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How to Offer Real "Value-Added"
Without Sacrificing Your Profit

"It's not just about selling. It's about communicating with your customers and sales team to determine the best ways to add value to your product or service without lowering your price so low that you can barely make a profit."

By Christine Corelli
The "Sales-Service Excellence" Expert

Tired of defending your price? Upset with having to give a discount to get the order but pricing the product so low you are not making a decent profit? Maybe you need to start looking at this the other way around.

Even though rising costs are driving your prices higher, you can not focus on price alone. If you do, your customer will also. You need to rethink your entire sales approach. You have to turn the attention to the quality of your products/services and the value-added offerings that your organization can provide that set you apart from your competition.

Staying realistic in today’s world

I realize we are in a tough economic situation and everyone is concerned about cost. But you need to be able to move your customer away from being concerned about the basic cost to recognizing the more intrinsic value that only your company can impart to your product or service.

The reality is that customers are also very interested in the quality and longevity of the products they purchase and the higher level of service your company can provide. That’s true regardless of price. In fact, some of the healthiest segments of the market today are in the high-end (high price associated with quality) product arenas.

The real approach to value-added selling

The answer is a renewed commitment to value-added selling. This is not new and it is not simple. In fact, if asked, most companies would say that they are already a value-added selling organization. The truth of the matter is that those same companies often pay lip service to the concept of value added. Just because they say it doesn’t mean they actually do it.

According to noted author and sales trainer Tom Reilly, who was one of the early advocates of the concept two decades ago, “Value-Added Selling is a philosophy and a process; it is strategic and tactical…it is more than a fad, it is a mindset, an attitude, and a paradigm deeply rooted in your psyche and demonstrated daily in your behavior.”

In today’s environment, where so many products are viewed as commodities and where there is intense competitive rivalry, adding value is not optional. It is critical to long-term success. Smart businesses and their sales teams continuously look at how they serve their customers. They determine how to add value to what they sell or offer to separate themselves from their competitors.

Value Added is the best way to differentiate

Every product and every service can be differentiated in the customer’s mind. Even in today’s world, the customer is often willing to buy based on the value they believe is inherent in the product or service--even if it is at a slightly higher price. To set yourself apart, you need to determine the appropriate value criteria and then communicate it loud and clear. Which benefits do your customers value the most?

Listen to your customer to determine value drivers

It is what the customer wants--not what you think the customer wants--that determines value. Before you can identify how to add value or be able communicate it, you must first identify value drivers for your particular customer. For every industry and every customer, it will be different.

Listening to customers is certainly not a new idea. However, many companies rely on market research instead of going directly to the source. And while top-level managers routinely make customer visits, they are often focusing on the largest ones. Consequently, their conversations simply do not go far enough to thoroughly understand the customers’ concerns and problems at all levels. The wise company knows that all customers, regardless of size, are important.

Asking great questions will give you the information you need to get started. They should be imaginative and probing to help you internalize their problems, issues, concerns, disappointments, as well as their successes. Phone and visit as many customers as possible. Conduct focus groups and do formal surveys as well. If you are a manufacturer who sells through distributors, talk to your customers’ customers as well.

In addition to talking to customers, your sales staff should also be able to identify at least ten things that your customers want based on what they hear in the field. Ask your external and inside sales teams the same questions you ask your customer. Talk to your customer service reps and learn what they are hearing as well. By viewing the situation from many different angles, you will be able to find out what is most important to them.

• “What is most important to you about…?”
• “What are your key business initiatives?”
• “What are your short and long-term goals?”
• “What are your biggest issues and challenges?”
• “What impacts your bottom-line?”
• “How well do you understand…?”
• "How do you think our company is viewed in the industry?”
• "What can we do to improve our level of service?"
• "How can we increase the value of our services?"
• "What can we do to make it easier to do business with us?"
• “What would make you say, “WOW?”
• “What questions would you like to ask us?”
• “Are there any questions I haven’t asked that I should be asking?”

Determine how your product or service will positively impact your customers’ business—or even their lives. If you sell to consumers, ask what your sales associates and call center people are hearing. Involve them in determining ways in which the customer can be enticed and delighted with your product or service.

Listen, listen, and listen again to your customers and to the cash register. Case in point is Victoria’s Secret, a well-known women’s retailer for undergarments. The company went from being a line of lesser-known products to a major seller to all age groups. They have been successful by knowing how to promote and up-sell at all their locations. They sell high-end luxury items that cost significantly more than the discounted products of comparable value. How do they do it? By being constantly in touch with their customer and modifying their efforts as necessary.

Recognizing that consumers are cutting back, they are changing their product line to reflect a less specialty product line to one that is more useful. They are keeping prices competitive by packaging items. They are promoting comfort over looks. While pushing value-added sales points, they still maintain a product line that is distinctive and captures attention.

