Price Competitiveness as an Engineering Strategy and Business Strategy

Raghuraman Ramamurthy March 25, 2015

price-competitiveness-as-engineering-strategyOvercoming price sensitivity and competition is something companies should strive for in all aspects of product development. Improving things like part and aftermarket efficiency can be so much more than an engineering strategy; it can be a business-wide objective that sets your brand apart in crowded marketplaces.

The price of products in your industry is what drives competitive growth; directly linked with the costs associated with producing products, this competition is the very essence of price sensitivity.

How efficiently, and affordably, you develop products during engineering is a sizeable portion of overall product cost. Adjusting the price of your products to gain advantage over competing goods, or alternative products, is one of the most effective ways you can overcome price sensitivity and competitiveness. By lowering your costs during the engineering stage, you can lower product prices when they hit the market, without taking a detrimental blow to profit margins.

Price Competitiveness as an Engineering Strategy

While you might be pressed to think of price competitiveness, or sensitivity, as outside the realm of engineering or product design, decisions made early in the product lifecycle, during these stages, can directly affect your price flexibility later on. It’s this flexibility that can allow your company to lower prices and get the strategic edge of competitors with variant or alternative products.

Optimizing engineering tasks also makes it easier for companies to expand existing product lines to new markets, thus increasing market share despite heavy competition. Product engineering has a cause-and-effect relationship with product price when those products reach the market; the more affordably or optimally you can engineer high volumes of products, the more you will be able to account for pricing challenges on the market.

Material costs can account for as much as 60% of a product’s total cost during engineering. Lowering this cost by, for instance, using more affordable, alternative parts, increases margins; these increased margins give manufacturers more flexibility when adjusting cost to meet market demands. Price competitiveness, in this sense, is as much of a factor in engineering strategy as it is in business.

To take on price sensitivity challenges during engineering, it can be helpful to reevaluate the way your company manufactures goods for potential improvement areas. The following are common steps manufacturers often take to improve engineering efficiency, and thus gain pricing advantages when products hit the market:

  • Improving design to eliminate unnecessary parts or materials
  • Substituting high-cost materials with more affordable alternatives during product engineering
  • Part standardization to limit excess and manufacturing wastes
  • Modularized engineering configurations, which expand a company’s potential to product variant products more efficiently

By lowering high product cost with various engineering practices, companies can better prepare themselves for price competitiveness in the marketplace. Engineering strategy has direct implications for a manufacturing business strategy, and vice-versa.

Next Steps: Solutions to Overcoming Sensitivity

As both a strategy for engineering and business growth, getting the upper hand over price competitiveness can be done in any number of ways. There’s no universal strategy for optimizing costs or gaining price advantage over your competition.

Very common initiatives businesses take to lower their product cost, however, deal with improving floor-level engineering and cutting back on production waste. Strategies like value engineering, modularization and standardization have been proven to give companies the upper hand in controlling price sensitivity.

Engineering cost and price sensitivity are linked more than many companies realize. The way you design and engineer your products has direct effect on how much you can adjust price to gain advantage over competitors later on, when your products finally hit the market. Solutions, such as those introduced above, give companies valuable flexibility in dealing with market competitiveness, fulfilling both engineering and business objectives.

PCO-Infographic

Topics Product Cost Optimization Competitive Advantage Product Development Solutions