How much would you pay for a five-pound bag of potatoes?

If you saw two similar bags of potatoes, one priced at $3.00 and one at $3.25, I suspect you’d choose the $3.00 bag. Even though the price difference is small, it offers a better value.

But what if one bag was priced at $3.00 and one at 59 cents? Would you still choose the cheaper one? Perhaps not, because you’d figure there was a reason why it was so inexpensive—and not a good one. Your value equation would be different in this case than when the potatoes were close in price.

Now take it in the other direction. One bag of potatoes is $3.00, and another is priced at $8.50. You may indeed still choose the $3.00 bag, but I’ll bet you’d stop and consider why the other was priced so high. Maybe there’s something really special about those potatoes that provides a different sort of value. Some people, I dare say, would purchase them just to find out.

One of my most popular BusinessWeek.com columns is “Five Words to Never Use in an Ad.” One of those words is value, and for good reason. What constitutes a value is not only different for everyone, it can differ by purchase occasion. And as the potato example demonstrates, it can even differ based on the dynamics of any set of circumstances.

I was fascinated to read an interview with David Ovens, Taco Bell’s CMO, in which he described the brand’s value proposition in three ways: price value (79-, 89- and 99-cent menu items), abundant value (larger products like a triple steak burrito) and quality value (new ideas like the “Fresco” menu). The chain’s pricing strategy further reinforces the point, and as a fairly regular customer of Taco Bell (thanks to my teenage son) I find even my own value equation changing depending on the circumstances.

Like a complicated mathematical formula, value is based on a number of variables. Change any one of those variables and you change the result. That’s why it’s vital to put the “who” before the “how much” in your pricing strategy. Value is as much about your customers as it is what they’re buying.