Effectively adressing customer needs through value-added services

In the current business landscape, organizations are navigating an environment where technological advancements and digital platforms significantly enhance access to new markets and diverse customer groups. Consequently, it is essential to prioritize customer needs and foster robust relationships with them. The objective is to transition from merely offering products to becoming a solution provider by strategically incorporating additional services into the core business. 

When an organization opts for this approach, it is crucial to consider both the core product and the value-added services as an integrated whole. Without additional offerings, distinguishing oneself from competitors and reaching new customer groups becomes increasingly challenging. Conversely, if an organization focuses solely on value-added services, it risks losing direct engagement with customers to partners or becoming overshadowed by the broader package. Therefore, the objective should always be to closely integrate these additional offerings with the primary product. This strategy can not only boost the product's attractiveness but also positively influence its pricing.

A look at the insurance sector illustrates this concept effectively: Insurance companies can, for example, provide additional services aimed at preventing or reducing damage. This can be achieved through early detection systems, alert mechanisms, prompt assistance, or encouraging behavioral modifications among policyholders. The implementation of these services directly influences the overall compensation that insurers are obligated to disburse. In exchange, individuals who utilize these services can enjoy a reduction in their premiums. Three examples:

BELTIOS, msg advisors' insurance and financial services consultancy, offers the capability to assess the real impact of value-added services on claims costs through a proof of concept. This approach employs actuarial models to test hypotheses related to claims reduction. The findings address critical inquiries, such as:

• Can the value-added service genuinely decrease the frequency or severity of claims?
• What quantifiable effects do these services have on the target group's behavior?
• Is the long-term implementation of these services beneficial?

Value-added services not only affect claim costs but also provide mechanisms to directly influence product costs or pricing. Recognizing and strategically utilizing this potential is essential for achieving success. A pertinent example is the promotion of CO₂ savings: As of January 1, 2022, owners of fully electric vehicles can have their CO₂ emissions reductions certified and marketed. A car insurance company that provides the option to sell these greenhouse gas reduction quotas (GHG quotas  - only available in German) as a value-added service, such as through msg.GREENfactory, can create appealing opportunities to enhance premium optimization or introduce additional services funded by the sale of these quotas. msg.GREENfactory consolidates the policyholder's GHG quotas, facilitates their trading in the market, and directly returns the revenue from these quotas, all through user-friendly plug-and-play solutions that require minimal effort. 

To successfully integrate value-added services, organizations must adhere to a range of technical and organizational requirements. Key elements such as information security, metering, and system architecture need to be governed by API management systems. Additionally, when integrating a partner that offers the additional service, it is essential to establish clear guidelines concerning business models, billing solutions, and legal frameworks. The evolution of any ecosystem encompasses the concept of digital sovereignty. After all, secure integration and, when necessary, adaptation of IT and business processes, along with technological resources and data, can only occur within protected environments.

When a core product is enhanced by the introduction of an initial additional service, it can be referred to as a minimum viable ecosystem (MVE). The MVE can be progressively developed into a vital business ecosystem, if necessary. For instance, in the context of bicycle insurance, it can incorporate tools for trip planning, navigation, fitness tracking, or CO2 savings. Additionally, the revenue generated from GHG quota trading can be utilized to fund climate protection initiatives, bicycle leasing, or sustainable investment options as additional services.

Offering appealing value-added services not only enhances cost efficiency in the core product and delivers a compelling customer experience, but also allows for the expansion of the customer journey through new touchpoints. Organizations benefit from this in two significant ways: They reinforce their relationship with customers while simultaneously maintaining oversight of additional customer interactions. This enhancement of services makes the core business more appealing and lays the groundwork for future growth.