In plain words
An add-on is an extra product offered with the main purchase: a mug with the coffee, a case with the phone. It is shown in the buy box or the cart, before the customer pays, and ships in the same parcel.
It is some of the cheapest margin a store can find. The order already pays for its label, its base fee and its box. The add-on brings its own unit cost, one more pick and the fees charged on its price. Everything else it sells for is kept.
Formula
- Margin added = add-on price − its unit cost − extra pick − costs charged as a share of its price
Worked example
A mug offered at $9.00 with the $40.00 bag takes the order to $49.00. The engine puts the order's margin at $19.45, up from $15.36.
The mug added $4.09 on a $9.00 sale. Sold on its own, with its own label, the same mug would lose money.
The example order
A $40.00 bag of coffee, shipped free, every cost counted
2 declared kinds cost nothing on this option
| Step | Grain | Amount |
|---|---|---|
| Revenue | – | $40.00 |
| Cost of goods | per unit | −$12.00 |
| Pick and pack | per order | −$1.18 |
| Packaging | per parcel | −$0.50 |
| Shipping label | per parcel | −$7.50 |
| Card fee per order | per order | −$0.30 |
| Refunds | percent | −$2.00 |
| Card processing | percent | −$1.16 |
| Contribution margin | – | $15.36 |
| 2 kinds costing nothing | – | $0.00 |
Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.
An add-on is not a gift
The customer pays for an add-on, and it has revenue. A gift has none. They sit in the same box and cost the same to pick, which is why they get confused in reports. An add-on raises the order's margin and a gift lowers it.
Using it
Offer add-ons that are light, small and already stocked with the main product, so they add a pick and nothing else. Check that the add-on does not push the parcel over a weight or box step. And measure how many buyers take it: an add-on taken by one buyer in five still moves profit per visitor.
In Offer Suite
In Offer Suite an add-on is a line of the option with its own role, priced and costed with the rest of the order, so the forecast shows what the option keeps with it.
Source: Offer Suite's margin engine.