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Adding value to products requires businesses to maximize the difference between the input price and the selling price of the output. Business activities are basically to add value, namely by processing inputs into higher-value outputs. For example, a furniture company buys wood from loggers and processes it into various household appliances. To do so, it requires manpower and machines to run the production process.
Businesses add functional benefits to their products; for example, smartphone manufacturers use 5G technology for their products. Some companies have also developed emotional and self-expression benefits, increasing functional benefits and making customers willing to pay more. Of course, they do it all to make a profit and money.
However, adding value does not always make a company successful and profitable. It depends on other factors, namely competition and consumer tastes and preferences. Companies must face competitors in the market to satisfy customers. To be successful in generating profits and encouraging consumers to continue to buy, they must be competitive. Otherwise, the money goes to competitors, not to them.
Competitive companies must outperform competitors to generate sustainable profits. Sometimes they succeed, but not a few also fail.
Competitors may develop competitiveness and offer better-added value, making consumers prefer competitors’ products. If that happens, of course, what the company has to offer becomes non-sellable and, therefore, non-profitable. As a result, it failed to achieve success and competitive advantage.
Then, companies must also face the changing tastes and preferences of consumers. It also affects consumer interest in buying products.
Take the increasing public awareness of health and the environment as an example. It’s becoming increasingly popular lately. As a result, many consumers shift demand to products they consider safe for the environment and health. In this case, the company can offer added value by offering environmentally friendly products. Producing organic food is another way to add value.
Adding value to products along the value chain
Michael Porter provides useful insights into how companies can add value. He presents the value chain concept to explain where companies can do it. He grouped company activities into two categories: primary activities and support activities.
By definition, creating added value is about widening the gap between price and input costs. Companies can increase added value in two ways. First, they create incentives for customers to be willing to pay higher prices. Second, they lower costs.
In each of the activities in Porter’s value chain, companies can manage costs optimally, enabling more efficient business, lower total costs, and higher profit margins. In addition, companies can also stimulate customers to be willing to spend more, such as through branding.
Porter divides activities into two primary categories:
- Primary activities: Directly involved in producing and delivering a product to the customer.
- Support activities: Provide essential functions that support the primary activities.
Primary activities
The main activities are divided into five and how companies can create value; here are examples:
- Inbound logistics: Ensure timely and efficient procurement of materials to avoid production delays.
- Operations management: Design flexible production systems that allow for product customization, meeting diverse customer needs.
- Outbound logistics: Implement robust quality control measures and efficient delivery systems to ensure products reach customers in pristine condition and on time.
- Marketing and sales: Craft a compelling marketing mix that includes effective branding, attractive store displays, and targeted marketing campaigns.
- Service: Provide exceptional after-sales support, including warranties, repairs, and readily available customer service representatives.
Supporting activities
Support activities cover four subcategories, and within each, companies can add value, for example, by:
- Firm infrastructure: Offer lenient credit policies to incentivize purchases and build customer trust, particularly for larger transactions.
- Human resource management: Train and invest in employees who interact with customers directly, ensuring they possess the expertise and communication skills to deliver exceptional service.
- Technology: Develop a comprehensive information system that integrates across the entire value chain, facilitating data-driven decision-making and improved efficiency.
- Procurement: Maintain positive relationships with suppliers to negotiate favorable pricing and secure extended credit terms, reducing financial strain.
Example of how to add value to products
In the previous section, we discussed how companies can add value along the value chain; in this section, we will look at specific examples.
Additional features or functions
One approach to adding value to products is by incorporating features that enhance functionality and user experience. Smartphone manufacturers, for instance, consistently add value by equipping their devices with high-resolution cameras, superior processing power, and innovative features like facial recognition or long-lasting batteries.
Similarly, software companies can enhance product value by providing additional functionalities that simplify user experience. For example, Google Translate’s document translation feature or Google Maps’ TAG Locations feature adds value by offering increased utility and convenience to users.
In the automotive industry, car manufacturers add value by highlighting performance specifications like acceleration rate, top speed, and fuel efficiency, catering to driving enthusiasts who are willing to pay a premium for superior performance.
