Kelly Borth: How to consider the concept of ‘value-added’ in your marketing — and does it work? Featured

8:01pm EDT May 31, 2012
Kelly Borth, CEO and chief strategy officer, Greencrest Kelly Borth, CEO and chief strategy officer, Greencrest

“Value-added” has become one of those terms that has grown in ambiguity in recent years. The term has been overused, improperly used in some cases and often misunderstood by marketers.

At the 2012 Columbus Presidents’ Forum hosted by The Entrepreneurship Institute, the question of how to use the concept of “value-added” was asked in a breakout session I was facilitating. It occurred to me that if one CEO was curious about this, there are probably others out there with the same question.

The term was defined and popularized in 2000 by renown marketing professor Peter Doyle defined and popularized in his last book, “Value-based Marketing.” He labeled the “differential advantage” as giving customers a reason to choose your products. According to Doyle, it has four important components: value to the customer, uniqueness, sustainability and profitable delivery. All four components must be present.

Defining market value

Let’s take a look at definitions of market value and value-added. Marketing value at its core is presenting a product or service to potential customers for a perceived fair exchange of benefit and cost. It is commonly expressed by the following equation: Value = Benefits/Cost.

Online encyclopedia Wikipedia states that value-added refers to "extra" feature(s) of an item of interest (product, service, person, etc.) that go beyond the standard expectations and provide something more while adding little or nothing to its cost.

Putting it together

If we put it all in the proper perspective via the definitions above, value-added can be a very powerful marketing tool.

It makes sense that before we can address value-added, we first must address the whole value equation. Are the products and/or services we offer to our target market perceived as valuable? If not, there is obviously some work that needs to be done before we can move on.

If there is value, is the value great enough to cause uniqueness or market differentiation from our competitor’s products and/or services? If not, what benefits, features or additional value can we offer to achieve a differential advantage? And since the market expects us to offer this added value at little or no cost to them, how can we add value without significantly adding to our production or service costs?

Ah, this is where the value-added equation gets tough. It is unlikely that most of us can come up with the answer on our own. We will probably need to pull our product development, production, sales/supply chain and marketing teams together to brainstorm on potential solutions. Then we will need to test the market to make sure the value-added component increases the perceived worth and satisfaction in the eyes of the customer, thus achieving a differential advantage.

This means it takes an investment of time and probably an investment in further product and/or service development. I know we all want an easy answer which, by the way, is one of the causes of ambiguity around the term value-added. If it were easy, there would be no real increased value because the fourth component needed to achieve differential advantage — sustainability — would not be achieved.

The fact that it is hard work and takes deep organizational thought, investment, discovery of special capabilities to deliver something of higher quality at little cost and input from the market is what creates the true value-added components needed.

Make the investment now

As the economy continues to recover, investing in the discovery of the value-added differential advantage for your products and services will catapult you ahead of the competition when market growth is in full swing. If you wait, you will lose precious time and opportunity to grab market share.

Why not make it easy to choose your product or service over the competition — it’s a no-brainer in my book — just as your value-added component should make the selection of your product or service a no-brainer for potential customers.

Kelly Borth is CEO and chief strategy officer for Greencrest, a 21-year-old brand development, strategic marketing and digital media firm that turns market players into market leaders. Borth has received numerous honors for her business and community leadership. She serves on several local advisory boards and is one of 30 certified brand strategists in the United States. Reach her at (614) 885-7921, kborth@greencrest.com or @brandpro, or for more information, visit www.greencrest.com.