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Many times, we heard the term value engineering and it is being used frequently by business barons and executives of top companies. All the people sitting at top always either want to do value engineering to their offered product or alleged that it is already being tried out. Question here arise is why there is so much of empathize on value engineering and what exactly the term means.

Let us understand this by example.

Cell phones are introduce with a prime focus on instant communication. Over a period of time, need arised for some additional facilities which customer can avail with the help of mobile phone, like calculator, alarm clock etc. This has happened because of competition and customer expectation. Now, if we so many additional features in the mobile phones like camera, games, Internet access etc. Even though, the purpose of mobile phone is same but customer is willing to pay for these features and that is where value engineering counts. The other thing is reduction in price, which let to quick acceptance and affordability.

Value engineering is the process of enhancing value of any particular product or service.

Some times it is also referred as reverse engineering.

There are three basic reasons for the monopoly of value engineering:

1) Today market has become too competitive, for every required product or service, customer can have options. There are many companies/manufacturers available for the similar or same products/services. In this condition, customer will have to choose a product or service, which will give him maximum possible benefits at minimum possible price. Apart from this, opening of economy has invited many foreign vendors. These foreign vendors come with advance technology or competitive pricing. This scenario again favors customer and he would in turn become too demanding or choosy.

2) Due to Education and advance in technology, customers are increasingly become aware about product features, cost and other product related parameters. He uses this parameters as yardstick to compare product of different brands before making final selection.

3) It is difficult for any company to launch new product every time, as it required time, money and other resources. It would rather easier for them to modify existing product features to get customer focus. In some cases, where product is already popular, companies would prefer to utilize the product market and reputation by either extending product or service in new form or making some changes in its original form to incorporate required features.

e.g. Hero Honda splendor is very popular and trusted motorcycle. So, rather than launching new product, company decided to add advance features in splendor itself and given a new name as splendor + and super splendor. This concept has got unique advantage of continuing new product with same market understanding of product as well as it retains old customers.

Value engineering can be understood as follows:

Value = Features of product

Price

Above formula defines value as a function of product features and price. Value of product is directly proportional to features and inversely proportional to its price. Here features mean attributes in the product or service desired by customer.

Features of product may be any addition, improvement or change of product attribute for which customer has got interest.

For enhancing value of any product, two things can be done:

a) Companies need to provide additional features in the product at same price. Needless to say that added features should have customer interest.

b) Price of product should be reduced without affecting product or service features or quality.

Value engineering done by product or service analysis. For a certain product, what customer wants and at want price should be worked out. Product features should be listed out. Expected features, which can be introduce should be thought or discussed between groups of people by brain storming or even customer may be consulted for his inputs or expectation.

The feature or change, which has got maximum customer appeal, should be tried out.

Let us understand this by referring few examples:

We all see television, Internet, radio, newspaper or other marketing source where products or services of different companies are promoted. One bicycle manufacturer company had utilize this value engineering concept by adding some feature in their product i.e. bicycle. Customer would always prefer a product if some additional feature without increment in the cost. This bicycle manufacturer used the same concept. It has introduced basket in the ladies cycle for keeping things while traveling. This was instant hit among the customers. In the same way, other innovation was provision of cricket bat in the kid cycle keeping in the mind popularity of cricket in kids segment and need for something which can keep cricket bat with bicycle without trouble. We can see the similar addition in racing cycle, which is having provision of water bottle holder in the bicycle.

These additional features introduced in the project without any cost or with minor increment which customer would not mind to pay.

Second method of value engineering, price reduction without affecting product / service offering or features has now become common tool for every manufacturer or service provider. It is also due to cut throat competition. Many of the companies, specifically, fast moving consumer goods companies, accepted a way of reducing price to keep existing customer or to attract new customer. Since many of the products have standard features and it is being available in all brands, the only way to add value is to provide product or service at discounted price. And this formula is used by all major companies to retain and attract customers.

e.g. Washing powder companies had used this concept by reducing per Kg price of their product. This also led to increase in the volume of sale and customer satisfaction.

Similar to above example, Cold drink giants have reduced price of 300 ml carbonated bottled drink.

It is also observed that people tend to by things if there is a price reduction. This is what manufacturer wants by value engineering. It gives them higher sales and ultimately results in higher profit.