Convenience
Consumers today prioritize convenience. Adding value to products often involves creating a seamless and effortless user experience. Consider the example of restaurants – customers are drawn not only by the food menu but also by the ambiance and overall atmosphere.
Adding value through comfortable seating, stylish décor, and attentive service enhances the dining experience and justifies a higher price point. Similarly, hotels located near tourist attractions add value by providing convenience to travelers seeking leisure and exploration.
Even the location of a retail store can contribute to adding value to products. By choosing a convenient location close to customers, businesses reduce the time, effort, and cost associated with making a purchase.
Customization
In today’s world of mass production, adding value to products can also involve offering customization options. While some products may have standard features similar to competitors, companies can differentiate themselves by allowing customers to personalize their purchases.
For instance, a clothing company might offer a variety of colors and design options, allowing customers to tailor their selections to their individual preferences. Even within pre-defined specifications, some manufacturers allow customers to customize specific aspects of a product.
Luxury fashion houses, for example, often offer such services to their loyal clientele, who are then willing to pay a premium for a truly personalized product.
Customer service
Adding value to products extends beyond the product itself. Exceptional customer service plays a critical role in differentiating your brand and building customer loyalty. Companies that offer free delivery services directly to a customer’s home add value by saving them time and money.
Similarly, providing free installation services at a customer’s residence adds value by eliminating the hassle and technical complexities associated with product setup. This level of service creates a positive customer experience, fostering brand loyalty and discouraging customers from switching to competitors who don’t offer similar levels of support.
Saving time
In today’s fast-paced society, time is a precious commodity. Consumers crave convenience and efficiency, and businesses that can add value to products by saving them valuable time will win their loyalty.
Consider the widespread popularity of fast food – it offers a convenient and time-saving solution for busy individuals who don’t have the luxury of spending hours preparing meals at home.
Similarly, software companies can enhance product value by releasing updated versions that improve processing speed and order execution times. Think beyond bug fixes and security patches – highlight how these updates empower customers to be more productive and efficient in their daily tasks.
Branding
Branding is more than just a logo or a catchy jingle. It’s about crafting a powerful narrative that resonates with consumers on an emotional level. A well-established brand can add value to products by associating them with positive attributes like quality, sustainability, or social responsibility.
For instance, a clothing company committed to ethical labor practices and eco-friendly materials can add value to its products by appealing to consumers who value these principles. They’re willing to pay a premium for a brand that aligns with their beliefs.
Similarly, a brand with a rich heritage or a reputation for innovation can add value by creating a sense of exclusivity or status associated with its products. Think Apple products – their sleek design, cutting-edge technology, and focus on user experience all contribute to a brand image that justifies a premium price point.
Customer service quality
Exceptional customer service is a key differentiator in today’s competitive landscape. Adding value to products involves investing in providing a positive and memorable customer service experience.
Knowledgeable and friendly sales staff who are passionate about the products they represent can significantly influence a customer’s decision-making process. Positive interactions create a lasting impression and encourage customers to return for future purchases.
This aspect is particularly crucial for service businesses like hotels, restaurants, and consulting firms where customer satisfaction hinges directly on the quality of service provided by staff.
Investing in training and development programs that equip employees with the skills and knowledge to deliver exceptional service is an investment in adding value to the overall customer experience. Empower employees to go the extra mile, anticipate customer needs, and resolve issues promptly and efficiently.
Advertise products
Craft compelling advertising campaigns to cut through the noise and add value to products. Effective advertising goes beyond brand awareness—it simplifies the customer journey.
Imagine encountering a captivating advertisement that not only piques your interest but also educates you about the product’s benefits. Later, when a need arises for that type of product, you’ll have immediate brand recall and recognition, eliminating the need for extensive research and comparison shopping.
By pre-selling your product’s value proposition through strategic advertising, you save consumers valuable time and effort while positioning your brand as a trusted solution.
Delivery speed
Consumers today crave instant gratification, and businesses that can add value to products by ensuring prompt delivery will win their loyalty. Gone are the days of waiting weeks for a package to arrive.
