What Is Value-Added?

The phrase “value-added” refers to the extra cost a firm adds to its products or services before selling them to customers. Value-added explains why businesses may sell their products or services for more than they cost to make. Adding value to products and services is critical since it encourages customers to buy, resulting in increased revenue and profits for the firm.
Value-added may thus refer to situations in which a company takes a product that would be deemed homogeneous—with few, if any, variations from that of a competitor—and adds a feature or add-on that gives it a higher perceived value. Putting a brand name on a generic product may be just as useful as creating something new or in a unique way.