In order to conduct a VIU
analysis companies need to estimate the value in monetary terms of the features
and elements of their product or service. Some of the ways to achieve this are
listed as follows:
Internal Engineering Tests: This involves
laboratory tests conducted to ascertain the difference in the performance of
different market offerings. Translating the differences in performance to value
estimates often requires some assumptions on the actual in-use conditions at
the customers’ end.
VIU Research involves the collection of
data on costs and benefits from customers. This often entails detailed value
stream mapping, and activity-based costing (ABC)
concepts and methods, to quantify all expenses related to the use of a product
or service. The approach may be used to estimate the TCO of the product. It does
however require a high level of cooperation and engagement with customers.
ABC analysis focusses on the interfaces between
customers and suppliers, and on expenditures. It identifies major cost drivers,
often revealing opportunities from cost savings.
Research Surveyi>: Customers are interviewed
on questions that address how product attributes/value elements affect
operations.
Conjoint Analysis: This quantitative research
methodology is covered in detail in Chapter Product Design.
Central to the methodology is the notion of product utility — a latent variable that
reflects how desirable or valuable an object is in the mind of the customer.
The utility of an offering is assessed from the value (part-worth) of its
parts. Conjoint analysis examines customers’ responses to offering ratings,
rankings or choices, to estimate the part-worth of the various levels of each
attribute of a product. Utility is not an absolute unit of measure, only
relative values or differences in utilities matter.
| Attributes | A | B | C |
|---|
| Oil Change | required | not required | required |
|---|
| Price | $ 500 | $ 500 | $ 750 |
|---|
| Utility | 10 | 15 | 10 |
|---|
Exhibit 6.17 Illustration of conjoint analysis to determine the
incremental value of eliminating need for oil change?
The illustration in Exhibit 6.17 provides three profiles of
a vacuum pump, which vary on two attributes — the need for oil change and
price. Profile B offers the benefit that oil change is not required, and
its utility is 5 points higher than profile A, which requires oil
change. Profile C, which also does not require oil change and is priced $270 higher,
has exactly the same utility as profile A. It follows that the benefit
of “no oil change” is worth $270 to customers.
