Value was once described to me as the difference in price between what you paid for something, and what you were willing to pay. This is a good definition but I would like to modify it slightly.
Let’s say my wife and I take a 4 night vacation to the Hyatt Regency Spa and Casino Resort in Aruba. Standard rooms are $565/night in April and airfare is $505 per person, bringing the total for airfare and lodging to $3270.
However, for our trip we’re using two pair of free-night vouchers which we had from each signing up for the Chase Hyatt Credit Card. We are using American Airlines miles to book the flights so we’re only paying about $200 in taxes and fees for the airfare. We are getting a $3270 vacation for only $200! (This is a hypothetical example but a friend of mine and his wife took almost the exact same trip, all with the sign-up bonuses from 2 credit cards each).
However, according to the definition above, the value is only the difference in what we paid ($200) and what we would have paid. This is where I diverge from the definition. In this example, let’s say we weren’t going to take the vacation at all if we had to pay for it. So our willing to pay price doesn’t apply. But what if someone had magically offered us the same trip for $500, out of the blue? Even though we hadn’t planned on the trip or budgeted for it, we probably would have paid $500; such an amazing deal would be hard to refuse. So how much would have we paid for the same trip? For the sake of this example, let’s say $1000 would have been our threshold. In this case we were willing to pay $1000 but we only paid $200, so according to the definition we derived $800 of value.
We followed the definition of value to the letter, and only came up with and $800 value for a trip that should have cost $3270 but we only paid $200 for. If that seems a bit off to you, I agree. Of course there is no definite way to accurately measure this sort of thing. Many things we would intuitively assign value to are intangible and hard to define. So to keep things simple, here’s how I do it:
In the example above we took a trip for $200 that would have cost your average non-ValueTactics reader $3270. We would not have taken the vacation if we had had to pay full price, though, so according to the definition of value, we can’t count the full price as value. HOWEVER, in my mind the enjoyment of the trip is amplified by knowing we got it for far less than it should have cost. To me, that adds value. FURTHERMORE, the fact that we took a vacation at all when we wouldn’t have been able to afford one otherwise makes it even sweeter, adding yet more value.
It’s impossible to assign a numerical value to these intangible benefits, but it’s apparent to me that they add value to the experience. So when I am tracking the amount of value gained by, for example, booking a trip with points and miles, I call it even and go with the full retail price minus my actual out of pocket expenses.
Therefore, in the example of the Aruba trip, $3270 – $200 = $3070 value! To me, this seems like a logical way of tracking how much value I create and capture from these tactics. In this example, my wife and I got a $3070 vacation by applying for 2 credit cards each. That’s worth it to me!