Manufacturing

# 1.11 Product value

What a marketing perspective provides is information to help the manufacturer to sell products in the market at an identifiable target price. The price might just cover the manufacturing cost of the article, including the material costs, labour costs, directors' salaries, land rent, bank charges and everything else which involves the company paying money out. Alternatively it might exceed the manufacturing cost, in which case the company makes a profit, or it might be less than the cost, and the company must subsidise the product manufacture from some other activity. This occurs more often that you might first think. In most countries it is possible to buy a mobile phone for much less than its manufacturing cost. The supplier makes its profit from the use of the phone and not from its original purchase price. Even high-technology products such as aircraft engines are sometimes sold at a loss by the manufacturer, which then makes its profit through maintenance and charges for spares for the engine during its lifetime.

But for the product to be bought by the customer at the target price, it must have a value to the customer which is at least equivalent to that price. If the value of the product, in this sense, is higher than the manufacturing cost, the firm is said to have added value to the raw materials during manufacture and the product is termed a value-added one. Value-added products are worth more to the buyer than they cost the manufacturer to make and, in practice, the value need bear no relationship to the manufacturing cost of the product whatsoever. If one product is bought in preference to another equivalent one of the same or a lower price, it must have a higher value in the eye of the customer. Most manufacturing industry aims to make a profit and it must therefore find ways of adding value to its products to make them seem 'a good buy'.

Much of the perceived value of products is a function of the design of the product – hence the adage 'good products sell themselves' – and in how it is presented to the customer (you only have to think about the premium price commanded by the shape and packaging associated with chocolate Easter eggs to appreciate that point!).

There is also a link between the value added to products and the numbers in which they are made. The nature of the competition in the various areas of manufacture means that as the volume of production increases, the added value tends to decrease. What's more, it is clear that you could make more money by making £1 profit on every one of a million items sold than by making £100 on every one of only a thousand products even if the products had the same market price. So making things in larger numbers, as long as the market exists for them, allows you to work at reduced added value.

Our wide view of manufacturing has shown that the decisions made by an individual manufacturing operation can be affected by its business environment as well as engineering issues. However, whatever the circumstances, decisions must be made about product design, material selection and process choice. So we will now concentrate on the specifics of turning materials into products and the principles behind the processes used.

## SAQ 2

Describe briefly how a simple PDS for a wristwatch might develop through the conceptual and detail stages involved in its design. Hint: try considering:

1. the shape of the product (draw a simple sketch);

2. the type of use you expect it to be put to;

3. the market you are aiming at (likely selling price and numbers you would like to sell).

## Answer

During the conceptual design stage, different solutions to the need defined in the PDS would be explored. In the case of a wristwatch, presumably the need is 'a portable method of telling the time'. It is conceivable (just!) that a free thinking design team might consider portable strap-on sundials or watches based on egg-timers! More realistically, the discussion will be heavily constrained to more modern solutions, so that the conceptual design stage might consider options such as the type of movement to the employed (clockwork or quartz) or whether the watch face should be digital, analogue or both. Decisions on the type of user, i.e. male, female or child, might also be considered at this stage. So would decisions on whether its main use will be functional, in which case it may need additional features, e.g. alarm, stopwatch, etc., or for decoration, in which case features as basic as numbers on an analogue face may be dispensed with.

The detail design will concentrate on the engineering and industrial design of the watch. Engineering aspects will concern the design of the strap attachments and the degree of shock and water resistance as well as decisions on material selection and process choice, not forgetting the important aspect of ergonomics which will involve making the watch easier to use (remember the early LED watches that you needed both hands to use, one to attach the watch to and one to press the buttons?). The industrial design will concentrate on making the product attractive to the end user and, of course, will depend on the market sector at which the watch is aimed.

## SAQ 3

What is the role of marketing in defining a PDS?

## Answer

The role of marketing is to identify the market need for the product and, from this, to define the product's functional requirements. The formal aspects of the product are also largely decided according to the tastes and needs of the customer. These are converted into shape and materials specifications by the various engineering functions in the company, which in turn also decide processing requirements, taking into account the capabilities of the company. Marketing can have a vital function in ensuring that all the relevant information is passed on to the right people and that the developing product design specification does not evolve away from the initial market needs of the product.

OpenLearn - Manufacturing
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