Consider using a Value Management Objective Process

Some companies use the VMO (Value Management Objective Process) in which performance criteria are set and evaluated by the customers themselves. Businesses and customers reach agreement on priorities, action, and outcomes. Then, they take action!

Below are just a few examples of how businesses have learned to provide value:

Speed of service or delivery
One of the ways to add value and differentiate your business is to guarantee on-time delivery or even faster turnaround than your competition. One company that profited from this is example is Domino's Pizza. They made a fortune with a simple strategy and brand promise... to deliver a simple pizza faster than any other company. If you have ever waited for a pizza at dinnertime on a Saturday night, you will know the value of this commitment promise. They have been able to consistently deliver on that promise and the rest is history.

Industrial distributors are well aware of the importance of speed. For example, a crucial part of the service that buyers are seeking from chemical distributors is the speed at which they respond to questions and confirm shipments on solvents purchased in drums or bulk.

Machine tool purchasers always ask their distributors, “How fast can you ship?” Construction equipment dealers also know that when a machine goes down on a job site, their ability to get a service tech on site fast is the critical factor in preventing loss of time and money on the project. Some dealers even offer 24/7 tech service since many construction companies do not work just 9 to 5.

If you are an industrial manufacturer who sells through distributors and your lead-time is four weeks for delivery, you have a real problem if your competitors start to deliver in one. Customers do not even have to tell you they may decide to switch. You need to counterattack fast. Appoint a steering committee made up of department heads from manufacturing, sales, marketing, finance, customer service, and information technology. Then, create a working task force of high-performing employees. Have the two groups map out the order fulfillment process from order entry to delivery at the customers’ dock including the billing process. Then figure out what’s holding back production and streamline your operation.

Speed in providing tech support of information is always critical. If you are a distributor, make sure you have knowledgeable people with high levels of expertise on staff at your distribution facility, so that if the customer has a question about a product, they never have to hear, “I don’t know. I’ll have to check with the manufacturer and get back to you.”

Instant rebates
If you provide rebates as a form of adding value, make sure they are instant. Providing instant rebates at the cash register is a major seller because it eliminates the customer of having to bother filling out forms, attaching receipts, mailing them to obtain the rebate.

Education and service above and beyond the competition
Another example comes from a construction equipment distributor who has a value-added service practice few others have. When a machine is delivered, they instruct the buyer to block out three to four hours for the "delivery presentation." During this period, the sales person and a service technician educate the buyer. Usually, the construction company president, the equipment operator, and the mechanic are included.

The sales person and tech make a thorough one-hour presentation on the machine's features and benefits, the next hour on critical safety aspects and procedures, and the next hour on maintenance. They allow the last hour for Q & A. A few hours after leaving, the sales person makes a follow-up call to ask if they have any further questions. Then, the sales person and the service tech call again two days later to ask if they can be of further service. This is a great example of a value-added practice. In addition, it helps to build profitable relationships.

If you own a party rental business, provide customers with ideas and information not only on how to best use the products you rent, but how to do the job more efficiently.

Free, shipping, delivery or installation
When a customer receives a call from an electrical fixture supplier informing her that the large chandelier she ordered is ready for pick up, she asks whether it will fit in her mid-sized car. The salesperson transfers her to the warehouse manager. He measures the box and informs the customer that it might not fit. The customer says she doesn’t know anyone who has a larger car or van. The warehouse manager tells her that he’ll have it delivered by the truck that brings lighting fixtures to building projects. The customer asks what the charge will be and is told there will be no charge—it is just a part of their service. The customer is absolutely delighted. This is value-added. So is free assembly or installation.

Keep in mind, that if you are going to go the extra-mile, for customers, it does cost. Make sure you don’t do anything without sufficient ROI.

Unique and desirable product features
Even though identification and prioritization of new features is a critical and daunting task, it can determine the success or failure of your product. Product managers, in particular, love to add features. Below are four basic questions you should ask to ensure that the added features will make a difference in sales:

1. Will your feature solve a particular problem for the customer?

2. Is the feature one that others have failed to add?

3. Will you be first to market the feature?

4. If the customer has a choice between our product and a competitor’s, will this feature make the difference in the sale?

5. What features provide real benefits?

Bundling and packaging
Many companies create desirable packages, purchasing levels, and a series of added benefits that are significant in value. Often, they are in themselves significantly more valuable than the product is by itself. The idea is to create a product that is bigger than itself and an offer the customer will have difficulty refusing.

Sales training
If you are a manufacturer who sells through distributors or dealers, you can add value and increase your sales if you provide sales training. Most companies offer extensive product training, including presentation of “features and benefits.” Often, however, they do not provide sales training, especially on value-added selling skills and consultative selling. The most important area is often left to sheer instinct and personal style. I don’t get it. Training is the key to success. Without it, the organization goes off on tangents—which may be fine during the best times but is disastrous during the bad times.

