The Next Level Purchasing Association\",\"publisher\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.certitrek.com\/nlpa\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\",\"name\":\"Next Level Purchasing Association (NLPA)\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png\",\"contentUrl\":\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png\",\"width\":149,\"height\":50,\"caption\":\"Next Level Purchasing Association (NLPA)\"},\"image\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.linkedin.com\/company\/next-level-purchasing-association\/\",\"https:\/\/www.youtube.com\/channel\/UCrNZYjcLcaNA4xMKQHEGamw\",\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\",\"https:\/\/twitter.com\/nextlevelpurch\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\",\"name\":\"Galo Matagay\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g\",\"caption\":\"Galo Matagay\"},\"description\":\"Lorem ipsum dolor sit amet, consectetur adipiscing elit. Aenean consequat rutrum ipsum quis iaculis. Duis non porta purus, tincidunt tristique mi. Cras eleifend tincidunt mollis. Aliquam egestas velit vitae interdum egestas. Aliquam vel lorem egestas lectus porttitor volutpat nec sit amet enim. Nullam bibendum vestibulum imperdiet.\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Difference Between Price, Total Cost, and Value - Next Level Purchasing Association (NLPA)","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/","og_locale":"en_US","og_type":"article","og_title":"Difference Between Price, Total Cost, and Value","og_description":"I hope that you have enjoyed the article, \u201cPrice vs. […]","og_url":"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/","og_site_name":"Next Level Purchasing Association (NLPA)","article_publisher":"https:\/\/www.facebook.com\/NextLevelPurchasing\/","article_published_time":"2014-12-02T19:18:34+00:00","article_modified_time":"2021-07-08T14:21:01+00:00","og_image":[{"width":1600,"height":1067,"url":"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/11\/nlpa-images-037.jpg","type":"image\/jpeg"}],"author":"Galo Matagay","twitter_card":"summary_large_image","twitter_creator":"@nextlevelpurch","twitter_site":"@nextlevelpurch","twitter_misc":{"Written by":"Galo Matagay","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/#article","isPartOf":{"@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/"},"author":{"name":"Galo Matagay","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa"},"headline":"Difference Between Price, Total Cost, and Value","datePublished":"2014-12-02T19:18:34+00:00","dateModified":"2021-07-08T14:21:01+00:00","mainEntityOfPage":{"@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/"},"wordCount":606,"commentCount":0,"publisher":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#organization"},"articleSection":["Procurement"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/","url":"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/","name":"Difference Between Price, Total Cost, and Value - Next Level Purchasing Association (NLPA)","isPartOf":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#website"},"datePublished":"2014-12-02T19:18:34+00:00","dateModified":"2021-07-08T14:21:01+00:00","breadcrumb":{"@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.certitrek.com\/nlpa\/blog\/difference-price-total-cost-value\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.certitrek.com\/nlpa\/"},{"@type":"ListItem","position":2,"name":"Difference Between Price, Total Cost, and Value"}]},{"@type":"WebSite","@id":"https:\/\/www.certitrek.com\/nlpa\/#website","url":"https:\/\/www.certitrek.com\/nlpa\/","name":"Next Level Purchasing Association (NLPA)","description":"The Next Level Purchasing Association","publisher":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.certitrek.com\/nlpa\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.certitrek.com\/nlpa\/#organization","name":"Next Level Purchasing Association (NLPA)","url":"https:\/\/www.certitrek.com\/nlpa\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/","url":"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png","contentUrl":"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/08\/NLPA-logo-small-1.png","width":149,"height":50,"caption":"Next Level Purchasing Association (NLPA)"},"image":{"@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.linkedin.com\/company\/next-level-purchasing-association\/","https:\/\/www.youtube.com\/channel\/UCrNZYjcLcaNA4xMKQHEGamw","https:\/\/www.facebook.com\/NextLevelPurchasing\/","https:\/\/twitter.com\/nextlevelpurch"]},{"@type":"Person","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa","name":"Galo Matagay","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/34d4be7be9c43eeb480e7e32739c2f3f?s=96&d=mm&r=g","caption":"Galo Matagay"},"description":"Lorem ipsum dolor sit amet, consectetur adipiscing elit. Aenean consequat rutrum ipsum quis iaculis. Duis non porta purus, tincidunt tristique mi. Cras eleifend tincidunt mollis. Aliquam egestas velit vitae interdum egestas. Aliquam vel lorem egestas lectus porttitor volutpat nec sit amet enim. Nullam bibendum vestibulum imperdiet."}]}},"acf":[],"_links":{"self":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts\/3373"}],"collection":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/comments?post=3373"}],"version-history":[{"count":4,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts\/3373\/revisions"}],"predecessor-version":[{"id":12603,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/posts\/3373\/revisions\/12603"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/media\/4027"}],"wp:attachment":[{"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/media?parent=3373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/categories?post=3373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.certitrek.com\/nlpa\/wp-json\/wp\/v2\/tags?post=3373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}