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.
About the Author
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.
You may also be interested in…
Which outsourced CFO services can benefit your company? It depends on your goals. Unlike controllers and CPAs who typically have a more straightforward job description of record-keeping, bookkeeping, and tax management, an outsourced CFO's role changes based on the...
What is Cash Flow and Why Is It So Important? Many financiers and business owners will agree that there is one four-letter word that is more important to a company than any other. C-A-S-H. Cash within a business is much like the waves of the ocean. It is constantly...
4 Mistakes Software Development Companies Make that Hurt Profitability—and How to Fix ThemSoftware development & tech CFO, Shawn Capistrano, discusses some of the most common financial mistakes software development companies make—and how to resolve...
Strategic CFO, Bradford Pack, discusses the 7 most common financial challenges faced by construction companies. With long project times, sizable material orders, and upfront labor costs, the construction industry often faces a variety of financial challenges. Below...
Preferred CFO Becomes a Strategic Partner for CEO Coaching International to Provide High-Level Financial Strategy to Elite Companies
FOR IMMEDIATE RELEASE Salt Lake City, Utah – Preferred CFO is proud to announce they have become a strategic partner for CEO Coaching International. In this role, Preferred CFO will offer financial consulting and advisory services to high-performance CEOs to...
Companies more than ever are adopting “lean” mindsets with the goal of lowering operational and labor costs while maximizing expertise. The outsourcing model allows companies to hire talent for only the hours needed to fill a particular role or achieve a goal. This...