Value-added Services (VAS)
Value added services is a popular term used in many different industries. The term generally refers to certain services, available at little or no cost, in order to promote the primary or core business. In the LED lighting industry, companies like ATG LED Lighting offer value-added services to support their core business of selling or marketing their LED lighting fixtures to target customer groups including electrical distribution (electrical distributors) and lighting specifiers including electrical engineers, architects, and lighting designers. These value-added services are very important because not only do they offer real value at no cost but they also significantly reduce the workload of their target clients allowing people to utilize their time in other ways.
Examples of value-added services in the LED lighting industry include:
- Site Surveys
- Application Engineering
- Rebate Assistance
- Return On Investment Analysis (or payback analysis)
- No-cost Beta Tests or Product Mock-ups.
How do value added services work?
Value-added services work together as an overall mechanism to generate a sale. For example, let’s say that a large school district is considering upgrading their outdated fluorescent and HID luminaires to LED. There could be a number of reasons for this including somebody simply introducing the idea of available rebates, bond measures that make available public money for energy-efficient upgrades, knowledge that LED lighting systems save a lot of energy and money, or maybe they’re just tired of paying that skyrocketing energy bill.
Many times, an energy service contractor/installer (known in the industry as an ESCO) will make an introduction and offer some or all these value-added services. ESCO’s offer a turnkey service and in many cases and can even arrange for low cost financing. In other cases, it can be a financial services company that offers to oversee projects and finance the entire project, so the owner doesn’t have to come out of pocket at all. this particular form of financing is generally known as “lighting as a service” (LAS) whereby by the school district won’t even own the new lighting system and they pay the financing company through a percentage reduction in their CapEx energy budget. In this LAS scenario the financing company is also responsible for maintaining the lighting systems. But in all these examples, the value-added services that lighting companies provide are key to the underlying success.
Once the end-user client, in this case the school district, has agreed to formally consider the project, the first step is a no-charge site survey. This is where the LED lighting company, the ESCO or the financial company’s representative actually goes to each and every school in the district and performs a painstaking survey that includes photographing, identifying and cataloging every single light fixture that is suitable for retrofit or replacement. This is an arduous process and time consuming, but it is very critical in the process so that there’s a basis to start with. When the site survey is finalized the data collected is temporary held until it can be used after vetting and verification of the anticipated new LED lighting system. LED lighting fixtures can often save as much as 2/3 in energy when compared to the outdated lighting system so as part of the process, the new LED lighting system must be evaluated and new fixtures selected on a fixture-by-fixture basis based on all the on-campus applications.
Value added services through Application Engineering
Elements of the new LED lighting system must be vetted and validated to make sure that they provide adequate light for safety, security and visual comfort. This is where application engineering comes in. Let’s take the parking lot for example, a specialist known as an application engineer, users a computer program that will simulate the actual lighting system once it’s installed. The software involved is very sophisticated and end result is virtually guaranteed of being accurate based on the output of the software. If it can be verified that new 150W parking lot fixtures will replace outdated 400W HID fixtures, and still produce adequate lighting for safety and security, that fixture may be chosen. This process is normally completed for each and every application on the campus. Now that there’s a comfort level that the new lighting system will in fact replace the old one in a much more efficient level, available rebates are considered.
Add value with Utility Rebates
Most utilities offer rebates as an incentive for owners to upgrade to energy-efficient fixtures. However, in complex projects like a school system they will need the help of people who have expertise in this area. Utilities make the available known through publication on their website or other advertising methods. At this point the LED lighting company can provide specific information on the available rebates for their own products as part of the sales process. There are numerous third-party companies, that study the rebates landscape nationwide to help the LED company understand available rebates for their own products. Now that the new LED lighting system has been verified, the site survey can be married with available rebates to determine the actual savings based on a reduction of kilowatt hours (kWh) and a return on investment (ROI) analysis is performed.
ROI Analysis as a value added service
The ROI analysis is the final part of the process and is often offered by the LED lighting company as well as one of their value-added services. This return on investment analysis is generally very straightforward and allows financial decision makers to decide whether or not to move forward with the LED lighting upgrade. If the return on investment, or simple payback, meets with the school district’s requirements the decision to proceed can be made, contract can be entered in to and financial transactions can we established. So it’s easy to see why LED lighting companies offer value added services in order to make the sale a reality. Without offering these services, the hypothetical school district is left like a babe in the woods to evaluate their own system, conduct their own ROI to verify that the new lights will actually replace the old ones.
The bundling of these various value added services makes the whole thing proceed and everybody wins because the school reduces their carbon footprint thereby helping the environment, they also lower their electrical bill dramatically, the lighting company generates revenue allowing for the enterprise to employ more people and the utility doesn’t have to build any more power plants. In the end, value added service are the key to the entire process.