Value-Added Services Can Provide a Pricing Advantage

Distribution pricing managers are typically focused mainly on product and customer segmentation to drive more favorable pricing and profit. Yet, value-added services can be some of the most effective ways to improve pricing and brand perception for a distributor and shouldn’t go overlooked buy pricing managers. Offering and aggressively promoting value-added services can allow distributors to capture more profit and higher pricing in several ways.

Value-added services are about differentiation – they make you stand out from your competitors. In many industries, products are fairly commoditized and similar. Services help justify price levels. This comes from what your marketing lead would call increased perceived value. When a customer understands that you are doing something unique to make their business run more smoothly, that you give them a higher level of service that suits their needs, they value your entire offering. You can charge more. That means you can make more profit assuming the service you offer doesn’t eat up said profit.

Customer interactions and relationships grow with the level of service you provide. Services drive more frequent customer interactions in ways that improve their lives. That tends to lead to higher customer retention and loyalty so you get a higher share of wallet. But that increased interaction builds trust which leads to more frequent orders and more upselling and cross-selling opportunities. When you interact in meaningful ways, you answer questions, learn about their business and can then explain your product lines, services, installation, delivery, maintenance or more. All of this allows you to keep your pricing and reduce overrides and tough negotiations.

The examples of value-added services in this article are from a variety of industries. They aren’t meant to be a specific playbook to follow because our readers come from a variety of industries and backgrounds. But we hope they spark some imagination for you when considering new ideas for value-added services.

Product Bundling

Product bundling is a marketing strategy where multiple products are sold together as one combined package. It’s a popular technique in the distribution industry, used to provide added value to the customers and boost sales volume.

Have you ever walked into a big-box or appliance store and been offered an appliance bundle? This is a very common tactic in retail and potentially with individual contractors and builders. Maybe you went in to get a new refrigerator, but you really liked the style, color and brand so the retailer offered you a kitchen appliance package that included a refrigerator, stove, dishwasher and microwave. Or when considering a remodel, you might change to a brand that has an attractively bundled offer. The end-user gets matching appliances at a cost-savings and the seller gets a higher total purchase price and moves more inventory.

Some common examples of product bundling in distribution might include:

1. Hardware Tools: Hardware distributors might bundle power tools together. For example, a DeWalt power drill could be bundled with a set of DeWalt drill bits. The buyer might have ordinarily purchased a generic brand for the drill bits, which would reduce your profit, but with a bundle they get more perceived value and you increase your order profitability. Maybe you sell a circular saw to a DIY enthusiast and you explain how they could save money by buying extra blades right now that they wouldn’t have considered given the immediate project they are planning. You increase the size of the order and the customer appreciates that you gave them customized service and convenience.
2. Electronics Bundles: Office equipment distributors often bundle products together such as a laptop, cabling, printers, and even software. These bundles are attractive to corporate buyers and IT teams as they get everything they need in one purchase, often at a lower price than buying each item separately.
3. Furniture Sets: In addition to supplying retailers and e-commerce outlets, furniture distributors often sell to office spaces, hotels, real estate developers, designers, property managers, restaurants and even supermarkets. It makes a lot of sense to offer sets of furniture as a bundle, such as a bedroom set that includes a bed, nightstands, and a dresser or a patio set that includes chairs, a table, and an umbrella to these large buyers. These kinds of buyers seek consistency in their physical spaces and value cost savings and convenience. These bundles allow them to furnish an entire room or outdoor space at once.
4. Automotive Parts: In the automotive industry, distributors might offer bundles of car parts that are commonly replaced together, such as brake pads and rotors. Customers save time and you increase your sales. Some distributors work with auto repair chains on bundled promotions to foster sales all the way down to the driver.

Custom Design Harness and Box Assemblies

Here’s a common example in the electrical industry. A value-added distributor might create bespoke or custom-made wiring harnesses and box assemblies based on the specific needs and requirements of a contractor or customer. A wiring harness is a group of wires, cables, or connectors that transmit electrical power or signals. Box assemblies, on the other hand, are the casings or enclosures that house various electrical components.

