The Add-On business model provides a base item at a competitive price, with additional features available for an extra cost. Customers often spend more than initially expected, but gain flexibility in tailoring the product to their needs. An example is airline pricing: passengers pay a base fare, supplemented by charges for extras like seat selection, baggage, and in-flight services. This model requires precise pricing strategies, often seen in online marketplaces where consumers can easily compare prices. Platforms like Skyscanner and Kayak compare travel costs, fostering competitive pricing. Consumers pay a premium for add-ons, which may include services, extensions, or customizations. They must choose whether to remain with the base product or enhance it with extras, potentially ending up with higher expenses than comparable options without extras. Companies should focus on valuable features that maximize utility for the most customers, enabling each to choose preferred enhancements.

When and how to apply Add-On:

This pattern suits firms where customers can start with a basic product, such as a flight or a car model, and enhance it with less price-sensitive extras. Studies show that once basic needs are met, customers often make emotionally driven add-on purchases. In B2B scenarios, the Add-On model works when initial investments are minimized to maximize future profits, even if it incurs higher operational costs later. A noteworthy example is Ryanair.