Value-Added Services

How many times have you said that competing on price is a fool’s errand and you need to find a way to break your clients mind set that it’s all about competitive pricing? Well, there are many ways to break this cycle. One of them is providing value-added services to your clients and prospects.

Value-added services are those services that you can offer clients and prospects to separate you from your competition. And where there is no difference between your clients and prospects, and you are providing a commodity,  the only logical choice in choosing one company over another is, “Who is offering the lowest price?”

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This is the situation in many industries, from mining to your local supermarket, gas station or internet provider. Some companies try to make a simple distinction by providing better or friendlier service or delivery, but that is the obvious first step and usually the commodity aspect of what is offered is so similar that price soon becomes the decision point. If you are in this position your choice is easy: get your costs down so you can offer the lowest price. If you are not a large company that can offer economies of scale, it is unlikely — though still possible — that you can have low cost. Your choice in then to reduce your prices, and hence profit, or become more creative to “decommodify” your product or service.

This is where value-added comes in. If you can discern your clients needs or get him to think out of the box, beyond offering him just the basic thing that you are selling, you are on the way to providing value-added services and avoiding cut-throat price competition.

Here are a few examples from the simplest to more involved and creative solutions. Volume discount, extended payment terms and zero interest financing fall into the first area — and you probably have done this already. To the extent that your competitors have done this as well, you are probably back to competing on price, so you need to become more creative.

Here is just one example of a value-added service. You are providing a service to a manufacturing company; it is either a small part of a large corporation and is not getting the resources it needs, or it is a small stand-alone company without such resources. In some cases, they might not even know what they are missing and you can open up their eyes to what value-added service they need and then provide that service, provided that they give their business to you. To do this you would have likely either worked for them before, or have serviced similar companies. You would then know enough about what they should have and be capable of providing that service to them. This could range from (depending on what you know) work flow improvement, increased processing speed and better quality control/reduced scrap, to assessment of their internal staff and free outplacement of terminated employees/HR consulting.

There is no limit to what value-added services you can offer to avoid commodity pricing, given a customers’ needs and your creativity. The more volume you get, the more value-added service you can offer; it’s like the gold, silver and platinum levels for frequent flyers.

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Michael Neidle

Michael Neidle
Michael Neidle is president and CEO of Optimal Management, an advisor to staffing firm owners and managers.

Michael Neidle
Michael Neidle is president and CEO of Optimal Management, an advisor to staffing firm owners and managers.

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