Use Value-Added Sales to Boost Your Profit Margin

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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How's your wallet these days? Thinner or thicker than usual?

If you're like most of us, you've got more room in your purse or pocket, more room in your bank account...and less room in your budget. You're looking to keep your expenses low and get as much value as you can out of what you buy. So are your customers.

How do you get cash-starved customers to keep buying what you're selling? Offering deals and discounts means slashing your own profit margin down to the unhealthy side of thin. This is the dilemma, then, for you the business owner, manager, sales person: do you cut prices in order to sell more (but make a tiny profit) or do you keep prices where they are for a healthy-sized profit (but a tiny number of buyers)?

The third option, which brings you nicely out of your dilemma and segues me neatly into my next paragraph, is this: add value without adding to your cost, and you can keep your higher profit and still sell the product.

And that's key, because any sales solution or marketing strategy that doesn't actually help get sales is worthless. A sure thing you have in common with me and your customers and everybody else is why this value-added approach will work: we all like free stuff. We all like extras. We all like to get the deal, to win by getting more than we pay for.

How do you know what value-added things to offer? Here's a checklist.

1. It has to be something that adds real and significant value.

Here's where you should picture the late-night infomercial: "And when you pay us 19 installments of only $9.99 each we'll also send you this other plastic doodad that will fall apart in two weeks! But that's not all! If you hurry, we'll send you an extra plastic doodad for when the first one does fall apart! And if you call in ten minutes, you'll also get this life-sized replica of Yogi the Bear doing the Macarena!"

You don't want to be an infomercial. You're not looking for a way to fool your customers, to make them think they're getting something when they're not. You're looking to actually provide significant, additional value.

2. It has to be something that doesn't cost you in cash.

At least, not much cash. That's why the infomercial approach of piling on product, extra product, and additional extra product isn't smart. You'll either spend all your profits on the extra value-added items, or you'll have to go so cheap in order to save some profit that you won't actually add value.

So, what do you have that you can give away with incurring cash cost?

A few examples:

• Consulting
• Education
• Tech support
• Customer hot line (exclusive)
• Warranty
• Guarantee
• Club membership/Special customer status (with specific, defined benefits)
• Rush service
• Free delivery
• Free updates
• Future trade-in option
• On-location service

3. It has to be related to what you're already selling.

There's a billboard in my town advertising free popcorn on Fridays at a local bank. I like popcorn just fine. But I don't go to the bank for popcorn. I go to the bank to manage my money, and I'd welcome any value-added bit that would help me take care of my money more efficiently. Free popcorn, besides being an obviously cheap choice for the bank, has nothing to do with the real service they're providing.

Make sure that the value you add is clearly related to the product you sell. If you have to explain the relationship, think again. Find something better.

4. It has to be directly helpful to the customer.

It has to be something that meets a demand, that answers a pain point. Otherwise it's just fluff, not value. If you're not sure, look at the whole transaction through your customer's eyes. What part of the process, from the initial thought of buying the product up to the final delivery or use of the product, could be made easier, more efficient, more educational, less time-consuming, less costly?

If you're still not sure, ask the customer. In fact, start there. Next time you have a hesitant buyer, just put it out there. What would make this product worthwhile for you? What would you provide enough value that you could easily justify the cost?

Your hesitant buyers, after all, are the ones who need to be swayed by the value you add. So ask them, listen, and then find a way to implement what they've said into a real and repeatable value that you can add on to every sale.