An add-on sale is an additional item sold to a buyer of a main product or service. Examples of add-on sales include extended warranties offered by sellers of household appliances such as refrigerators and washing machines, as well as electronics
As businesses seek to improve profit margins, they often find it necessary to look beyond core products and services.
The fast-food industry pioneered a technique adapted by many large businesses, across a range of industries, called add-on selling or upselling.
While that value menu can look tempting, fast food restaurants will try to steer you away from the lower-priced items in favor of more expensive foods. This tactic, called upselling, is used in most industries and is one of the ways fast food restaurants keep turning such large profits.
You might tell yourself you're going to just order a $1 hamburger, but when you get to the restaurant and see mouth-watering images of combo meals complete with fries and a drink, there's a good chance you're going to rethink your order. Menus at fast food restaurants will prominently feature these tantalizing images to convince you to spend more money.
In essence, when a customer arrives at the cash register, the clerk suggests an additional item to buy. The add-on selling approach often proves profitable, yet many small businesses fail to take advantage of it.
Tom Duncan, author of "Principles of Advertising & IMC," defines upselling as “encouraging customers to buy a more expensive product than they had in mind.” While this can mean suggesting a more expensive model, it typically calls for the salesperson to offer the customer related products. For example, clerks at a bookstore might ask customers if they also want to purchase a bookmark. The addition of a bookmark makes the book buyer’s reading experience easier, while also increasing the size of the sale.
Effective add-on selling hinges on understanding the customer’s needs. A hardware store customer who buys a wheelbarrow will probably not want paint samples, but he might need a shovel. Staying conscious of the customer’s needs lets the salesperson direct him to an appropriate add-on. The add-on should sound like a solution, not a sale. The customer should see how the add-on will solve a problem, not just pad the business’s bottom line. The salesperson should present several add-on options and an explanation of the value for each one, which allows the customer to make an informed choice.
Standard add-on sales vary by industry, but some add-ons work in a variety of industries. Warranties on parts or products are very common. Many businesses offer upgraded versions of a product for less than the equivalent retail cost, such as a software upgrade on a new computer. Businesses that deal in products installed in homes or offices frequently make service plans available at a discount from normal service call prices.
The primary benefit and goal of add-on selling is an increase in the total purchase amount. Businesses that employ effective add-on selling also benefit from increased customer loyalty. Customers who view businesses as providing good service, such as making useful suggestions, tend to return to those businesses for future purchases. The business serves as a resource for information or advice, rather than just a place to shop.
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