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The Benefits of ‘Value Add’

(June 2009) posted on Wed Jun 03, 2009

What does value-added service mean to you?

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By Marty McGhie

One of the favorite buzzwords in our industry is “value added.” The ideal of value-added services for our customers is one we all attempt to achieve in the various segments of our businesses.

But just what does value-added service mean to you? Or more importantly, what does it mean to your customers? And ultimately, is the value-added service you provide actually perceived by your customer as something valuable? Let’s attempt to define just what value-added service might be.

Rules of engagement
Some of us use the notion of “value” in a misguided attempt to avoid focusing on price or to justify a higher price on a given product. That just doesn’t work. This begs the original question: If what you call value-added service doesn’t seem like that to your customer, then price will likely become the driving force in determining whether or not you get a particular job or retain a customer. That’s not really a place you want to consistently find yourself.

So how do pricing issues and valued service interact? In today’s difficult economic climate, it generally feels like we are at war, and in many ways the rules of engagement have changed. Pricing now has to be part of the equation, no matter what.

In our own company, we have had more pricing-related discussions with our customers and vendors in the first part of 2009 than we probably have had in the last three years combined. I’d have to say that we are now functioning in an environment unlike any we have ever experienced. And in this environment, costs are critical to everyone. So if you grant me that assumption, we can now ask ourselves: Is price going to always be the most important issue we deal with? I firmly believe the answer to that question is “No.” Providing consistent value to a customer can still trump the pricing game—but you really must approach your customer with both value and pricing in the equation.

Case in point: Last October, one of our key clients flew to our facility to discuss product options, production issues we might have had during the previous year, and any changes to our pricing structure for 2009 so she could, in turn, pass those costs on to her clients. We agreed on some modest percentage increases on most of the products we produce for them and were set for the upcoming year.