The internet has definitely torn down some barriers to entry and made it much more challenging for businesses to stand out amid a sea of competition. It can feel like there are dozens of companies competing for your customers on a daily basis. If this sounds familiar, you need to focus on differentiating your offering in the form of strategic value-adds.
The Internet and Increased Competition
“Competition is a game — the game that ultimately ensures that the supply and the demand functions for a given good or service interact in an efficient manner,” finance expert Bernardo Urrutia explained. “This game requires a playing field and fair rules to play it. The playing field is called ‘market’ or, more precisely, ‘the relevant market’. It is defined for a given product or service in a well established geographical space. Competition rules, also called anti- trust principles, ensure the fair development of the game.”
The thing about the internet is that “the relevant market” and “competition rules” don’t apply in the traditional sense. The internet is unlike any physical market and the same restrictions don’t always apply. You’re dealing with a myriad of external and global factors, as well as barriers to entry that are virtually non-existent.
While increased competition is good for the consumer, it’s dangerous for established businesses that find it challenging to remain competitive when new companies enter the industry with a focus on slashing prices.
How Value-Adds Create Differentiation
When competition is high, differentiation becomes the prominent focal point for businesses hoping to thrive. And while price is something that businesses typically turn to, it’s almost impossible to differentiate on price in an ultra-competitive market. You’ll find that prices are already pared down to the bone and there’s hardly any room for movement.
Thankfully, price differentiation isn’t the only choice. Many choose to pursue organizational differentiation through branding. As one expert puts it, “Maximizing the power of a brand, or using the specific advantages that an organization possesses can be instrumental to a company’s success. Location advantages, name recognition and customer loyalty can all provide additional ways for a company differentiate itself from the competition.”
But organizational differentiation takes a lot of time — time that you may not have. While you can pursue this sort of differentiation, you’ll need another strategy that works well in the meantime. The easiest and most effective solution is differentiation through product offerings. More specifically, you can enhance your core product offering through value-adds.
As Investopedia explains it, “Value-added describes the enhancement a company gives its product or service before offering the product to customers. Value-added applies to instances where a firm takes a product that may be considered a homogeneous product, with few differences (if any) from that of a competitor, and provides potential customers with a feature or add-on that gives it a greater sense of value.”
While value-adds have been around for years, the concept has become increasingly popular in the world of eCommerce where customers have access to just about any product they want and can comparison shop for the lowest price in a matter of seconds.
The biggest question you have to consider when thinking about value-adds for your products is, “What does your customer really value?” It may take some time to find an answer to this question, but it’s imperative that you discover it before investing in things that may not work.
Three Suggestions and Value Added Examples
While you’ll need to tailor value-adds to your products and target market, it can be helpful to mull over a few suggestions and study what other successful brands have done.
1. Free Gifts
One of the preferred methods of adding value to a core product offering is to offer “free” gifts that come with the purchase. The word free is in quotations because you can obviously account for the cost in how you price the product.
Free gifts are appealing because they make customers feel like they’re getting more for their money. The good news is that free gifts don’t have to be expensive or nice. A simple tchotchke can do the trick.
StarNamer, a website that specializes in star naming services, is a great example. Whenever a customer makes a qualifying purchase, they get the following free gifts: star name and photo launched into space, planetarium software for online star viewing, an astronomy ebook, and the ability to upload a digital photo into the star registry. These are all simple things, yet add tremendous value to the core product itself. Why? Because StarNamer knows that its customers value them.
2. Unique Packaging
While some companies look at packaging as a nuisance and attempt to design the most cost-effective solution possible, it’s ultimately a form of differentiation in crowded niches.
Take the wine and spirits industry as an example. Liquor is a notoriously difficult niche to enter. Liquor stores only have so much shelf space and most customers go in looking for a very specific brand — or at least brands they’re familiar with. Trying to get noticed amid a sea of other bottles is a challenge that even the most successful branding experts have failed at multiple times over. This is why so many liquor brands are turning to unique packaging as a value-add.
The tequila brand Buen Suceso is the perfect case study. Their bottle uses multiple colors and shapes to create a visually enticing pattern that stands out when compared to countless other clear bottles. It also screams “fun,” which is the point of tequila, right?
3. Intangible Benefits
The third major category of value-adds refers to intangible benefits. As the name suggests, these are benefits that can’t be physically held. They are things that speak to the customer’s longing for acceptance, affirmation, or status. In the eCommerce world, these often include memberships or other related benefits.
Gun manufacturer Taurus is a good example. They occasionally run deals, like this one, where they give customers a free one-year NRA membership when they purchase a qualifying firearm. While this is a $35 value, it’s more than the money that matters to customers. Gun buyers care a lot about gun rights and safety, and the NRA speaks to them on many levels. The fact that they’re purchasing from a company that understands this adds considerable value to the purchase. It’s a small touch that makes a big difference.
Overcome Competition With Value-Adds
The internet is great for businesses. It allows them to connect with new customers without physical barriers and points of friction. However, as you’re well aware, this also mean competition is higher than ever before. Instead of competing with one or two companies in your region, you’re tasked with cutting through the noise and fending off dozens of competitors offering products and services that are nearly identical to your own.
As shown in this article, value-adds represent timely and cost-effective solutions for differentiating in even the most congested of industries. Attempt to find value-adds that truly speak to the needs and desires of your target market for best results. If you succeed in adding value to your product, you’ll benefit tremendously.
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This article, “How Value-Adds Can Enhance Your Core Product Offering” was first published on Small Business Trends