Monday 30th September 2013 Mr Nicholls Year 10 Business Monday 30th September 2013 Mr Nicholls

Objectives To consider the importance of ‘adding value’ to goods and services in business.

Today… Today we consider the need to add value…

Adding Value… Consider this: In that bag: Therefore – Price of Walkers Crisps in local shop = 35p In that bag: 30g = (roughly) 1p of potatoes Oil Salt Flavouring Therefore – Actual Unit Cost = (approx.) 3p. Value Added = Mark up to cost (1100%)

So… It’s all about balance – Added value is the difference between the cost of materials and the selling price. Value can be added by Pushing the price UP Bringing the costs DOWN

In order to make the product more valuable… Convenience & Speed Good Design High Quality Manufacturing/Service Brand Name USP Most people are willing to pay more if it saves them time! A product that looks good might be marked up to a higher price, where as a product using the same materials but not looking as nice will cost less. A Rolex watch might sell for £1,000 where as a Casio might be £9.99 – they both tell the time, both fit on our wrist, it’s just the quality of the product that differs. Think about Nike trainers – more expensive than other trainers simply because of the ‘swoosh’ on the side. Something that makes that particular product worth paying for – wireless on the PS3 when it came out V wired on Xbox 360

Why? - There needs to be a big enough difference between price and bought in costs to allow internal costs to be paid for. - Costs MUST be considered (Electricity/Phone/Wages/Damage/Theft/ Recruitment/Training/Marketing/Growth… ) Therefore – whilst Value Added might be seen as profiteering off of customers, it is actually making sure that there’s enough profit in order to pay the bills and grow the business!

Exercise: Please turn to page 30 in your text books then answer Questions A and B.