This topic describes the importance of add-on products in an organization. Many organizations in their early stage do not recognize the importance of add-on products. Before going deeper, I need to explain two terminologies – ‘base product’ and ‘add-on product’.
What is Base Product?
Base product is the range of products that a company mainly sells. This is considered as the fundamental or core product of the company. A company may have several base products.
What is Add-On Product?
Add-on product is not the core product; it is some other product a company also sells and generally suggested by the salesperson once the customer already bought the core product or took a firm decision to buy the core product. Usually, company does ‘upselling’/’cross-selling’ by selling add-on products.
Now, I am taking an example from one of my old analysis to explain it in a better way. Here, I took BoostLite as my base product and WildFire as my add-on product. The price of the mentioned base product is 3-4 times higher than the add-on product. Here, I am going to show the results of my analysis. But before that I need to explain what is BoostLite, WildFire and CLTV.
What is BoostLite?
BoostLite is a base product. With the help of BoostLite, customer can create his own business site instantly by himself with zero technical knowledge. He also can add content to the website, share product catalogues, share business updates, share new product launches, share offers etc. NowFloats structures the website automatically so that it is more discoverable online. The discovery of customer’s website will increase gradually and steadily.
What is WildFire?
WildFire is an add-on product. It is essentially a way to drive inorganic web traffic to a website using different channels like Google adwords, Facebook ads by matching the keywords from the content of the website and pushing them out to popular online ad networks and thus generating ROI for the website.
What is CLTV (Customer Lifetime Value)?
CLTV refers to the amount of revenues that you expect to generate from a customer during his lifetime. For example, if a customer signs up for your product for duration of ten months, the amount that he will pay during the period will determine the life time value.
Assumptions for this Analysis
In my analysis I have frequently used these two words – ‘WildFire customer’ and ‘Non-WildFire customer’. Here ‘Non-WildFire’ customer means the customer who has only taken a BoostLite (base product) from NowFloats, whereas ‘WildFire’ customer means the customer who has taken WildFire (add-on product) as well as BoostLite.
Result1: Analysis on Visibility: #Visitors, #Tracked Calls
I took visitors and tracked calls data for all WildFire customers and all Non-WildFire customers. The result is obvious – the average number of visitors and tracked calls per month per WildFire customer is higher than the same for Non-WildFire customers. But do you know how high is this?
It is almost 3-5 times higher than non-WildFire customers.
Yes, the visibility of WildFire customers is really too high compared to Non-WildFire customers.
Result2: Analysis on Profitability: CLTV of WildFire Customers
Here, I calculated the CLTV of existing customers. Now, if you compare the average NowFloats revenue per customer per year for WildFire customers and Non-WildFire customers, then you will see WildFire customers are giving higher revenue in long run.
Benefits of Add-On Products
Add-on product is profitable.
Add-on customers are highly likely to do repeat purchase.
It is always better to sell add-on products to existing customers compared to only finding a new customer, as finding a new customer is costly.
Add-on products are as profitable as base products in terms of visibility and profitability. So, any organization should focus on add-on selling from its early stage.