What is upselling and why is it such an important part of the sales landscape?
In any sales or retail environment, companies are constantly working to increase revenue. In order to make a sustainable profit, brands need to ensure they’re not only selling items and services to as many customers as possible, but that they’re convincing customers to make bigger purchases.
Upselling is a strategy used to increase the “average order value” of each client, by encouraging customers to buy a higher-end, or more luxurious product than the one they originally intended to purchase. Used correctly, upselling can increase sales, generate customer loyalty, and unlock new opportunities for brand growth.
However, like any sales strategy, upselling must be used with caution. Today, we’re going to be taking a closer look at how upselling works, to ensure you can use it as effectively as possible.
What is Upselling? Upselling Meaning
Upselling is a sales technique which involves persuading customers to purchase an upgraded, more expensive, or “premium” version of their chosen item. Upselling is a technique companies use to generate the best potential value out of a lead that’s already engaged.
For instance, a car sales person might show a customer a luxury model of a car side-by-side with the basic model, to highlight the benefits of upgrading. Alternatively, in a technology store, a salesperson might try to convince a customer to buy a computer with a bigger hard drive and better specs than the one they originally inquired about.
Upselling is an effective strategy for generating revenue because it’s often easier to sell to an existing customer than it is to find and convert new customers. In fact, the probability of selling to an existing customer is often somewhere between 60-70%, while the probability of selling to a new prospect is somewhere between 5-20%.
Upselling vs Cross-Selling: What’s the Difference?
Upselling and cross-selling are two terms that are sometimes used interchangeably in sales, but they’re not actually the same thing. While both strategies are techniques for increasing the average order value of each customer, they use slightly different approaches.
Upselling is a strategy which involves convincing a customer to purchase a more expensive version of a service or product they’ve already shown interest in. Alternatively, cross-selling is a method of encouraging customers to add related or complementary items to their existing purchase.
For example, imagine you were running a business selling computers. A salesperson who wanted to upsell to a customer would focus on steering a client away from a low-end or mid-tier computer, by highlighting the benefits of a more expensive product. Alternatively, if the salesperson wanted to cross-sell, they would support the customer in buying the product they originally looked at, but would recommend adding extra components, like a wireless mouse, or an external hard-drive.
An ecommerce business might use cross-selling to convince customers to buy additional products alongside the item they already want. For instance, they could add a carousel and use automation to recommend products on Shopify related to the main product. Ecommerce companies can also use upselling techniques an upselling apps in a similar way, showcasing the benefits of a more advanced products based on customer needs, to improve the chances of a higher sale.
What are the Benefits of Upselling?
Now you know the definition of “upsell”, you might be wondering whether it’s a good strategy for boosting customer experience and sales.
While most customers tend to feel negatively about obvious selling techniques intended to make them spend more money, strategies like upselling can still be extremely effective. Done right, upselling can actually improve the shopping experience for customers, and increase a company’s chances of generating repeat purchases and revenue.
While salespeople need to ensure they’re using the right techniques when “upselling” products and services, there are many benefits to unlock, such as:
- Building deeper relationships: Upselling doesn’t have to be a sneaky sales tactic, provided the salesperson is considering the best interests of the customer. If a salesperson actually addresses the goals and needs of the consumer when suggesting more expensive products, they can help them to save money and time in the long-term. An upsell might ensure a customer ends up feeling happier with their purchase.
- Easier revenue generation: As mentioned above, it’s much easier to upsell to an existing customer than it is to acquire a new one. Lead generation and marketing are expensive practices. It’s much cheaper and easier to optimize a sale to a customer who has already developed a relationship with the brand, than it is to try and convince someone new to make a purchase. Upselling can lead to easy wins for a lot of retail and ecommerce brands.
- Greater Customer Lifetime Value: Customer Lifetime Value, or CLV is an important metric in sales. It refers to the net profit contribution a customer can deliver to a company over time. Higher CLV means each customer can generate more revenue for the business, without the company having to invest extra. Upselling is an excellent way to turn shoppers into more profitable customers for the company.
- Increased retention: If salespeople effectively consider the needs of the customer and guide them towards a purchase which increases their satisfaction levels, they’re more likely to come back for more in the long-term. Upselling can be a great way to give customers a simple and straightforward buying experience, which convinces them to purchase again from the same brand in the years to come.
How Does Upselling Work? Upselling Examples
Upselling can seem like a slightly confusing prospect at first, but it’s actually relatively straightforward. The strategy can work in virtually any industry, whether you’re selling products, or services. It’s also suitable for both B2B and B2C sales. Let’s take a look at some examples of upselling might include:
- An airline representative might encourage a passenger who chooses to fly coach to upgrade to a first-class, or premium seat, during the check-in process.
- A restaurant could give diners the option to increase the size of their meal (large fries instead of medium fries), or switch a protein (shrimp to lobster).
- On an ecommerce website, a company could give customers purchasing an eBook an opportunity to purchase the audiobook version for a slightly higher price.
- A car salesperson could encourage a customer to purchase a car in a “luxury trim” which includes additional amenities like a stereo system or leather seats.
- A company selling “SaaS” or software as a service products could offer access to more features when a customer upgrades to a premium subscription over a basic subscription.
When Do Companies Use Upselling?
Like with most sales techniques, there’s often a specific time and place when upselling is more likely to generate the right results. Salespeople need to ensure they’re offering the upgrade at the right moment to improve their chances of strengthening the customer relationship.
The most common time to “upsell” a customer is prior to an initial sale. Often, in both retail and ecommerce stores, the strategy for a successful upsell process begins the moment a customer interacts with the store. For instance, on an ecommerce website, companies will often place recommendations for purchasing more expensive versions of a product on the pages advertising the cheaper versions.
Software companies might use price charts to show their customers how the features of different subscription levels compare. In a brick and mortar business, a salesperson might approach a customer and start discussing their goals, to help drive attention towards a more expensive sale.
In some cases, upselling can also take place at the last stage in the purchasing cycle, when a customer visits the cart or checkout page, or goes to the checkout at the front of a store. On an ecommerce site, companies can use banners and pop-ups, as well as other tools to remind customers they could get a better offer by updating. Some salespeople can even offer discounts for premium products.
It’s also possible to upsell a customer after the purchase has already taken place. In post-purchase upselling, customers add upgrades to their order after they’ve already finished the acquisition. This is usually an effective strategy for software sales and the sale of digital assets, as it’s easier for companies to add features and functionality after a sale. Companies selling a premium product can offer customers an extended warranty or premium product support.
Upselling can even be included as part of an email marketing strategy, with automated emails intended to encourage customers to upgrade their purchase or subscription after they’ve already entered their credit card details for a base product.
Is Upselling a Good Idea?
Upselling can be a fantastic way to increase sales and average order values, without having to guide customers to related products or add-ons. You can easily add premium versions of items to product pages, and encourage customers to increase the size of their order with a more advanced item.
Upselling can be a lot easier than trying to sell new products and extra services to customers. After all, your client has already decided they need something from your online store, all you need to do is show them the benefits of upgrading to a more expensive version of whatever they’re interested in.
Plus, there are countless upselling opportunities to take advantage of in today’s sales landscape. Companies can use an email template to upsell customers after they make a purchase or show interest in a product. Sales professionals can introduce an advanced version of an item before a client makes a purchase to increase AOV, plus, you can even offer discounts and offers on the premium version of your item, so your customers are more likely to consider the purchase.
Used correctly, upselling can be a great tool for increasing sales and revenue. The key to success is knowing when to use upselling and cross-selling effectively, without appearing too “pushy” in the eyes of your intended audience.
