1. Added Value
AS Business Studies

2. Aims and Objectives Aim: Understand Added Value Objectives:
Define Added Value
Calculate added value
Analyse methods of adding value
Evaluate the factors needed to maintain a USP

3. What do you think added value means?
Starter
What do you think added value means?

4. Added Value
Added Value = the difference between the price of the finished product/service and the cost of the inputs involved in making it.

5. Added Value Example Sales Revenue
1,000 units sold for £20 each = £20,000 revenue
Costs
To make 1,000 units
Raw Materials - £7,500
Labour - £5,000
Other production costs - £2,500
Total Costs = £15,000
Added Value
£20,000 less £15,000 = £5,000 Added Value

6. Calculate Added Value For 2000 Units
Sales Revenue
2,000 units sold for £30 each
Costs
To make 1,000 units
Raw Materials - £8,000
Labour - £5,000
Other production costs - £4,000
Added Value

7. Added Value Example
Good quality potatoes make great potato chips or crisps. But what do you with the smaller or mis-shapen potatoes which fail the raw material quality test for a premium crisp brand? Simple, you use them to create a premium brand of vodka…

8. Ways of Adding Value What methods can you think of to add value?
In other words, what would allow you to charge a high price and cut costs to increase added value?

9. Ways of Adding Value Build a successful brand
Deliver great customer service
Add product features customer want
Operate efficiently
Offer convenience and speed
Have a unique selling point (USP)

10. Unique Selling Points (USP)
A characteristic of a product that makes it different from other similar products being sold in the market such as design, quality or image.
One of the best ways to add value!
How many product’s USPs can you think of?

11. The Importance of a USP What may be the benefits of having a USP?
A way to differentiate compared with competitors
Don’t have to compete on price
Higher profitability

12. USP Evaluation Reaction of competitors
What does the maintaining of a USP depend on?
Reaction of competitors
Demand being maintained over time
Advertising and publicity of USP

13. Benefits of Adding Value
What may be the benefits of having a USP?
Charge a higher price
Create a point of difference with competitors
Focuses business on its target market segment

14. Signs That a Small Business Is Adding Value
Strong gross profit margins
Gross profit/Sales
A strong signal
Repeat Business
Sign of satisfied customers
Suggests customers feel they are getting value for money
Good brand or name recognition
Important for word of mouth recommendation

15. Plenary Quiz Define added value.
What is the formula for calculating added value.
Explain three methods of adding value.
Define a USP.
What does the maintenance of a USP depend on?
Give two signals that a small business is adding value.