Unit 2: Deliver Customer Service in a Business Environment
Task 1.1: Produce a report on explaining what ‘added value’ means in terms of customer service
Added value or value addition is something that can help to increase a product’s price or value. (Sherrington). In business, the difference between the sale price and the production cost of a product is the unit profit. In economics, the sum of the unit profit, the unit depreciation cost, and the unit labor cost is the unit value-added. Summing value added per unit over all units sold is total value added. Total value added is equivalent to revenue less intermediate consumption. Value-added is a higher portion of revenue for integrated companies, e.g., manufacturing companies, and a lower portion of revenue for less integrated companies, e.g., retail companies. Total value added is very closely approximated by compensation of employees plus earnings before taxes.
The first component is a return to labor and the second component is a return to capital. In national accounts used in macroeconomics, it refers to the contribution of the factors of production, i.e., capital (e.g., land and capital goods) and labor, to raise the value of a product and corresponds to the incomes received by the owners of these factors. The national value-added is shared between capital and labor (as the factors of production), and this sharing gives rise to issues of distribution.
Companies are putting their effort to find a competitive advantage as consumers can buy any product they want and can have them delivered to their homes in this digital age. Companies are constantly challenged to find a way to add value to justify their pricing to a more discerning market (Thomas, 2015). Consumers’ focal point is on the usefulness of the product rather than the product itself. This is why the companies are facing many difficulties in order to find new ways to maintain a good way to justify their product value.
There are many companies that can be shown as examples. Bose Corporation has advanced itself from a company that used to produce speakers to a company that delivers a noteworthy sound experience. When a BMW rolls off the assembly line, it sells for a high premium over the cost of production because of its reputation for high performance and sturdy mechanics. The value-added has been created through the brand and years of refinement.
Added value is the difference between the price of a product or service and the cost of producing it (Andresen, 2016). The price is determined by what customers are willing to pay based on their perceived value. Value is added or created in different ways.
On the other hand, the Added value is equivalent to the increase in value that a business creates by undertaking the production process. It is quite easy to think of some examples of how a production process can add value. “Adding value = the difference between the price of the finished product/service and the cost of the inputs involved in making
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There are lots of advantages of added value which are:
Building a brand: to create reputation the quality and value which the customers are prepared to pay for. Nike trainers sell for much more than Hi-Tec, even though the production costs per pair are probably pretty similar (Church, 2015).
Delivering excellent service: high quality, attentive personal service can make the difference between achieving a high price or a medium one can deliver the excellent service
Product features and benefits: Such as additional functionality in different versions of software can enable a software seller to charge higher prices; different models of motor vehicles are designed to achieve the same effect (Church, 2015).
Task 1.2: Recognize the opportunities to add value to a customer interaction
Added value is an important tactic that can be used by small businesses to acquire and retain customers, increase brand awareness, and differentiate one’s place in the marketplace. Five ways are described below to create added value that can be easily implemented into a business and help to find the opportunity to build customer interaction immediately…………..