Subject areaRevenue and sales
Also known asvalue added
Added value has two meanings, and the context tells which applies.
In economics it is the difference between the value of what a company produces and the cost of the goods and services bought from outside to produce it: it is the wealth the company creates with its own work.
In marketing and sales it means what an offer gives beyond the alternative, and for which the customer agrees to pay. The articles of the site use it this way: brand equity is the added value that a brand gives to a product or service, and for a company the added value is what competitors do not offer and what decides the choice.
The same term also describes the human work that remains when automation absorbs repetitive tasks: people turn to higher-value activities. It differs from margin, which measures what is left to a company after costs, while added value describes the distance created from what was bought in.
An example
A manufacturing company buys steel bars and sells finished components. The added value is the difference between the selling price of the components and the cost of the steel and the other external purchases, and from that difference come salaries, depreciation and profit. In negotiations the same term means what the offer gives beyond the competitors.
Enrico Giubertoni. Licensed under CC BY-NC 4.0: you may quote, translate and adapt this entry with the author’s name and a link, stating any changes. For commercial use, write to info@enricogiubertoni.com
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