Business Articles
	The Importance of Added Value by Mary Hanson

Historically, fortunes have been made by being in the right place at the right time - and being able to take advantage of economic opportunities. Having money, transportation, contacts, a labor force, or information used to be a major advantage that allowed an individual or company to take advantage of opportunity where others could not. Historically, the average person did not have the means, the education, the contacts, or the opportunity to engage in business.

Having money, access to transportation, the ability to communicate, contacts, a labor force, the ability to maintain records, or other resources available when technology or industry or social circumstances presented an opportunity was sometimes all that was required.

In today's economy just showing up is definitely not enough. Whether you are providing (or hope to provide) goods or services, you must have some angle or advantage over your competitor's goods or services if you wish to have a successful business plan. If you and your current competitors cannot or will not provide customers with the goods or services they wish or require, some other business will. There are few barriers to entering the marketplace.

The economy in the United States today is a well developed economy. Almost every individual and every firm has access to funds, personnel, transportation, communication, technology, and education. Your business plan (whatever it is, whether written or just in the back of your mind) must address the question of what advantage or extra benefit you can provide your customers.

In a developed economy in which there are few barriers to keep new competitors out of your market, it is important to include some "added value" to the services you provide to your customers. Success requires doing more than just showing up and just doing what is required or expected.

Some of the "added value" that customers may particularly appreciate include:

       * Personal attention to particular customer needs;

       * Prompt response to customer requests;

       * Attention to detail to make sure goods and services will meet specific customer standards;

       * Honest and timely communication to the customer (on timing, schedules, delays, problems, costs, availability, and alternatives);

       * Taking responsibility for the project, making sure services are complete, co-ordinated with other parties, on schedule and according to specifications, rather than making the customer take on this responsibility;

       * Personal relationship and personal credibility that what is recommended is best for the customer and that information provided is accurate and complete;

       * Clear billing practices that give the customer control and satisfaction with the payment process;

       * Efficient databases to facilitate tracking and communication regarding the project.

While these are not unique services that cannot be provided by every competitor, they are service attributes that small businesses can provide more consistently than larger businesses. A smaller business can make certain that every employee is able to provide the added value. A small business owner is able to make changes in procedures, training, and hiring to make certain that customers get the "added value."

Most of the above can be a significant added value to a customer, and yet cost little or nothing to implement. There are many other business services that could add value to customers. Many do involve additional cost. Any service feature that involves technology can provide significant value, but can also be costly in set up, maintenance, and training. These include web sites, 800 telephone numbers, delivery tracking systems, and project or inventory tracking systems.

Perhaps the more costly technology based improvements should be considered, if the added value provided justifies the expense. If the value is significant to your customers so that the added cost can be passed on to customers or if the improvement in service or efficiency will save money, even a large expenditure can be appropriate.

Whether you are trying to increase business, trying to increase profits, or just worried about maintaining a good level of business in a down economy, providing "added value" to your customers will help you achieve your goals. If the economy weakens it will become more important to have a competitive advantage or a reason for customers to choose your firm over your competitors.

If you are merely providing the same goods and services as your competitors, then why would a customer chose you? If you are competing solely on price, without providing any added value, is your only competitive strategy to put your price down lower and lower? As the price drops will you drop service levels, advertising levels, skill levels, and customer contact? If these valued services drop, how can you justify your price? Will you have to drop your price further to get business at the reduced service levels? Obviously, this is a downward spiral for a business competing on price.

The better approach for the successful small business is to develop a plan based on providing added value to all services provided, basing prices on both the core services and the cost of the added value. Include added value as part of your basic business plan.

Added Value

Consider whether any or all of the following might be "added value" that your company could provide beyond the basic product or service that your competitors provide:

       * Better record-keeping or tracking of what services were provided, when services were provided or are scheduled to be provided?

       * Clearer invoices, more efficient consistent billing procedures, or more payment options?

       * Better communication about service availability, personnel, schedules, delays, or alternatives available?

       * Informational brochures or a web site to make additional information available without keeping your personnel on the phone (and knowing how the information is presented)?

       * Longer hours? Alternative methods of communication including cell phones, pagers, or e-mail?

       * Better follow-through and responsibility? Rather than requiring the customer to follow up and make sure things are done, could your staff take fuller responsibility and make sure things are done, completed, and co-ordinated with the customer or others?

       * Follow-up procedures that require your personnel to call the customer at certain points in a project or when a project is completed?

       * Improved databases that make project information available to your entire staff, so that the customer does not have to track down the one person with the information?

The objective of providing added value to the customer is to become the preferred vendor to your customers, to be the first choice over your competitors, to benefit from word of mouth referrals and enjoy lower costs of advertising or promotion, and to be able to charge higher prices for premium services.

Service Negatives

If you are thinking that YOUR customers will not pay for or appreciate added value, consider how customers respond to service negatives. Have you ever suffered the following in situation where YOU were the customer:

       * No response to your calls?

       * Confused information or wrong information in response to your requests?

       * Surprises when you get your bill?

       * Surprises when you receive the services you supposedly ordered?

       * A bill for services you never knew you ordered?

       * Lack of follow through, so that your time is needed to inquire, double check, review, and supervise the services provided?

       * Wrong delivery time, address, or cost?

       * No one but your contact or the business owner has any information whatsoever, and you cannot obtain information until they find Tom?

If your blood pressure goes up recalling these failures to provide service, reconsider whether added value in customer service can really go unappreciated.

If you are thinking of starting a new business, you must ask yourself what "added value" you can provide to customers that is not being provided by your competitors. If your competitors are failing to provide "added value" to customers, your opportunity in the market place is to establish your firm as the one that can and will provide added value to customers.  

Publisher's Note

There are some goods or services that are sold based on price only. Or markets where customers simply won't pay a penny more for good service. Avoid getting into these industries or market situations. If you believe your industry is structured based on price alone and resistant to paying for added value, try to find another product line or service to get into where some value can be added.

Even in good times, competing on price alone is a fairly hopeless proposition. Most small businesses cannot adequately compete on price, since in our well-developed economy there is always some large competitor who can has the greatest advantage on price. The small business does best when added value is appreciated.

Mary Hanson, MBA, Attorney at Law (310) 543-1355 Torrance (Los Angeles County), California USA