Value Added Nervous

In Business on March 17, 2009 at 6:24 am

When attempting to close a sale new entrepreneurs and business owners too often make the mistake of offering additional products or services for free when they should instead be refining their core product’s value proposition. What young entrepreneurs often call “value added service” – the giving away of other soft or hard commodities – is really just poor business; a lack of understanding of their product’s value and a clear sign that they posses little or no skill as a salesperson.  Secondly, the perception that whatever extra time spent and advice given to a sales prospect (regardless of relevancy to the product) is  good customer service is just wrong – that’s what I call “under the radar” value added service, you don’t even know what you gave away.

Rule Number 1: Value Added Service ≠ Customer Service (Great or otherwise).  I’ve read the industry bibles about excellent customer service and not one says anything about pre-sale giveaways (which in the real world of business are called promotions).  In fact, customer service does not begin until a prospect becomes a customer.  It sounds like semantics, doesn’t it? It’s not.  The sooner you learn this, the sooner you’ll stop drowning.

Rule Number 2: You cannot afford to play the Value Added Service Game.  Why? Because you don’t yet know the value of the products you are selling or giving so blithely away.   I called it a game because it is such a thing – and it is a Big Boy’s Game.  How can you afford to give things away unless you know what they are worth?  If you don’t know what your time and products  are worth and you give them away, we should assume they are worthless.  If you’re going to act like your time is worthless go work at McDonald’s.

Rule Number 3: Learn how to price your product – know your value proposition. This should be Rule Number 1, or really before all rules.  Unfortunately, most of us have to live through failing the first two rules to understand it. You are inclined to believe your product is of high value, and therefor worth a high price (you wouldn’t have put your effort into it otherwise, right?).  Yet, you find that you are repeatedly giving away extras (in time or materials) to help close the sale,  and believe this an acceptable, even successful solution.  You made the sale, maintained the price and only gave away three hours of your time doing X,Y and Z for your customer.   The reality is you spent 3 hours not making money when you could have been making other sales, 3 hours devaluing both your core product and your personal expertise, 3 hours failing with your value proposition.

Rule Number 4: Learn to sell your product – a business owner is a salesperson. Yeah, I know, you don’t want to.  You hate salespeople and you just don’t want to become one of those assholes.  In the meantime you’ve leveraged your home into a second mortgage, borrowed 100K from your parents and your spouse doesn’t remember what you look like, all so you can sit on a garage full of tchotchkes you can’t get rid of.  Who’s the asshole now?  Learning to sell is invaluable for every person who wants to own a business.  Selling is a skill necessary for many business activities, from enticing investors down to unloading your goods.  Becoming a disciplined salesperson will help you identify the strong and week points of your value proposition, and learn the ticks of your customers.

Somewhere along the way customers got wind of the term “value added service” and thought it was for their benefit, which it is not.  The term is for a marketing method by which companies bundle services or products together because it is convenient and profitable for the company to do so.  Look it up.  If you think your single product needs to have items added to substantiate the price you’ve set – well, why not just lower the price, double your sales and stop working so hard?  If the thing you’re giving away has such value that it’s closing the primary sale, why aren’t you pricing and selling that secondary item as well?

  1. Hi Mike,

    Great post about providing profitable value to clients!

    How did you obtain so much expertise?

    Christine Elisabeth von Malsen Hueber

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