The logistics service industry competition has constantly increased over the last decades. It has led to the traditional services offered by third-party logistics (TPL) providers becoming commodities.

When the company’s core product becomes a commodity, the company’s performance of supplementary services becomes vital for competitive advantage.

The term “value-added service” adds extra features, forms, or functions to the primary service. It stands for all activities not directly based on services traditionally offered by 3PL providers, i.e., transportation and warehousing.

On the other hand, discounting is a way to get more money, attract sales and undercut the competition in the area.

What are Value-Added Services in Logistics?

Value-added service is a used term among practitioners in the Logistic industry. Value-added services add value to the goods or increase value for the customers depending on what customers themselves consider to be value for them.

A third-party logistic is to provide a completely integrated solution for all logistics and supply chain requirements. Third-Party logistics creates a broad range of value-added services that cover all aspects of supply chain service offerings with this in mind.

Pros

Below are the advantages of value-added services in logistics.

Easy market entry

The more unique your products and services are, the easier it will be for you to get into a market that doesn’t like brands and isn’t very mixed up. Sales of new and limited-edition products increase when value-based service is provided.

Adding value to a company's name

Value-based pricing boosts your brand’s worth by putting your consumers first and guaranteeing that your goods and services are of the highest quality. Quality items and exceptional customer service justify your pricey offerings.

Places a greater emphasis on customer service

Customers’ satisfaction increases with value-added customer services. The ability to enhance customer service and create an unmatched customer experience is also a benefit.

Cons

Below are the disadvantages of value-added services.

Production costs

Higher manufacturing costs are associated with specialized goods and ongoing initiatives to expand product lines and services. You will require high-quality raw materials and highly trained workers to maintain and increase product quality.

Commodities' additional value is difficult to justify

If a business sells many of the same things, it will be harder for them to show that their products have more value than before. With so many alternatives and competition in the market, it may be challenging to stand apart.

Getting discounts or providing value-added services is an excellent way to get more money for your business, but you also want to keep the value of your business high.

Discounting

Price cuts, often known as sales discounts, may seem like an easy approach to get people’s attention and interest in your company, and it usually does.

Offering one, though, comes with several complexities and possible drawbacks. Discounting helps build customer trust but can also hurt your reputation and business in the long run. And in the case of value-added services, it’s quite challenging to keep the audience engaged.

Pros

The pros of discounting are below.

It may boost short-term sales

Offering a strategic sales discount is one of the easiest methods to generate immediate customer attention. A sales discount is a viable choice for your company if you need rapid sales to boost. However, this advantage only applies to short-term deals. If you consistently give a discount on your items, your clients will start to anticipate it.

It helps to get rid of outdated stock

The items you sell become “excessive or obsolete” only when you can no longer sell them at full price. Offering a discount on unwanted goods might be an appealing, practical way to get rid of them with some return.

It may help you gain popularity with particular groups

Sales discounts may sometimes be targeted at specific populations. Now and then, businesses offer discounts for older or younger people. A sales discount might help you target and attract a particular consumer base.

Cons

Below are the cons of discounting.

It conveys insecurity

Some clients can see a discount as an admission that you don’t have enough faith in your product or service to offer it for its full price. They’ll doubt your product or service if you give a steep discount and hunt for confident competitors in their offerings.

It reduces profitability

It is perhaps the most evident disadvantage of sales discounts. You’ll lose money if you don’t sell your goods or service at full price.

With a 50% discount, you need to sell twice as much to meet your targets. Discounts aren’t always financially sound. Remember the potential pressure on your sales staff when planning and executing one.

Furthermore, discounting is a highly competitive game, and if you decide to give 25% off, your rival may quickly reply by providing a more appealing 30% off.

Conclusion

In the eyes of a consumer, a personal touch may go a long way, and rivals won’t be as aware of your actions if they don’t visit your facilities because of the increased difficulty in replicating added value. But manufacturers can fail to justify prices even in value-added services, such as Information Technology Services and Transition & Change Management.

As a result, businesses opt to outsource these services to other providers. It allows them to focus on what matters the most: building their brand and products.

In the end, discounts and value-added services can be effective tools for boosting your bottom lines. Just make sure you do it right!