There is no better way to demonstrate that you can cater to a customer’s exact need than offering custom design solutions based on industry and application. This saves the customer a lot of time, offers convenience and saves them from trying to meet their specifications by shopping off the shelf.

Here are examples:

1. Automotive: Car manufacturers and aftermarket vendors often need custom wiring harnesses to connect various electronic systems within a vehicle, such as the audio system, lighting system, and engine controls. Each vehicle model can have its own unique harness design.
2. Aerospace and Defense: Aircraft and military equipment require highly specialized and robust wiring harnesses and box assemblies. These assemblies must meet stringent standards for durability, reliability, national security and safety. Often the main competitive advantage a particular supplier might have is more related to the demonstrated security and compliance of these assemblies.
3. Healthcare Equipment Manufacturers: Medical devices, ranging from simple handheld devices to complex diagnostic machines, often require custom-designed harnesses and box assemblies that meet specific biomedical standards. Hospitals don’t have the time or staff to build these on their own and want to work with a distributor who specializes in solutions that best serve their standard of patient care.
4. Telecommunication Companies: Telecommunication equipment often involves complex wiring systems. Custom designed harnesses can be built to improve signal transmission, while custom box assemblies can protect sensitive electronic components, all while providing convenience to the customer.
5. Industrial Machinery Manufacturers: Manufacturers of heavy machinery and equipment often require custom wiring harnesses and box assemblies that can withstand harsh conditions and heavy usage. Replacing these is critical to keeping the factory floor productive. Just a few hours of downtime can mean millions of dollars to certain manufacturers so working with a distributor who has prebuilt solutions ready to put into place is critical to their profitability. In these cases you can often price the assemblies much higher than you would if you sold the parts separately because of the urgency of the buyer.

Inventory Management as a Value-added Service

Distributors can offer inventory management as a value-added service where they help their clients manage and control their inventory levels. Usually, the distributor has access to warehouse space, logistics solutions and technology that makes them more adept at forecasting demand, tracking inventory levels, determining reorder points, and managing relationships with suppliers. In turn, this lowers the overhead costs for their customers, minimizes stockout situations, usually eliminates overstocks altogether, streamlines delivery and just takes a big weight off the client who doesn’t specialize in inventory and logistics.

By offering inventory management as a service, distributors can help their clients reduce overhead costs, minimize stockouts and overstocks, streamline their supply chain, and improve overall efficiency.

Here are some specific examples of inventory management services in various industries:

1. Automotive: Just-in-Time inventory is fairly popular among many manufacturing industries. In automotive, a distributor might agree to ensure that parts arrive only and exactly when they are needed on the assembly line. This reduces the need for an automotive manufacturer to keep large amount of parts and components on hand, which eases storage issues and costs and reduces the risk of obsolescence.
2. Food and Beverage: Distributors who have access to advanced demand planning or predictive analytics could work with restaurants, hospitality outlets and grocery stores to forecast more accurately. This would help reduce cost and wastage and also help to ensure their customers meet the demand for popular items.
3. Healthcare: Hospitals and medical clinics go through a lot of inventory but do not have the available space to manage large inventories. Distributors in this industry offer inventory management services that track usage and help replenish supplies as needed. They might also help arrange the safe disposal of expired supplies.  There is a very high value in this service for hospitals that want to stay stocked with life-saving and essential supplies and also want to maintain their safety and compliance standards.
4. Construction: It is fairly common for construction and building materials distributors to provide on-site vendor managed inventory solutions. That way the distributor can help manage the inventory of construction materials right on site. Poorly timed materials can add cost to a construction project – imagine a stack of drywall board delivered too early and sitting in the rain. These services save construction companies time, space and risk and help keep their projects on time.

