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.
12 Things Investors Look for in an Investment Opportunity Being funded by a VC fund has been glamorized in the past 10 years—and it’s no wonder why. Venture capitalists not only provide funding for young and innovative businesses, but also bring a partnership with...
Business growth requires both organic and inorganic growth. Each method carries its own set of advantages, challenges, and implications for the trajectory of a company. Whether you are a startup or established enterprise, understanding the dynamics of organic and...
Recognizing Cash Flow Problems & How to Solve Them We know that the majority of small businesses fail within the first five years, but a study by Jessie Hagen, previously with U.S. Bank, drilled down into the reasons why this occurs. In her study, she found that...
In today's dynamic business landscape, having a strategic financial perspective is more crucial than ever. However, not all businesses can afford to have a full-time Chief Financial Officer (CFO) on their roster. Many choose instead to utilize virtual CFO services – a...
Financial Key Performance Indicators (KPIs) are crucial measurements of a company’s fiscal health. These metrics provide a window into the current and projected profitability of an organization, enabling managers and stakeholders to make informed decisions. By...
For many businesses, product inventory is their biggest asset. Effectively managing the inflow, storage, and outflow of inventory is critical to the financial success of the company. When inventory management is done right, customers can place orders with confidence,...