This is the first of an occasional series of marketing-related columns by Matt Bowen that Plastics News plans to publish in the newspaper and on our Web site.
You've heard the buzz about ``value-added'' services for years. You no doubt talk about them regularly at company meetings, with customers, prospects and investors.
And for good reason. Value-added services can do a lot for your company, such as:
Increase revenue and profitability with existing customers.
Win new customers by offering unique and needed services.
Blur the line between you and your customers for better retention and loyalty.
Differentiate yourself from your competition.
Looks ideal on paper, right? Well let's let the swirling dust from the bandwagon settle and take a closer look at your repertoire of value-added services. Can you honestly say that they are helping you expand your business and profitability at a faster clip than if you did not offer these services at all?
If your answer is ``No,'' ``Maybe'' or ``I have no idea,'' chances are one of two things is happening: Either your customers don't need these services or you aren't marketing them properly.
But let's back up. Since the term seems to be dropping so freely, let's start by defining what a value-added service really is: anything that adds value to your core product or service. The key word here is value — not how it is defined by you, but by your customer.
So if your billing department's opportunities for invoicing for such services are few and far between, how do you tell if it's a service or marketing problem?
Don't make the mistake of automatically assuming that it's poor marketing and sales that is causing the lack of takers. The best marketing in the world can't move a service that isn't needed. Period.
Let's look at two companies, Ebb Plastics and Flow Plastics. Both offer the same basic core service. Just over five years ago, these companies were equal in size and each was fairly indistinguishable from the other.
But both saw the market shifting and added a slew of value-added services to expand their business base.
Now, five years later, Flow Plastics has grown 35 percent faster than Ebb Plastics. That's certainly news in itself. But the real story is shown in the profit numbers. Not only has Flow outperformed Ebb in sales, its profitability has increased by 20 percent during that same period. While sales also are up at Ebb, profitability actually has decreased. A definite recipe for disaster.
What did the two companies do differently? Flow focused on the viability of their value-added services. They constantly talked to their customers to learn what services they really needed and would welcome with open arms. Then they codeveloped and customized them directly with each customer to ensure that they were a perfect fit. And not so coincidentally, these services also were more profitable than their core service.
Ebb, on the other hand, came up with a host of services they speculated were needed by their customers. They never tested their theory they simply gave the task to sales to go out and sell these services. Time passed but sales just didn't seem to gel.
This simplified example, based on two actual companies, shows the importance of finely tuning your services and honestly assessing them every step along the way.
Talk to your current, potential, and lost customers and ask them if they really need the ancillary services you offer. If not, ask them how the services can be tweaked to better fit their needs. Ask what additional services they need that you don't currently offer and make steps to provide them. This basic, intuitive, and rarely done process is vital for keeping an innovative and profitable edge.
The key is to offer value-added services that your customers really need. Value-added services are not fillers for marketing brochures. They are do-it-or-die services that differentiate you from your competition and help develop secure, long-lasting relationships.
Now it's time to market those services better, which is what we'll do in my next column.
Bowen is president of Fuse Integrated Marketing Inc., which he founded in June 1996 in Newburyport, Mass., to serve the plastics and coatings industries. Bowen previously served as marketing director for injection molder Global Zero LP and vice president of marketing for injection molder Shape Inc., and also worked for Clorox Co. and PPG Industries. E-mail him at [email protected]