Frequent fliers--frequent buyers
The concept is simple. The more someone buys from you, the more service, pricing, benefits, and related items they should receive. It is the same as frequent flyer miles with an airline. If you have a rental business, you can give price reductions for long-term rentals, or even provide rent-to-own options. Any business can do it—and it is good for business!

Security of supply
Another major concern among buyers is security of supply. For example, if a pharmaceutical company needs chemicals for their insulin products, a supply disruption from their distributor can have a devastating effect on the customers that depend on that product. Here, peace-of-mind and risk avoidance are value-added components. Keeping abreast of the market conditions and continual communication with the customer will help provide a level of buyer comfort that is really appreciated today.

Longer warranties, after-sale service, and superior service policies
In the auto industry, one of the most important value-added services was the provision for warranties that extend to the life of the car. This still is a major draw for the average car buyer who wants a good car with a lot of protection. And it worked.

Lexus provides another great example from the auto industry. They were the first auto manufacturer to instruct their dealers to provide a lifetime offer of a free weekly car wash with their purchase. It was such a great value-added service offering that other car manufacturers followed suit.

A material handling and construction equipment distributor who is known for World Class service has a “No-Questions Asked” policy. If anything goes wrong with the new equipment in the first couple of months after purchase and their tech cannot fix the problem the first time, they ship a brand new machine to a job site; this practice costs money, but provides enormous peace of mind to a construction company owner. It also breeds extremely high levels of customer loyalty, and is, indeed, value-added.

Value-added conversations
Customers ask for quotes or prices based on their understanding of your products or services. They do not necessarily consider your “value-added” options.

The most important job you have is to educate the customer, not only on features and benefits, but also on the additional benefits that make buying your product or service the best decision

Little things make the difference
Often, it’s the little things such as a free car wash that can make a big difference. For example, smart hotel enterprises have a practice that demonstrates this point. They have not one, but two, free bottles of water in their hotel rooms. Do you think guests appreciate this? You bet!

Others have added value beyond free water. There’s sign on the top of their honor bar that reads, “We want you to enjoy your stay. Please accept the following contents in the honor bar with our compliments: bottled water, orange juice, and soda.” Of course, they build the price into the room rate, but in the eyes of their guests, this is a hotel worth the money.

And let’s not forget FREE Wi-Fi—the ultimate value-added concept. No hotel should be charging for Wi-Fi these days. In fact, many conference planners have stated that they only choose hotels that offer this value-added service because their attendees complain about having to pay this charge. I predict that soon, all hotels will catch on and Wi-Fi will be free in all hotels.

Some hotels help the early-bird check-outs who must catch the first flight out by having complimentary coffee, a bottle of water, a muffin, and an apple to go. Nothing is more appreciated as they pick up the bag and coffee and quickly get on their way.

There are so many simple ways that smart companies are adding value:

1. Including batteries in children’s toys is a wonderful value-added practice…especially during the holiday season when frazzled parents have too much on their plates! Including them in all electronics would be a great help.

2. Banks can and should offer business development programs to their commercial clients. They can also bring seminars on savings, trust programs, and other investment products to their larger consumer account holders.

3. Some distributors send a special little gift to the purchaser with every order. Sometimes, it’s a box of golf balls, other times, it’s a coffee cup. But there’s always a little gift people can look forward to.

Little things make a difference, but like going the extra mile, they do add up. Make sure you track the cost and also that you’re getting a return on investment.

Businesses Don't Do Business. People Do Business!
It's all in the relationship. This holds true for every business. The critical underpinning of all selling situations, especially value-added, is the relationship between buyer and seller. This is true in remote buying situations where the relationship is established through brand loyalty or in closer relationships where the buyer and seller sit face-to-face and develop strong personal relationships.

Loyal customers become loyal because of having a relationship with someone they can trust. This is as high a priority as fair price.

Value-added sales people work hard and use many techniques to enhance their business relationships. If you are in sales, listen more than your competitors. You will never listen yourself out of a customer. Become a true master of your product or service and your industry. Strive to provide more knowledge, more expertise, and a higher level of service than your competitors.

Position yourself as the "go-to" person for your customers and potential customers. Help your existing and potential customers -- even when there's nothing in it for you. These are all value-added contributions to your customers. They help to build long-term relationships and increase your ability to obtain quality referrals and increase word-of-mouth advertising.

The Bottom Line
Based on my experience working with some of the most successful businesses across the globe, adding value and providing a superior level of service than your competitors, is not optional; it is critical to the success of your business. Develop an obsession to deliver the highest level of service with every customer, every day. And when it comes to relationships, they will see you through the inevitable cycle of hard times.

Now is the time to communicate your value-added offerings and not lower your price where you barely make a profit. Instead, “partner” with your customers and work with them so that the price is fair and affordable to both. The advantages are many and there is absolutely no downside. Most important is the opportunity to sustain a competitive advantage in the most competitive situation we have ever experienced.

© Copyright 2008 Christine Corelli. All rights reserved