The success of e-commerce giants like Amazon.com hinges on their robust logistics networks, which enable them to efficiently deliver products within a short timeframe. This emphasis on speed extends beyond the e-commerce realm—traditional shipping and postal services are equally reliant on efficient delivery processes to create superior value for their customers.
Adding value through fast delivery requires a strategic approach to managing information flow and goods throughout the supply chain. Investing in information technology and streamlining processes across all value chain activities is crucial for achieving optimal delivery speeds. This ensures products reach customers when they need them most, fostering a positive customer experience and repeat business.
Product diversity
For retail businesses, a diverse product line can be a game-changer. Adding value to products by offering a broad and deep selection caters to a wider range of customer needs and preferences.
Imagine the convenience of visiting a single store, either physical or online, and finding a comprehensive selection of products that fulfills all your requirements. This eliminates the need to waste time and resources visiting multiple stores in search of specific items.
Furthermore, product diversity empowers customers to compare prices, features, and quality within the same store, ensuring they make informed purchase decisions and select the product that best suits their needs.
By providing a variety of options, businesses can add value to the overall shopping experience and establish themselves as a trusted one-stop shop for customer convenience. This approach not only increases customer satisfaction but also fosters
Company image and reputation
A company’s image and reputation are more important than ever. Consumers are increasingly basing their purchasing decisions on factors beyond just price and features. Businesses can add value to products by establishing themselves as trusted and reliable entities.
Consider the credit card industry – consumers entrust their financial information to these companies, so a reputation for robust security measures and data protection is essential.
Similarly, with the growing emphasis on environmental responsibility, companies with an eco-friendly reputation can add value to their products. This resonates with environmentally conscious consumers who are willing to pay a premium for brands that align with their values.
By demonstrating a commitment to ethical practices, sustainability, and social responsibility, companies cultivate a positive brand image that fosters trust, loyalty, and ultimately, adds value to their offerings.
A strong reputation allows businesses to command premium prices, attract and retain top talent, and build stronger relationships with partners and suppliers – all factors that contribute to long-term success.
Free gifts
Adding value to products can be as simple as offering free gifts or promotional incentives, but it’s important to go beyond mere giveaways. Imagine a soap manufacturer that throws in a free bottle of shampoo with every soap purchase. These freebies can entice customers, create a perception of greater value for their money, and foster a sense of delight.
However, to maximize the impact, companies should strategically plan their free gift offerings. Consider targeting freebies that complement the core product or cater to a specific customer segment.
For example, a razor company might offer a free travel-sized shaving cream with every razor purchase, enhancing the overall shaving experience for customers. Beyond free gifts, companies can implement various promotional strategies, such as loyalty card programs that offer discounts or coupons. These incentives not only encourage repeat business but also add value to the overall customer experience by rewarding customer loyalty.
Unique packaging and design
First impressions matter, and this applies equally to products. Adding value to products can be achieved through captivating packaging design and aesthetics. Consider the smartphone market – consumers are often drawn to a phone’s sleek design and stylish look before even delving into its technical specifications.
Similarly, packaging design plays a crucial role. Manufacturers can add value by creating visually appealing packaging that not only grabs attention but also effectively protects the product inside.
Investing in creative design elements that combine aesthetics with functionality can significantly enhance a product’s perceived value. For instance, a company selling organic cleaning products might utilize recycled materials for their packaging, showcasing their commitment to sustainability while maintaining a clean and modern aesthetic.
Offers simplicity
Consumers increasingly crave simplicity and ease of use. Businesses can add value to products by prioritizing user-friendly design and intuitive functionality.
Imagine software programs that utilize clear buttons and straightforward interfaces instead of requiring complex coding to execute commands. This focus on simplicity empowers users of all technical backgrounds to navigate the product effortlessly, saving them time and frustration.
By prioritizing a user-centric approach and eliminating unnecessary complexity, companies can add value to their products and cultivate a loyal customer base that appreciates a seamless user experience. Furthermore, simplicity extends beyond the product itself.
Companies can add value by offering clear and concise instructions, readily available customer support, and streamlined warranty or return processes. By making it easy for customers to understand, use, and maintain their products, businesses demonstrate a commitment to customer satisfaction and build lasting relationships.
