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- Value added is the difference between what the company pays for raw materials, and what they sell their products for
- I’d have trouble buying pieces of gold and selling them for more than I bought them for – I’d have to make them into phone cases or something
- A business has to buy things and add value to them then sell them and make a profit
- Like this:
1) Buy something
2) Add value
3) ????????? <– Sell it
- Value can be added by:
- Turning raw materials into something useful
- Making the product appealing to customers
- Packaging the product in a better way
- Before it can sell bottled water to you, a company has to:
- Extract the water from the spring, volcano or whatever
- Purify the water
- Make the bottle
- Make the bottle cap
- Print the label
- Assemble the bottle
- Transport everything
- Advertise its water to get a good brand name
- All to make a simple bottle of water
- There are lots of places to add value
Adding Value Using Celebrities
- Companies use advertising and celebrities to make their brands cool and popular
- This means people will be willing to pay more for their product than they would for one that isn’t endorsed by a celebrity
- Thus value has been added!
- It’s like “We’ll take this screwdriver set and put a singer on it!”
“Ooh, yes please! I’d pay hundreds!