Add-On Sale: Overview, Example, Advantages

What Is an Add-On Sale?

An add-on sale refers to an ancillary item sold to a buyer of a main product or service. Depending on the business, add-on sales may represent a source of significant revenues and profits to a company. An add-on sale is generally suggested by the salesperson once the buyer has made a firm decision to buy the core product or service. It is sometimes known as "upselling."

Understanding Add-On Sale

Typical examples of add-on sales are the extended warranties offered by sellers of household appliances such as refrigerators and washing machines, as well as electronics. A salesperson at an automobile dealership also generates significant add-on sales by suggesting or convincing a buyer sitting at his or her desk that the buyer would be much happier with the car with a few or several add-on options.

Once a car buyer has committed to buying the base model, adding on options (leather trim interior, a premium stereo system, heated seats, sunroof, etc.) can substantially boost the final purchase price.

Examples of Add-On Sales

Sometimes it is hard to get through a day without someone trying to ring up an add-on sale on you. Order a lunch. Would you like to buy a pastry for 99 cents? Buy a smoothie. Would you like a power protein shot for a dollar? Order take-out. Would you like a drink with that?

These are harmless enough for a consumer, but repeatedly and over time, add-on sales represent a drain on consumer wallets and hefty profit margins for the sellers. A $2 cup of soda costs the seller only pennies to provide, for example.

More insidious are high-cost add-on items that are not necessary. For instance, buying insurance at a car rental agency when your credit card already provides coverage is a waste of your money. However, some add-on sales may provide adequate value to a consumer. An extended warranty (perhaps to give peace of mind) and that premium stereo system for a new car are examples of add-on items that many consider to be worth the extra cost.

Advantages of Add-On Sales

Add-On sales can help a seller establish a rapport with a customer, which equates to planting a seed for future business. It is not a dirty tactic if it focuses on helping customers "win" with add-ons that will enhance their experience with the primary item. By delivering enhanced value and making them feel like they got a better deal, chances are good you'll generate increased Customer Lifetime Value (CLV), which is the net profit contribution a customer makes to your company over time.

Increased CLV means each customer generates more revenue for your business without additional effort from you, which also means your company has more money to spend on acquiring new customers. Many consider CLV to be an extremely important metric for understanding customers because it provides data that informs important business decisions about sales, marketing, product development, and customer support.