Calculating EVC for an instant mix – Seviyan Upma.

Seviyan Upma instant mix is a product wherein you need to add hot water (as done for Maggie
or saffola oats), keep it for 3 minutes and hot seviyan upma is ready to be served. Suppose the
small packet has a quantity of 50g which serves one person.
To calculate the EVC for a new product: EVC = Reference Value + Differentiation Value

 The Reference Value is the price of the closest perceived substitute. – There is no direct
competition of this product in the market.
 The Differentiation Value is the value of the product's attributes that exceed the
reference value. In this case the reference value is raw vermicelli. Estimating
differentiation value consists of measuring monetary value and psychological
value.
Estimating Reference Value: The closest perceived substitute can be taken as raw vermicelli
which customers buy from the market and use to prepare upma themselves. (The customer’s
cost to make or perform the services themselves can also be used as a reference value).

Estimating Monetary Value: Monetary value drivers are tied to the customer’s financial
outcomes via tangible cost reductions or revenue increases. In the case of Seviyan Upma
monetary value can be estimated by taking the cost of each ingredient that the customer adds
when he prepares it himself (for a serve-1 packet).

Estimating Psychological value: In contrast to monetary value drivers, the intangible nature
of psychological value drivers such as satisfaction are not inherently quantifiable. In this case,
the convenience that the instant mix provides in the form of time savings is the psychological
value that the customer receives. Even for customers who don’t know how to cook a Seviyan
upma at home can now make it for themselves. Moreover, to other 3-minute snacks such as
noodles, this product is a far healthier alternative with no added preservatives and no maida.
All these factors together add to the psychological value that the customer receives in the form
of a healthy and convenient snack.

Reference Value Monetary Value Psychological Value

The convenience of making the entire dish (which usually takes 10- 20 mins to be prepared)
ready in 3 minutes is the psychological value that the customer gains.
The total economic value for the 50g packet should be anywhere more than 5.5 + 4+ 3 = Rs13.
The Psychological value for time saving, convenience and healthy alternative for a serves 1
packet can be assigned as Rs 5.
Therefore the total economic value can be 5.5+4+3+5 = Rs18.
An ideal point for the company to price a product like an instant seviyan Upma mix – 50g can
be Rs 20. The psychological value associated in such a case would be somewhere around 7Rs.
Keeping in mind the margin in each unit, 20Rs can be an ideal price for a product like this.

Note:
The monetary value is estimated by taking a tentative assumption of the cost of ingredients
used while preparing seviyan upma – single serve. Taking the market price for each ingredient
used and calculating for per unit, the price for ingredients is estimated.

Kunika Pandey
18020841165