If you’re like most distributors, you already provide several value-added services at no cost to your customers. But have you analyzed the cost and value of those services? Chances are, you need to get more intentional about delivering, marketing and monetizing them.

Understanding and monetizing value-added services in distribution is becoming more important because:

• What were differentiators in distribution have become commoditized, such as getting products to customers quickly and conveniently, and offering a wide assortment of inventory.
• Simpler transactions with high margins and low service costs are increasingly moving to marketplaces.
• More manufacturers are distributing directly via e-commerce because delivery is more affordable and accessible.
• Local manufacturers, and even customers, can increasingly make items themselves using 3D printing, bypassing the supply chain.

If you want to differentiate in this market, you must look at what you can offer that others cannot or will not. We believe value-added services are a perfect solution.

Most distributors don’t understand the actual cost and value of their services. Their offerings are the result of ad hoc, structureless aggregation according to need. Therefore, they can’t establish, prove, communicate or monetize the value their services provide.

The number of services distributors currently provide hardly scratches the surface of what they could. This means there’s great opportunity for growth. However, with hundreds of potential services, how do you identify the right ones for your business? We cover this in this episode.

We divide services into three categories: logistics, informational and value-added processing. Logistics services are often related to the supply chain, as in bin replenishment and kitting. Information services include such offerings as design, configuration, technical support and training. Value-added processing services are hands-on, such as product setup, software setup and repairs.

To identify the most useful services and build your service offerings, perform quantitative and qualitative research to find out what your customers need. This could include focus groups and/or surveys. It could also include research on your competition and suppliers. 

Once you’ve established which services to offer, estimate the actual cost to deliver them and the potential value for the customer. This will help you monetize your services and prove their worth.

In estimating the potential value for the customer, draw from those customer surveys, interviews and focus groups. How are the services you currently offer helping your customers? Are they saving on cost, efficiency, labor or materials? Quantify the economic value, even if it’s imprecise.

Now that you’ve built and monetized your offerings, make them easy to find and understand, and make their value known.

As you build and promote your services, it’s important that you’re thoughtful about your offerings. There’s a big opportunity here. Use it to choose the right services, communicate them, understand their value and turn them into a profitable part of your business.

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