What is Upsell?

What is Upsell?

Upselling can be defined as a marketing technique in which a customer is offered a higher-quality product/service than the one they currently are purchasing. Businesses use this strategy to entice the customer into buying something of higher value than their initial purchase. Often, this type of upselling comes with discounted rates for higher-value products. It can be a revenue management technique that targets increased sale volumes and generation of additional revenue. Moreover, it involves suggesting complementary services/goods that can impact the buyer’s experience and potentially raise customer loyalty and satisfaction.

Examples of upselling
Some examples of how business apply the upselling concept are:

Usage-Based Pricing

• A cloud storage service offers a basic plan with limited storage capacity.
• Additional storage capacity can be purchased in increments (e.g., +100GB for $10/month).

Tiered Pricing Plans

• A project management tool offers a basic plan with limited features for $10/user/month.
• An upgraded plan with additional features (e.g., advanced reporting, integrations) is offered for $20/user/month.

How to upsell a service/product?

Upselling is not just a game of additional prices. It is a strategic process that involves steps such as understanding the customer and their behavior, getting your team well-trained, and using technology to make the upsell personalized and effective. The sales team must not only be trained about products but also figure out lucrative opportunities where upselling can be applied.

What are the steps involved in upselling?

Upselling is a skillful job and requires knowledge about how to instigate a customer into buying something more advanced than what they are paying for. It can mean additional features, a plan upgrade, a premium service, or a complementary product. Given are some steps involved in upselling:

Trust Building with Customer

As the initial steps, you must understand what your customer thinks and wants to get. By building a strong customer-business relationship, you can encourage them to share their needs, preferences, and pain points, if they have any. Recognition of customer motivation, or what drives their purchasing decision, is key to understanding how they will decide what they want to pay for. Analyzing customer usage patterns and preferences can be helpful.

• For a successful upsell, you must know your product well.
• Make suggestions as per customer preferences.
• Prioritize customer service.

Get to know customer needs

Listening to the potential buyer about what features and functionalities they want in a product can assist in making suitable choices. In most cases, customers approach the sales team themselves and ask questions that can help in deciding what to offer them, but there are some other alternate ways of figuring out your potential buyers’ preferences.

Information and data gathering of customers, including history and past purchase records, can also help in making an upsell. Use of sales automation and analytics software can make it easier to understand current customers. You can utilize this data for optimizing customer services, personalizing customer offers, and thus gaining customer loyalty.

Recommendations

When customers are offered undesirable products/services, they are likely to lose interest in your brand. It is best to make the right recommendations for successful upselling by utilizing the customer information you have. Ensure that whatever you sell to them meets their wants. Also, it is best to give limited options to avoid confusion with excessive options.

Avoid Overselling

Recommending costly upgrades to customers in parallel to what they originally are purchasing could lead to lost customer interest. In general, the upsell must not increase the total product price by more than 25%. Data generated through marketing automation tools or CRM can help in tailoring recommendations to suit the buyer’s needs.

What is cross-selling?

Cross-selling is a practice in sales that involves related supplementary products or services to a customer based on their interest in one of your company’s products. It is a great way of gaining customer satisfaction and improving customer lifetime value and retention.

What is cross-selling vs. upselling?

While both are somehow similar, upselling involves selling a more expensive service/product to a customer than their current purchase. While cross-selling does not involve selling customers something more expensive than their current choices. Their key differences involve:

Price: Upselling involves selling a more expensive product, while cross-selling involves selling complementary products that may or may not be more expensive.

Product: Upselling involves upgrading to a better version of the same product, while cross-selling involves purchasing additional products that complement the original purchase.

Goal: Upselling aims to increase revenue by selling a more premium product, while cross-selling aims to increase revenue by selling additional products that enhance the customer’s experience.

How to measure upselling?

Upselling can be measured by analyzing its impact on average customer order value. For instance, an increased order value may mean a successful upsell strategy. Increased customer conversion rate and products per order increase is also an indicator of an upsell. Upsell rate can be calculated by this formula:

Upsell rate % = Upsell Revenue / Total Revenue

Selling a product to an existing customer rather than a new one is much easier, and companies do so to capitalize on current customers of their services. Thus, incremental revenue in excess of the baseline revenue prior to the upsell is a great way of gauging recurring revenue for your business. Moreover, a company upselling effectively may witness an increased ARPU, or Average Revenue Per User. It is a key performance indicator (KPI) that helps businesses measure the revenue generated by their customers.

ARPU is calculated by dividing the total revenue by the number of users or customers. For example:
ARPU = Total Revenue / Number of Users

When should you upsell?

Although most sellers are familiar with pre-sale upselling, you can avail upselling opportunities at many stages of the customer lifecycle:

Prior to the Initial Sale phase: As soon as a customer reaches your store, whether online or in person, the upselling process begins. You can use product pages for cheaper products and depict premium products via comparison charts. For brick-and-mortar businesses, you can place upsell products next to the basic products shelf.

