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[edit] Title::Types of Competitive Alternatives (Content Type::Read Duration::2 mins)

[edit] Practice Case 1

The AirVentis Corporation manufactures heating, ventilation, and air conditioning (HVAC) systems. Its newest offering is called the System BTR. The customer in this EVE® analysis is a defense contractor that has a manufacturing plant in a remote, arid climate. After conducting customer interviews, AirVentis learned that energy efficiency and especially maintenance were important value drivers. The EVE® analysis reveals a large amount of potential positive differentiation value, the biggest source of economic value coming from reduced downtime because of more effective maintenance (by using the 24-hour call center support). This same feature is also a source of another value driver, reduced maintenance costs. Finally, note ^[1]).

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[edit] Economic Value Estimation Output

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icon	Component	Description
1	Reference Value NTG $195,000	NTG is the manufacturer of the existing factory HVAC system, which has outlived its useful life. According to the customer, NTG plans to do a complete overhaul of the existing system, with certain upgrades, for $195,000.
2	Energy Savings from High-efficiency Fan Motors $52,000	This is a value driver in the Production functional area. Specifically, this is the savings in reduced energy costs. It is estimated that the electricity to run the ventilation fans in the NTG unit costs $260,000 over 10 years. System BTR uses 20% less energy.
3	Reduce Maintenance Costs — 24-hour call center support $30,000	This is a value driver in the Production functional area. The 24-hour support center will eliminate emergency repair visits by outside service companies, which average $3,000 per year (times 10 years).
4	Reduced Downtime — 24-hour call center support $205,000	Here is another Value Driver in the Production functional area associated with this feature/functional benefit. The 24-hour support center will improve productivity by reducing the amount of downtime. It is estimated that downtime costs (lost labor productivity) related to HVAC system would be $410,000 over a 10-year period. System BTR claims to cut this cost by half.
5	Additional Installation Cost $50,000	This is a negative value driver that can be entered directly, i.e., not through the Value Driver Wizard. This figure is the cost for additional electrical and construction work required for installation of the System BTR.
6	Differentiation Value $237,000	This is the sum of the positive value drivers (2, 3, 4) minus the negative Value Driver (5). This is the amount of incremental value that the System BTR provides the defense manufacturer over the competitive alternative (NTG). AirVentis can hope to claim some of this value in its price.
7	Total Economic Value $432,000	This is the sum of the net Differentiation Value (6) plus the Reference Value (1).