Value Analysis

What is a Value Analysis?

A value analysis (VA) is a systematic, function-focused process used to improve the value of products, services, or processes by balancing functionality and cost to meet customer needs while minimizing expenses. By applying creative and analytical techniques, VA identifies opportunities for cost reduction and product optimization without compromising quality or performance.

value analysis functions vs cost

The Basic Idea

Imagine you’re a product design engineer stuck on how to reduce the cost of your company’s existing product: reusable coffee cups. As a daily coffee drinker, you’re well aware of all the typical frustrations of travel mugs, especially when you go to take a sip… only to end up staining your shirt instead. You want to revamp the design to ensure smooth sipping—but you also don’t want to cost the company a fortune either. In this scenario, a value analysis may be your best friend in achieving this perfect balance.

A value analysis (VA) is a useful technique to introduce a reasonable price for manufacturing an existing commercial product or service.1 As a systematic approach, a value analysis examines designs within an organization and its industry to evaluate the effectiveness of their function. It also considers the lowest cost—both in terms of production and customer willingness to pay—while ensuring performance satisfaction. This concept can be a bit confusing, especially for those of us who aren’t engineers, so let’s break it down into its key parts.1

Separating “Value” from “Analysis”

Before diving into VA, it is important to consider what value is in general. Consumers may define value differently depending on whether they’re interested in how well a product works, how aesthetic it is, or how applicable it may be to a given situation. But as a general rule of thumb, we can consider value as equal to the function of a product relative to its cost.1

In a typical value analysis, value is systematically calculated in team settings, usually amongst management. Critically, the analysis part of this approach comes into play when determining the function of a product or service in meeting the customer’s needs. This is usually achieved through a review process that tests the “fit” between a product and its value—and most importantly, whether this feels justifiable to the target consumer or not. In particular, this process may include determining what a fair price is for the average customer, as well as distinguishing between the product’s use value (practical utility) and esteem value (personal desirability).1

Value Analysis, Simplified 

A lot of VA can feel abstract. Here is a brief summary of what a value analysis looks like in its simplest form (using our travel mug example from above):

  1. Determine the function of a product or service. Taking coffee on the go when you (unfortunately) don’t have time to sit and chat. 
  2. Set a value for the given function of a product or service. For a to-go cup that really works by keeping coffee hot and avoiding spills, you decide the fair value is $25.00.
  3. Provide the necessary function of a product or service relative to the overall cost. You consider how the mug’s assigned cost and its functions are relative to the manufacturing cost, design cost, or any other overheads. 

Value Analysis, Expanded

We can further break down VA to understand each phase involved in how a product, process, or service may be improved relative to cost. This comprehensive breakdown is also known as a value analysis job plan, which is usually brainstormed in workshop settings and includes alternative plans to ensure a product’s function is maintained. The six phases are as follows:3

the six phases of a value analysis job plan

Value Engineering and Value Management

While a VA approach analyzes existingproducts or services, value engineering (VE) evaluates a newproduct or service from a design perspective, while value management (VM) optimizes the overall project from a bird's eye view.4 The principles across the board are essentially the same, but we can further distinguish VA, VE, and VM by asking the following questions:

what sets value analysis apart

Defining functions is so difficult and requires such powers of concentration that most people give up and go back to the same old ways.


— Lawerence Miles, Creator of Value Analysis and Value Engineering

About the Author

A smiling man with light hair and a beard is wearing a denim jacket over a light turtleneck. He is standing in a nighttime setting, with warm lights glowing in the background, including a large, glowing yellow sphere. He has a black strap across his chest, possibly from a bag, and the environment around him suggests an outdoor, urban atmosphere.

Isaac Koenig-Workman

Justice Interviewer @ Family Justice Services Division of B.C. Public Service

Isaac Koenig-Workman has several years of experience in roles to do with mental health support, group facilitation, and public speaking in a variety of government, nonprofit, and academic settings. He holds a Bachelor of Arts in Psychology from the University of British Columbia. Isaac has done a variety of research projects at the Attentional Neuroscience Lab and Centre for Gambling Research (CGR) with UBC's Psychology department, as well as contributions to the PolarUs App for bipolar disorder with UBC's Psychiatry department. In addition to writing for TDL he is currently a Justice Interviewer for the Family Justice Services Division of B.C. Public Service, where he determines client needs and provides options for legal action for families going through separation, divorce and other family law matters across the province.

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