Checkout page: You can use the checkout page to inform buyers about volume discounts, fast shipping options, additional features, etc.

Post-purchase upselling: Customers can enhance their orders through post-sale upselling. For software or digital assets, when adding features or functionality is simple, this works particularly well. Offering clients an extended warranty or premium support for their purchase is one method to upsell after a transaction if you’re selling a physical product.

What are the business benefits of upselling and cross-selling?

Upselling and cross-selling hold significant value in the business landscape and bring along several advantages. Upselling/cross-selling can help to increase loyalty on the customer’s part and encourage word of mouth. Thus, they can be beneficial for attracting new customers to your business. Among some of the main benefits of their implementation are

Increased per sale value

Upselling or cross-selling raises your sales value as customers are redirected towards buying more in addition to the products that are costly. It increases the items being bought and allows revenue optimization, allowing more cash inflows.

One-stop-shop facility

With the availability of different products of varying types from each product class, you can enjoy a broad range of options. When the sales team makes relevant recommendations and understands buyer wants, it allows convenience, and buyers can explore new categories. Thus, it enhances the buyer’s experience and offers them the convenience of exploring newer products based on what you recommend to them.

Improved customer experience

Offering recommendations to customers ensures that you are involved with them to make an informed and well-thought purchase. It enhances their trust in your brand and improves brand reputation.

Long-run benefits

Increased customer satisfaction can lead to repeat purchases, thereby offering opportunities to better exhibit your products in the consumer market. When your business keeps the customers feeling valued, they are likely to return and help generate revenues and more sales.

Increased ROI

When you fully take advantage of upselling to your current customers, it allows quick return on investments with ongoing purchases from repeat buyers.

What is down selling?

It is a sales practice that involves offering a less expensive alternative to allow a customer purchase. This is done in case the customer finds the original offer too pricey and seems hesitant to make the purchase. Down selling is meant to retain sales by suggesting a pocket-friendly option to the customer.

This sales technique is more suited to customers who show interest in your product/services. For instance, a person has placed an item in the cart but not purchased it due to high price. Under such scenario, offering cheap alternative can incentivize them to buy from a business. Despite, the low rate of profitability, this technique can be beneficial in long-run due to acquisition and customer retention benefits.

What is value proposition?

It is a statement that explains the unique features and value offered by a product/service, often used to support upselling efforts. A well-crafted VP will stand out among competitors for its products/services in the market. It shows the inherent value of a product, answering questions such as what a product does, the outcomes it offers, benefits for the customers, and more.

A company can benefit from its value statement as it can be an opportunity to inform customers why your products, services are best to use. It is a summary of why the company can meet the demands of customers and solve their problems in an effective manner. A value proposition is an opportunity to win customers, gain their trust, and boost sales to stay ahead of competitors.

What is an upsell product?

It is an advanced, upgraded, and premium version of an item a customer wishes to purchase. It can be a model with enhanced features or an extended warranty to enhance customer satisfaction. For instance, a customer subscribes to a basic software plan for $5/month. In case of upsell, the provider offers a premium plan with additional features such as advanced analytics, priority customer support and extra storage for $15/month.

Some types of upsell products are:

• Feature-rich models as in case of smartphones with additional features.
• Extended Warranties offering more comprehensive coverage for a product.
• Premium services such as priority access and exclusive customer benefits.
• Bundled packages combining multiple products into one that offer more value than each product when sold alone.

What is bundling?

It means combining several products in one discounted offer. If you are selling a mobile phone, you can sell it with additional products such as AirPods and a case. This bundle can cost less than these three products sold separately. Bundling influences the customer’s purchasing decisions and benefits them owing to saver offers. Moreover, it indicates a win-win for the business as well. Some benefits of bundling include increased average order value by encouraging customers to buy more products and improved customer satisfaction by offering a cost-effective solution leading to higher conversions. Moreover, it can help to clear out inventory by putting together slower-moving products with fast-selling ones. Furthermore, bundles can incentivize customers to stick to your brand and ensure loyalty.

What are some common upselling mistakes to avoid?

A successful business utilizes carefully crafted strategies to gain customer trust and loyalty. Upselling in a complex yet competitive market can be tough. Here are certain things you must avoid while upselling to your customers:

Recommending expensive products:
You must never recommend a product/service to customers that is more costly than the original one.

Pushing hard:
Try not to force customers into buying your product; know when to stop.

Focus on the solution:
Try to help customers with a solution to what they require rather than constant recommendations.

Find an opportunity:
Do not upsell all the time; rather, look for selling opportunities.

Comparisons:
Indicate free and premium upgrade benefits to the customer through comparison to let them know what added features they can avail themselves of with an upgrade.

Discounts:
Offer a discounted rate to the customer on the spot in order to encourage them to complete their purchase.