Added Value Today Understand what added value is

Added Value

Today… • Understand what added value is • Understand why added value is used in a business

What is Added Value? It is the difference between what a business pays its suppliers, and the price that it is able to charge for the product/service. Materials are bought, business costs are paid (eg suppliers, electricity) Something is “added” Product or service is sold to the customer

Sources of Added Value • Businesses can add value to their product/service by doing something with the raw materials and providing something ‘different’. Task Make a spider diagram with all the different ways you can think of that a business can ‘add value’

Sources of Added Value Think of all the reasons why a business can sell a product or service for more than what they paid for it in the first place. Design Quality Speed of Service Unique Selling Point (USP) Branding Convenience

Quality USP (unique selling Point) Design Sources of Added Value Convenience Branding Speed

Example of Added Value Chocolate bar sold to customers Ingredients purchased 1. 20 p per bar 30 p per bar Ingredients made into a chocolate bar + 20 p per bar Value Added = 70 p per bar of chocolate

Example of Added Value Meal sold to customers Ingredients purchased £ 15 per meal £ 3 per meal Ingredients made into a meal; café furnished + £ 6 per meal Value Added = £ 6 per meal

Importance of value added • Every business must add value to survive and be successful • The higher the added value, the more likely it is that a business will survive, grow and be successful in the long term

Complete the activity ticking the correct column – for each statement, is the action adding value?

Complete the worksheet by showing how the three businesses could add value.

• Jacob Simms is a solo singer who tours the country appearing at concerts and revues. Select ONE answer. The added value of his singing is: A – the total cost of putting on the concerts minus the revenue earned from selling tickets B – what he makes in fees plus his costs such as petrol and hotels C – the total cost of his concerts at which he appears minus what he has to pay to concert hall owners D – the revenue he earns minus what he spends

• Jacob Simms is a solo singer who tours the country appearing at concerts and revues. Select ONE answer. The added value of his singing is D – the revenue he earns minus what he spends

Which two of the following might be a source of added value for a farming business? A – Quality of products grown on the farm B – The wages of the farm workers C – The profit earned by the farmer D – Speed of delivery from harvesting to the customer E – The receipts from the sales of the farm produce

Which two of the following might be a source of added value for a farming business? A – Quality of products grown on the farm D – Speed of delivery from harvesting to the customer

Why is added value important for the survival of a business? Select one answer It is important because…. A – added value allows a business to target its customers successfully B – added value always means a better quality of product C – a business that has value added is one that is likely to make enough money to make a profit D – all businesses have to have a unique selling point

Why is added value important for the survival of a business? Select one answer It is important because…. C – a business that has value added is one that is likely to make enough money to make a profit