KVC Economic Value Module

Economic Value is the second component of market value. It is determined by means of an end-product cost - customer goal ratio. The numerator of an economic ratio is the customer's detailed cost picture, which shows the variable and fixed costs associated with the manufacture, sale and distribution of products and services. The denominator deals with the customer's goals and objectives. The customer's aim is to achieve the best economic ratio for its own business. This is achievable by either improving the numerator (customer's cost of products and services) and/or improving the denominator (enabling the customer to achieve its goals and objectives). Economic ratios begin at a level of 1.3 or higher and asymptotically approach a level of 0.8 to 1.0, depending on the nature of the product portfolio and the maturity of the market.

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Approach: Following its comprehensive background review, the KVC team designs customized Economic Value models. The KVC team launches the Economic Value module and conducts one or more experiential modeling sessions within and/or external to the company according to contract terms. The KVC team does everything that is required to optimize profitability. Economic Value models are a prerequisite for economic value pricing. Excel files are prepared that are readily adaptable to other products and services. The KVC team also uses the customized Economic Value models to help the company develop economic value pricing guidelines. The KVC team also uses the custom Economic Value models to help the company develop competitive intelligence. Depending on contract terms, the KVC team might also develop a knowledge portal for the company, which makes the customized Economic Value module a dynamic knowledge block system.

Benefits: Economic Value models can be used to guide process development and to achieve economic value leadership. Economic Value delineates competitive cost positions, establishes economic value pricing and provides marketing direction.

Prerequisites and Deliverables: Participants will receive a customized workbook and a CD that contains customized files that are conveniently adaptable to other products and services. A laptop computer with a CD ROM drive and Microsoft Office Software (Word, Excel and Power Point) are prerequisites. Participants do not have to be expert in Word, Excel or Power Point software but rudimentary computer proficiency and knowledge of the basic function of this software is desirable. The KVC team will partner with the company to form the company’s team. The KVC team will conduct all experiential modeling sessions and publish minutes and newsletters as required. The KVC team will also prepare a final Power Point presentation.

Download Economic Value
Knowledge Block Leaflet (pdf)