Delivery Add-on Services

Delivery doesn’t have to be about just dropping off boxes at a job site or loading dock. You can take – and charge more – extra steps to ensure that your customer experience is optimal and you help promote efficiency in their own organizations.

Here are some ways a distributor can offer value-added delivery services:

1. Same-Day or Expedited Delivery: For businesses that require immediate access to supplies, offering same-day or expedited delivery can be a huge benefit. Think about industries like healthcare, where urgent access to medical supplies can be critical especially in the emergency room, wound care or ICU.
2. Scheduled Deliveries: Distributors once just delivered whenever it was convenient for them based on their own schedules and trucking routes. This isn’t very convenient for most customers. You can position yourself as an elite service distributor by delivering according to your customers’ schedules instead of your own. Some businesses have unusual hours or have to attend to peak hours, such as restaurants and retailers. Being able to schedule deliveries during downtimes creates a lot loyalty.
3. Direct-to-Site Delivery: This has become fairly standard in industries like construction, as delivering materials directly to the job site can save builders time and resources. It eliminates the need for them to transport materials from their own warehouses or storage facilities. But many other industries could benefit as well such as catering, event planning, healthcare, agriculture or offering drop-shipping for e-commerce providers.
4. White Glove Delivery Service: The term “white glove,” implies a high level of service – meticulous, personalized and professional. Some distributors offer premium delivery services that go above and beyond simple delivery of a product to a business or home. Usually this involves high-value, large, heavy or complex items that require special expertise to deliver or install. It is fairly common with appliances, grand pianos, furniture, artwork and high-value electronic systems. It can also include services that help minimize mess and frustration for the end user such as installation, unpacking, inspection, and assembly and clean up.
5. Track and Trace: Providing real-time tracking information can give businesses peace of mind and help them plan more effectively. It’s valuable for any industry, but particularly for manufacturing or retail businesses that rely heavily on timely deliveries.
6. Reverse Logistics: Managing returns efficiently can be a major value-add. In industries like e-commerce, a smooth and easy return process can significantly enhance the customer experience. There are many examples of the benefits of reverse logistics including handling returns for e-commerce partners, helping manage expired pharmaceuticals, food or manufacturing recall issues or even green trade-in and recycling programs.
7. Temperature-Controlled Deliveries: For industries like food service or pharmaceuticals, maintaining the right temperature during transport is crucial. Offering temperature-controlled deliveries ensures these products arrive in optimal condition. In fact, many companies in these industries require temperature-control throughout the entire supply chain.

Training and Technical Support

Distributors often offer a variety of training and support programs to their customers, either independently or in collaboration with their vendors. Training encourages both loyalty and upsells. You are really only limited by your own imagination but here are some examples.

1. Product Knowledge Training: Most distributors sell something that is difficult to use or understand the first time. Some products have value or additional uses that your customer wouldn’t consider without training. And this type of training is a great way to get your vendors involved explaining features, benefits, usage and more. Vendors love to work closely with distributors who are active with their customers on marketing, pricing, promotion and more.
2. Sales and Marketing Skills Training: Maybe you don’t sell to the end user of your product. That makes it difficult to drive demand. For example, a contractor or designer might work with a homeowner to choose bathroom fixtures. Giving the contractor sales and marketing assistance and training can help them pull demand through your business even when you don’t deal with the end user.
3. Customer Service Training: Similar to sales training for contractors, the contractor is often the first person to get called if something goes wrong. Giving them extra service training and support can help you cement your customer relationship, help their business and lead to increased sales.
4. Compliance and Regulations Training: This can position you as a valuable partner and thought leader in industries that must adhere to specific regulations. It can also encourage new or replacement sales based on legal or compliance changes.
5. Webinars and Events: Don’t limit your training to simply in-person events. Consider hosting online webinars and events as well. This allows you greater access to experts and presenters who might be able to join you online but couldn’t join a local event. It also allows you to offer training on-demand so that your busiest customers can view training when it is convenient for them.