Incremental Cost

You could have bought the simple drone with just a camera and the 30-minute battery. But you wanted to be able to fly it 2 hours, have it glow in the dark, and make crazy high pitched noises just to scare the crap out of the bats in the area. (Your plants needed fertilizer so...you know.)

Those extras were an incremental cost. Notably, in many products where there is a base cost and then extras with incremental cost (and price to buyers), the add-ons are where all the profit margins live. Like...in a basic, vanilla car that sells for $20,000 stripped down with nothing on it, not even electric windows, the car manufacturer makes like 1,200 bucks. But add on $5k worth of extras and they have an incremental cost to the maker of something like $2,500.

So that $5k upgrade ended up contributing more than double the profits in the sale of the car. Remember that next time Smilin' Freddy's Car Dealership humps you to buy extra insurance and/or the glow-in-the-dark hub caps for $300 each.

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