PFFC - October 2007 - (Page 16)

PROCESS MANAGEMENT T By David Argent Contributing Editor Hierarchy of Value: Part I he previous column offered a framework had difficulty in measuring and communicating for customer management meetings and the value of products and services provided to mentioned the topic of value. Everyone our customers. in business wants to deliver and receive To address this, the team at Flint developed value, but what is it and how is it measured? Here the Hierarchy of Values concept. This model are some useful abstracts from Wikipedia on the sorts the types of value provided into four topic of value: different levels. The chart below builds from the Value of a product within the context of bottom up, with each succeeding level building marketing means the relationship between the on the previous one in value added. consumer’s expectations of The principles can apply product quality to the actual to almost any segment of amount paid for it. It is often the converting industry, expressed as the equation: so while the narrative For an organization relates to ink, try to relate uValue = Benefits/Price or the concept to your own it to alternatively: products and services. uValue = Quality received/ its has to Level 1: Ink Cost expectations For a firm to deliver value to its customers, it must consider what is known as the “total market offering.” This includes the reputation of the organization, staff representation, product benefits, and technological characteristics as compared to competitors’ market offerings and prices. Component 4 Effect of ink in use 3 Cost of ink use 1 Ink cost/lb Differentials (Price/lb) x (Coverage) x (Process efficiency) x (End-use capability) (Price/lb) x (Coverage) x (Process efficiency) Price/lb deliver value, improve value: cost ratio. Per Pound The basic level is called Ink Cost per Pound. It’s very straightforward and considers only the price per pound of the ink. A printer operating at this level considers all the inks available to him as interchangeable, so all he needs to know is price to make a purchasing decision. Certainly, this is the easiest way to buy ink, and 2 Ink cost per unit printed (Price/lb) x (Coverage) D e te rm on o in at i ue f Val Value can thus be defined as the relationship of a if all inks are interchangeable, that is, in fact, a legitimate comparison. firm’s market offerings to those of its competitors. However, this is rarely the case. There is no On the quantitative side, value is the actual information on color strength, and the impact on gain measured in terms of financial numbers, process cost is not defined. So, in the equation: percentages, and dollars. For an organization to deliver value, it has to improve its valueuValue = Benefits/Price to-cost ratio. When an organization delivers high only the numerator is defined, and value at high price, the perceived not knowing the product benefits value may be low. When it delivers leaves you with value deliverable as high value at low price, the an unknown. perceived value may be high. ADDING Moving up | Next month, Over the years I worked with the VALUE levels 2, 3, and 4 will be described management team at Flint Group, Part 2 of a 2-Part as the value of products and services which constructed a model to Series are increased. demonstrate value hierarchy. We often COMING NEXT MONTH Process improvement expert David Argent has 30+ years of experience in process analysis with particular emphasis on ink and coating design and performance. Contact him at 636/391-8180; djvargent@sbcglobal.net. 16 | OCTOBER 2007 WWW.PFFC-ONLINE.COM http://WWW.PFFC-ONLINE.COM

Table of Contents Feed for the Digital Edition of PFFC - October 2007

PFFC - October 2007 Contents First Glance From the Editor Calendar of Events Web Lines Process Management Package Converting News Clips Narrow Web & Label Reporter Narrow Web & Label What’s New Products Bagmaking Slitting/Rewinding Digital Printing EB Flexo Web Handling Paperboard Packaging Security Packaging Business Transactions What’s New Products Focus: Unwinds & Rewinds Trade Show in Print Services Directory Classified Marketplace Equipment Buyers & Sellers Advertisers Index thePLACE Experience Speaks

PFFC - October 2007

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