May 28, 2020
For consumers today, a huge number of providers are available to choose from and it is crucial for organizations to stay competitive and provide quality services that can prevent customers from moving towards other competitors. They need to establish a value-based relationship with their customers and one of the ways to add value is to offer ancillary services that customers can choose apart from the core services.
What is a Value-Added Service?
By definition, a value-added service (VAS) is any feature that can be offered as a standalone product/component or added to a core product to enhance the user experience. An example of VAS is text messages. When text messages were first introduced, they were added as an extra attribute to cell phone plans, however, slowly they became standard features that every phone now carries by default. Another example is a subscription to Netflix that functions for millions of people as a standalone subscription but T-Mobile offers it as a VAS to customers.
In the above examples, VAS are being offered complimentary to customers to add value to their services. However, some VAS are offered at a cost and can still contribute to value addition and customer loyalty. One recent example of this is Sprint initially offering a free trial of Tidal music streaming service to its customers for 6 months, but later costing a certain amount at the end of the free trial. This type of VAS offering not only drives value to Sprint’s core services but also generates revenue for the company.
Below we list a few core characteristics of a feature or service that could be classified as a VAS :
- It complements core products and services and, hence, provides additional services.
- It generates additional revenue either through direct sales or by an increase in retention.
- It is profitable by itself which implies that the ROI of offering the product pays for the cost of the product and/or is funded by offering it at a fee.
- It can stimulate additional demand for core products and services.
A quality VAS that meets the criteria listed above, and is in demand by consumers, can largely contribute to an increase in customer loyalty and deliver competitive advantage.
Identity protection is one such in-demand VAS that more and more companies are employing across many industries. The fear of identity theft is on a significant rise and most of the consumers strongly believe that being a victim of cybercrime will adversely affect their lives. These concerns have driven consumer demand for cybersecurity and a large number of users would prefer to buy identity protection from a firm they already trust with their business and data. Consequently, there is also a rise in the value that identity protection can bring to companies who offer it as a VAS.