The impressiveness of the Add-On Model is made clear every time we run out of lives on Candy Crush Saga. Would we like to add more lives for 99 cents? In a weak moment, or (more likely) a repeated series of weak moments, the answer is yes; we want more lives. Or at least we want a booster that will help us move from that level that’s had us flummoxed for weeks of casual gameplay on public transportation or in boring phone calls. And if you do advance levels, that measly 99 cents is usually worth it—and your dollar represents 1/25,000,000,000,000th of King Digital Entertainment’s (Candy Crush’s creator) massive net worth.
So what is the secret to the company’s explosive success? They’ve mastered the art of acquiring and retaining their customers (addictive games can do that to a person!), and they’ve learned to brilliantly execute the “Add-On Model.”
Business Dictionary defines the Add On Model as: Fees or charges that are added to the basic price of a good or service for additional features or benefits, such as those added to the price of a car for accessories. The real key is to add on high-margin products or services.
We see this model everywhere!
Buying an airline ticket: Would you like to upgrade to first class? Would you like to purchase flight insurance?
Buying a new iPhone: Would you like to purchase Apple Care?
At McDonalds: Would you like fries with that?
Why and How it Works
The beauty of the Add-On Model is that your product endures and makes additional money throughout your customer or client’s usage. Acquisition costs seem less substantial when customers feel loyal to and continually pay for your services as opposed to using your product once for a brief spell or only sporadically.
While many “Add-On” companies offer their initial product for free, you may find that if your product encourages serious brand loyalty (as we hope that it does), you can offer an initial cost and then continue to add reliable in-demand features for your clients.
The Add-On Model keeps your product fresh and relevant, and best of all, responding to the demands of your client base. New features are low-risk; you already know what your clients need. Customers will be excited about being heard and about getting more use out of a good product.
As you design your business model, you might keep in mind that you don’t want to convolute your plan.
Consult with one of our Preferred CFO consultants to evaluate your product mix to determine each product/service’s profitability and to develop a strategy for generating more profit while satisfying your customers. Adding on high margin products, whether in video games, retail, or professional services, can reap enormous benefits.
Bradford is a senior executive with over 25 years of experience in finance, accounting, administration, and operations management roles around the world. He has managed global teams and advised executives, board members, and other key stakeholders. He has also mentored hundreds of individuals at all levels, backgrounds, and areas of expertise.
Whether implementing a new software system, adding office space, acquiring another company, or any other substantial investment, companies want to know how long it will take to recoup the money they spend on major purchases. The way to determine this is by calculating...
Finding funding for your business is a process that takes a lot of time and effort, especially during the startup phase. Many entrepreneurs fail in their first attempts at fundraising because they are poorly prepared. Others get themselves into trouble by choosing the...
In these days of economic challenges and changes, many companies struggle with uncertainty about the future, seeking tools and resources to best position their businesses for financial success. Often it can be beneficial to bring in a financial advisor who has...
Capitalization tables, commonly called “cap tables,” are highly useful spreadsheets maintained by companies that have multiple owners or investors. Cap tables are especially important for private companies at startup and in the early stages of the enterprise. They...
Many companies experience times when they find their accounting departments short on staff or short on expertise. Sometimes emergencies and financial needs arise that are beyond the capability of their financial personnel to address. This is particularly true in times...
A Profit and Loss (P&L) Report, also called a Profit and Loss Statement, is a key financial document that details a company’s income and expenses over a specific period of time. This time period is typically a month, a quarter or a year. Depending on company needs...