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…
Preparing to raise capital can be an exciting and stressful time. It means your company is experiencing growth and that you’re ready to take things to the next level. The best way to prepare to raise capital is to ensure you have the documents and...read more
An outsourced controller is a financial expert who helps keep your books up-to-date and provides financial reporting and information in a timely manner. Controllers can be in-house or outsourced. If the controller is outsourced, that means the controller...read more
There are several reasons your company may be seeking professional financial consulting or expertise. Your company may be preparing for a transaction or raising funds, may be experiencing growing pains, or may be in a state of transition. It may also be...read more
A CFO brings high-level expertise and strategy to an organization. A CFO’s primary role is to elevate financial strategy, streamline operations, trim fat, and maximize sustainable growth. But how do you know if your company is ready for a CFO? How do you...read more
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; they also bring a partnership with seasoned professionals and experts with a proven ability to...read more
How to Determine How Much Your Business Is Worth To determine how much your business is worth, first choose your method of measurement. Choose the best method for your company based on your size, industry, and lifecycle stage. These methods of business valuation use...read more