An Introduction to Value Analysis

Value analysis is an ongoing process in which a product is subjected to various techniques designed to determine how much “use” or “value” the product has. The primary goal of value analysis is to offer a superior product at a minimal cost. An emphasis is placed on keeping things that are useful for the customer while removing aspects that add no real or perceived value to the product.

Products and services are assigned value based on their usefulness and the perception that consumers have. While two products may do the same basic task (such as sanitizing a counter), resulting in an equal degree of usefulness, customers may perceive one cleaner as superior for a variety of reasons. Any business which must compete to attract customers must, by necessity, focus on perceived value.

Any hospital in a given region may be able to perform most medical treatments, but a hospital that is known for being cleaner, having a more friendly staff, or is otherwise perceived as somehow “better” will be the preferred location, resulting in more business. Similarly, medical equipment that is perceived as being faster, safer, or more reliable will be purchased more often than slower, less safe, or notably unreliable products.

Value Analysis and Business

Price and quality are two of the most important factors that customers will take into account when deciding what to buy. Sufficient quality will allow for a higher price tag to be accepted by customers, but the overriding factor of price will never be forgotten by any customer that has a limited budget to work with. Accordingly, offering competitive prices is important for any business intending to succeed. Lowering the sales price directly will result in a decreased profit for each unit sold, though increased total sales may provide economies that yield a higher total profit. Great in theory, not always proven in fact.

Value analysis provides alternate solutions for remaining competitive. By lowering manufacturing costs through the elimination of unnecessary components, it is possible to offer a lower price to customers while simultaneously increasing the profit per-unit. An emphasis is placed on quality…goods that are perceived as cheaply made may not be preferred by customers. However, a product that is perceived as both high in quality as well as less expensive can be very successful. This reputation can spread to the rest of the company, creating a brand name with a positive reputation.

In addition to the strictly financial benefits of inexpensive manufacturing and higher-quality products, value analysis is also able to increase overall customer satisfaction. This is particularly important for any business in which customers may visit repeatedly; feelings such as “I got more than what I paid for” are much more likely to result in repeat customers and, therefore, ongoing success. A business with a positive reputation may also have access to other benefits, such as an easier time attracting investors and partners, free advertising via word-of-mouth, better terms on contracts and agreements. Higher customer satisfaction typically translates into higher profit, making value analysis one of the most financially effective tools a business may have.

Successfully Analyzing Value

There are several key points that businesses should keep in mind when starting a value analysis program in order to get maximum utility from it, including:

• Obtain support from senior management within the business
• Informed, experienced leadership that are supportive of the value analysis program
• Select and train the value analysis team
• Message the goal of value analysis effectively throughout the business
• Start small (1-2 products) to demonstrate the concept in a reasonable amount of time
• Set realistic, measurable goals
• Be transparent about problems, then fix them
• Inform the leadership and the company of value analysis results

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