Value Addition for higher Profits
Value Addition
for
higher Profits
The other day I went to a small eatery with a friend of mine.
I ordered Ooththappam(Round Shaped South Indian dush - looking like a thick Dosa - prepared with a batter made of rice and black gram).
It had been quite some time since I ate Ooththappam. My friend ate ordinary dosa and idli(both are made of same batter)
When we received the bill, it gave me interesting inputs to understand value addition better.
Interestingly, the difference in raw material cost between idli, Ooththappam, Kal Dosa(one more dosa variant), ghee dosa (in this variant ghee is used instead if oil) and Dosa is very less or even negligible.
The batter(raw material used are rice and black gram) used is almost the same, with very marginal quantitative variance.
How they are priced different, is very interesting and there lies the success and secret formula for a business model, which can be emulated.
price
Ooththappam. 50 upwards
Ghee Dosa 75 upwards
Dosa. 45 upwards
Kal Dosa 35 upwards
Idli. 2 nos 25 upwards
Good case study to understand increased profits through value addition.
I also came across a few restaurants who specialise in dosas, offering more than 60 varieties of dosas, each priced differently.
I had been to one of the restaurants in Delhi offering number of variants of parottas (a staple food in Northern India made of wheat dough), and they do not serve items other than parottas.
They had a Roaring business.
Here again each cariant of parotta was priced differently.
Same Dough, small value addition, different prices, higher volume, better margins.
Interesting?
The following are some more simple examples of value addition;
- Lemon as a fruit is very cheap. But Fresh Lime juice is not. After all, water and sweetener are added to Lemon to make fresh lime.
- A customer may resist when water is added to the juice, but the
same customer will be agitated when ice cubes are not added to the
same juice. Change of state(liquid to solid) changes the status and
value of water.
There are more such things elsewhere, making good business sense!
Let us ask ourselves.
How many of us are applying this theory in our business.
Of course, it is not easy to get such ideas of value addition. A combination of few factors like Creativity, out of the box thinking, adoptability, acceptability by the user community do matter.
An insight into identifying the gap in the market will certainly do the trick.
Let us add value in our products or services and enjoy the benefit of growth and higher margins at the same time and do business smartly.
Principal Consultant
Turnaround & Debt Management Expert
CBO, VAC Softtech
Founder Marg Consulting
http://muralimarg.blogspot.in/
Connect: muralimarg@gmail.com
Simple yet thoughtful insights...
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