What Is Ancillary Revenue?
Ancillary revenue is any type of revenue that is generated by a business enterprise by means of selling goods and services that are not classified as the main products offered by the company. In many cases, these additional sources of revenue will have some relation to the main products, making it possible to sell them to consumers who are already customers of the business. The ability to generate ancillary revenue helps to improve the financial stability of the business in question and can often generate additional funds that can be invested back into the business and aid in promoting growth.
One common example of ancillary revenue is found at the local gas station. The main goods and services sold by the station have to do with managing car repairs and upkeep. While the repairs are the main focus of the business operation, the owner of the station may also sell other items that are of interest to his or her customers. For example, the owner may also carry a line of sodas and snacks that customers can purchase while waiting for the repairs to be complete. At the same time, goods such as air fresheners for the interior area of the cars, cleaning products for tires or washing the exterior of the vehicle and similar products may also be offered for sale. In this manner, the station owner is able to generate revenue from both the main function of the business enterprise, and the sale of a range of ancillary products.
This general concept of ancillary revenue is found in just about any type of business operation. Clothing stores may also carry a sideline of perfumes or jewelry as well as a wide range of garments. Airlines typically offer passengers beverages and snacks for a cost above and beyond the purchase of a ticket. Movie theaters have as the main product or source of income the sale of movie tickets, but offer beverages and snacks as an additional or ancillary means of generating revenue from those attending the movies.
With ancillary revenue, the strategy often involves not only attracting consumers who will buy the main product or products offered, but also choose to purchase at least one of the ancillary products on display. This approach allows companies of all sizes to create multiple streams of income which help to augment the revenue generated by their main products, while also meeting additional customer needs and wants. Meeting a wider range of consumer demands can often generate additional loyalty from those customers, prompting them to continue making purchases over the long term.
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