Add-on

Add-on

Add-on is mechanisms for generating revenue from “additional sales” of certain products and services . For example, in the standard in-flight services of Japanese airlines such as “JAL” and “ANA”, drinks and meals are usually provided free of charge because the service price is substantially included in the airfare. On the other hand, LCC (Low-cost Carrier) “Peach’s airfare is cheaper than JAL and ANA, but all drinks and meals offered on board are provided for a fee. The cheapest plan is” Checked baggage is also charged for “Simple Peach”.
In addition, the statistical analysis software “ SAS Analytics Pro ” is a “statistical analysis add-on” that can perform more advanced statistical analysis and time series prediction in addition to statistical analysis that can be executed by the software alone. There is a paid option called “.
Any add-on that can be added to a basic product or service is one of the following:

  1. Complementing the basic parts of products and services and enhancing their functions
  2. Higher added value than basic products and services

 

 

Why companies adopt add-ons

The reason companies are adopting add-ons is to increase the profitability of existing customers . In general, it takes cost and time for a company to reach new customers. Therefore, you can efficiently earn profits by making additional sales to customers who are already using your products.
And if a company wants to meet all customer needs perfectly at once, it needs to have every product ready from the start. For example, if the sAS described earlier tries to enable all statistics in one product, it can result in expensive multifunctional software and a buyer’s choice. This is a risk for the enterprise.
Add-ons can be said to be a mechanism that ensures that the basic part is sold by the company by letting the customer select the addition.
 

 

Benefits of add-ons for users

You can customize it freely

First of all, adding add-ons has the advantage that you can freely extend and customize the basic services to make them easier to use. In the case of software, one of the features is that many add-ons have a simple structure that allows you to enable / disable functions with a single click. By adding and customizing add-ons, you can use it as your own unique and original service that no one else has.
 

 

Improvement of work efficiency

By adding add-ons, you can expand the functions to make it easier for you to use, and there is a merit that you can significantly improve work efficiency. When adding a browser add-on, you can customize the search results, hide advertisements, store information, etc. to create an environment that is more convenient for you. It has the advantage of being able to reduce and achieve high performance. By adding add-ons in this way, you will be able to work comfortably and work stress-free.
 

 

Disadvantages of add-ons for businesses

Add value needs to be added to add-ons

If the add-on part has no added value to the basic part, the user does not select the add-on. Also, if the add-on part is set too high, the customer may complete it by using only the basic part. Moreover, if the basic parts of the product offered are fully functional, again there is no incentive to choose an add-on.

 

Success conditions for add-on business

The basics alone cannot meet all customer needs

The most important condition for a successful add-on business is that the basic parts of the products and services offered by a company cannot meet all customer needs . As you can see from the examples of LCC (low-cost carrier), statistical software, and bridal business introduced in this article, we will customize products and services and respond to customer needs by providing additional add-on parts. increase.
 

 

The add-on part has enough added value to the basic part

It is also important that the add-on part has enough added value to the basic part. If the part that requires an additional charge does not differ in performance from the basic part, it cannot stimulate the customer’s willingness to pay.
 

 

Add-ons do not reduce profitability

There is no point in reducing the profitability (profit margin) of a company by adding the add-on part. Therefore, it is necessary to select an add-on that does not require a large additional cost for the cost required to provide the basic part.
 

 

Add-on examples

IBM SPSS

SPSS is a statistical analysis software provided by IBM that is used for academic research and customer analysis. The company’s basic software, “IBM SPSS Statistics,” facilitates a basic monthly billing plan called “Base Subscription,” which can be used from 13,800 yen a month. This plan allows you to perform basic statistical analyzes such as factor analysis, clustering, and linear regression.
In addition to that, three types of advanced statistical analysis services are also provided, which can be used at an additional cost of 11,000 yen per month.
 

 

Bridal business

The bridal business implements a typical add-on revenue model. Usually, a “basic plan” is prepared for the cost of holding a wedding or reception, depending on the number of participants, the time of the reception, the place, the food to be served, and so on.
On the other hand, costumes and hair make-up, production and decoration, paper items, food and drink upgrades, etc. can be selected according to the user’s taste and budget, and the cost will change depending on the combination.
 

 

Related Terms

Reverse innovation
Reverse innovation means that multinational companies develop and sell their products and services based on the "needs of developing countries" rather than developed countries. Traditionally, when a multinational company expands into an emerging or developing country, it first develops and sells it in the developed ...
Born global
Born Global means that international expansion (business expansion in overseas markets) will be carried out in a short period of time after the company is founded, and sales of overseas business will account for the majority of sales . Specifically, a company that expands overseas ...
Upselling
Upselling is a sales approach that aims to improve the sales unit price obtained from customers by proposing high-ranking (high sales unit price and profit margin) products at the time of purchase, replacement of products, contract renewal, etc. For example, when you ask for regular-sized ...
Cross-selling
Cross-selling is a sale that aims to increase the number of items purchased from customers and improve profits by recommending the purchaser of one product to purchase another product related to that product. It's an approach method . For example, a hamburger shop may recommend ...
Subscription business model
The Subscription business model is a revenue model that asks customers to pay a fixed fee according to a period such as "monthly fee" and continuously provides services. Subscriptions to newspapers and magazines are typical models of subscriptions. The main features of the subscription model ...
C2C
C2C is an abbreviation of (Consumer To Consumer), which is a business model that mediates the buying and selling of products and the sharing of information between consumers and individual consumers. C2C is also known as "CtoC" or "personal transaction". With the spread of the ...
MTO
MTO is an abbreviation of "Make To Order", which is a business model of manufacturing after receiving an order from a customer . A typical example is a supplier company that develops and manufactures parts for products sold by manufacturers of automobiles and electronic devices ...
Revenue sharing
Revenue sharing is a profit model in which companies cooperate to do business and distribute profits among companies according to a predetermined distribution rate. Revenue share has been widely used in recent years as a contract form to reduce risk, especially in IT / Web ...
2021年11月29日
top
©Fluphie Business Terms Directry

Add-on

Send this to a friend