You have probably seen it before. Every once in a while, you get a mail from one of your favorite e-commerce websites asking you to upgrade your account with a list of benefits of having such a premium account.
What they are doing is upselling their product. By adding more value to a product that their customers already consider valuable, companies are cashing out on up-selling, and if your business has not recognized this to date, you need to.
But how does up-selling differentiate from cross-selling?
Cross-selling hinges on the principle of selling complementary products to customers who are already buying from you. For example, when you buy a laptop, the store might offer to sell you an extended warranty or antivirus software.
Upselling, on the other hand, is about convincing a customer who is already buying a product from you to buy a more expensive version or add-on features to the product they are buying.
To give you an idea about how effective upselling can be, Starbucks makes almost 60% of its revenue from selling add-ons and upgrades such as whipped cream and caramel drizzle to its coffee drinks which cost them almost nothing to make!
These advantages are only the tip of the iceberg. Upselling has several other benefits starting with:
Average order value: An average order value is the average amount of money a customer spends every time they place an order on your website. You can increase this value by upselling and making more revenue per transaction.
Customer lifetime value: Customer lifetime value is the total amount of money a customer is expected to spend on your products or services during their entire relationship with your business.
The longer they stay with you, the higher this number will be. And since upselling generally leads to satisfied customers, it can only mean good news for your business in the long run!
Increased margins: When you can successfully upsell a product, it leads to an immediate increase in revenue and increases your margins since you are selling a more expensive product.
Now that we know what upselling is and why it matters let’s look at some strategies you can use to start upselling in your business.
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There are two main types of upsells: hard and soft.
Hard upsells are when you try to get the customer to replace their current product with a more expensive one. On the other hand, soft upsells are about adding complementary products or services that enhance the customer’s experience with the original product.
One of the most common examples of a hard upsell is when car salesmen try to get you to trade in your old car for a new one. A soft upsell would be like trying to sell premium seats to someone who has already bought a ticket to a concert.
The key to upselling is ensuring customers feel like they are getting value for their money.
If you try to sell too hard a product that is not an upgrade from what they are currently using or is not complementary to their needs, you will only end up annoying them and driving them away.
While the strategies of upselling depend from salesmen to salesmen, there are a few strategies that most companies stand by. The first and most important rule of thumb is always to offer more value.
If you are selling a product for $100, an upsell could be a better or upgraded version of the same product for $150.
But if the customer does not perceive any additional value in the upgraded product, they will not buy it, which is why you must focus on offering products that have real value for your customers.
Another thing to keep in mind is to make sure that your upsells are relevant to what the customer is buying from you in the first place.
For example, if someone buys a dress from your clothing store, an upsell could be a pair of earrings or a necklace that goes well with the dress. But if you try to upsell them a pair of shoes, they will likely be less interested because it is irrelevant to what they are buying.
Finally, always give your customers the option to say no.
If you force an upsell on someone who does not want it, you will lose out on that sale and damage your reputation as a business. Always remember that people like feeling in control, and if you give them the option to choose, they are more likely to go along with your upsells.
The best idea with upselling is to start small and gradually increase the intensity. You can use these strategies to increase your average order value and customer lifetime value which are both essential for the success of any business.
Just make sure that you focus on offering real value to your customers and do not try to hard sell them products they do not need. If you do that, you will be well on your way to successfully upselling in no time!