The above image shows something called a desire path: A path formed naturally when people choose a more desirable route than the one provided. This worn-down path is an example of observable evidence of people’s subjective value. We can clearly see that many people value the grass route over the paved walkway.

When businesses assume what their customers want, they often invest time and money building solutions that don’t quite fit (e.g. the concrete walkway), and it’s usually too late when they discover their customers actually needed something different.

However, simply asking customers what they want isn’t enough. We could ask a thousand people where they think a walkway should be built, but direct observation provides us with more useful data. The principle of Subjective Value can be applied to gain real evidence using a testing method called Subjective Value Exchange (see below).

Subjective Value is a traditional economic principle which states that the value of a product or service is not determined by what it costs to produce, but is instead defined by what someone is willing to pay (or do) for it.

In essence, the real value of a product is subjective. Value is in the eye of the beholder!

If you understand the principle of subjective value, and apply practical methods like Subjective Value Exchange it will help you:

Subjective value applies to both the tangible and intangible, like experiences and services. Also, a person’s subjective value can – and often does – change over time. Think about what you loved when you were a teenager versus what you love now.

Subjective value is affected by many factors, including:

In the Principle Based Management™ culture we pay particular attention to 3 components of Design Thinking (read more).

The principle of Subjective Value is most useful to apply in both the Empathy and Action stages.

Before exploring creative ideas it’s important to take time to understand more about your customers. What do they value? What are their needs, frustrations, fears, goals,…?

Because value is subjective, it can be challenging to measure. With a Design Thinking approach we often choose learning and progress over perfect data. One of the best ways to learn if something is valuable is to understand if it matters to people who need it most. We often speak with extreme users as a starting point. Check out this idea of “Extremes and Mainstreams”

Empathy is a critical component of Design Thinking, and knowing about subjective value means we can use it to have more insightful conversations with our customers. Check out

It’s here that subjective value really pays off big-time. In Design Thinking the Action stage is about taking new, untested solution ideas and reducing risk before investing time and resources.

Remember the desire path above? In that example we would want to check if our plans for a concrete walkway will suit people’s needs before we actually build it!

So how do we find out if customers will value our idea enough to pay for it, or enough to choose it over an alternative option?

To really validate our idea it’s not enough to ask people if they would buy it, we need to find a way to simulate the solution and observe people’s actual behaviour and choices. We do this using a method called “Subjective Value Exchange”.

Subjective Value Exchange is a type of test that helps us determine the real-world value of our product. Until we observe that someone will exchange something of value, we won’t really know if our product is going to be chosen and used by real people. Just like the desire path we want to see clear, observable evidence of people’s subjective values.

So, we can now use our knowledge of subjective value to find out if potential customers value our new idea enough to make it viable. Everyone values things differently. So, do other people value our product enough to exchange something that holds value for them?

Types of value-exchange:

Real-world example of Subjective Value Exchange:

In many industries it’s common practice to use pre-orders to test interest in a product before creating the real thing. E.g. Publishers often launch a pre-order page before an author has finished writing the book, and video game companies take orders before a game is released.

In the example below from decibels.so they created a quick web page (using a template like Squarespace) to check if people would value their product enough to commit a 10% deposit to pre-order their hearing enhancers - a brand new type of product that’s never existed before.

They then used that evidence of consumer interest to validate the concept before investing in production, and it helped them in negotiations with manufacturing companies!

It can be easy to see how subjective value applies in our personal lives and to customers, but it’s an incredibly powerful principle to apply when it comes to creating preferred partnerships with employees.

A job is a bundle of attributes – responsibilities, schedule, location, type of work, culture, co-workers, etc. – that any one employee might enjoy (or not). And a person’s subjective value will evolve.

Here are just a few examples of how subjective value might show up in the workplace: