We can have Variations or Add-ons or both for our products.
But when do we use which of them?

Variations VS Add-ons

In short, we use variation when there is pricing different based on option, and we use add-on when there is pricing added when an option is selected.

For example, we are selling a T-Shirt, with variation of colors and sizes, but with add-on of “Custom printing text” option.

Different colors or sizes might cost different pricing, hence they are variation. While “Custom printing text” will add additional cost, hence it is add-on.