Ancillary Product

Business, Legal & Accounting Glossary

Definition: Ancillary Product

Ancillary Product

Full Definition of Ancillary Product

An ancillary product is one that is acquired as a bonus or add-on purchase when another product is purchased. Instead of lowering costs or offering discounts to encourage buyers to buy the primary product, this type of product is frequently supplied as a bonus. It can be supplied to the customer for free as a sales incentive or at a reduced price if the main product is purchased. This allows a company to increase sales without having to offer discounts, as well as improve revenue through upsells.

In the business sector, there are numerous examples of ancillary items. If you are planning a move and rent a moving vehicle from a moving company, for example, they do not simply rent you the truck. They can also sell or rent you ancillary items for your move, such as boxes, bubble wrap, packing tape, dollies, and other equipment, in addition to your vehicle.

Ancillary products such as insurance plans can also be purchased. Even if they don’t sell the insurance as a stand-alone product, a vendor selling smartphones might offer smartphone insurance coverage as an add-on purchase.

Because insurance is a heavily regulated business in most nations, this is a particularly fascinating exception. Before they can manufacture and/or distribute insurance goods, most sellers or providers of insurance products must be licenced and regulated by their local financial or insurance regulating agency.

Ancillary products are an excellent way for businesses to increase sales without sacrificing income through discounts, or to improve revenue by upselling clients who have already committed to purchasing one of your goods or services.

Because insurance plans can be bundled with a range of different goods or services, they are a perfect fit as an ancillary product for various transactions. Warranties, free replacements for broken things, and even guarantees of operation or performance that recompense the owner in the event of a loss are examples of supplementary products in this category.

An example of an insurance-like auxiliary product tied to a performance guarantee would be if a maker of bicycle locks decided to provide their customers with up to $5,000 in “coverage” if their lock was defeated mechanically and the bicycle it was guarding was stolen. This is an example of an insurance-like auxiliary product aimed at persuading users to buy the lock because it is “assured” to protect their bikes in some way. This form of auxiliary product offering is extremely popular among firms attempting to persuade clients to buy a new product by lowering the risk of loss if the product fails to live up to its marketing claims.

Many consumers who purchase electronics or other high-priced items want to provide security and peace of mind by insuring them. The sellers of these things may then provide warranties and other insurance policies that can be purchased in addition to the item. In some cases, the insurance policy or warranty is an add-on to the initial purchase. These assist the seller in generating additional cash through an additional stream while also providing the buyer with peace of mind. This sort of product is so significant that many merchants get up to half of their revenue from the sale of supplementary products.

In a strictly insurance context, supplementary products can also refer to coverages that are not included in the core plan, such as optional coverages. In the context of health insurance, supplementary care products include vision care, dental care, short-term medical care, hearing care, and so on. These are regarded as supplemental to the primary health insurance coverage for accidents and illnesses.

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Modern Language Association (MLA):
Ancillary Product. Payroll & Accounting Heaven Ltd.
January 19, 2022
Chicago Manual of Style (CMS):
Ancillary Product. Payroll & Accounting Heaven Ltd. (accessed: January 19, 2022).
American Psychological Association (APA):
Ancillary Product. Retrieved January 19, 2022
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Definition Sources

Definitions for Ancillary Product are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 7th January, 2022 | 0 Views.