Getting a new customer is one of the main goals in business. We all know what it takes to do that, and we can all agree that it is a pain in the neck sometimes.
But, the increase in revenue is a strong motivation for the hard work.
Fortunately, there is a more efficient way to increase the revenue per customer, and I’m not talking about raising the price of the products.
I’m talking about getting higher purchases from the existing customers through the upselling process.
The catch is, that you can do it right and benefit a lot from it, but also if you don’t do it correctly you can get the opposite effect.
That’s why in this blog post I’ll present all you need to know before you start upselling your products and services.
Let’s dig into it.
What is Upselling?
Here is the definition from Shopify
Upselling is a sales technique used to get a customer to spend more by buying an upgraded or premium version of what’s being purchased.
This is a really complete definition because it points out the moments that determine what upselling is all about - spending more than planned, for an improved version.
We need to make sure to understand what upselling is because people often confuse upselling and cross-selling. Take look at the example
The terms are similar but not quite the same. The similarity is that both have a goal to increase the order value.
The main difference from cross-selling is that upselling includes the improved version of product or service, while cross-selling involves different product or service, usually related to the original.
Benefits from Upselling
When you manage to upsell, you gain many benefits, but the most important things are retaining customers and accelerating the profit.
One big advantage of upselling is a fact that it’s easier to upsell than to get a new customer.
In the book Marketing Metrics
, you can find that the chances to sell to a new prospect are a lot lower than chances to sell to an existing customer.
When you think about it, it makes a perfect sense. Any customer would rather buy from a trusted seller then take a risk with a new one.
Accelerating the Profit
This is Chaotic Flow rule of thumb #8
where they explained how upselling and upgrades leverage the initial investment of customer acquisition cost to accelerate SaaS time to profit by countering the delays of both growth and churn.
There is a detailed explanation at Chaotic Flow, but the conclusion is that SaaS companies can speed-up the time to profit when they upsell and upgrade their customers.
But the condition is that the cost purchase process has to be at a low level and distinct from the new customer acquisition process.
Not Being Pushy
What do you think why the inbound marketing was the next step in the evolution of marketing
? For me, it was a clear statement from customers that they don’t want sellers to be pushy anymore.
They have the Internet and they will learn about the products before they decide to buy.
However, upselling is a part of a good old outbound marketing, and that's why many have asked if it still works. Oh yeah, but only if you can adapt to a well informed high demanding customer. That adaptation requires canceling pushy selling.
Going aggressively include behaviors like making a customer feel guilty for not buying an improved product or making offers too frequently. Also, trying to upsell before original purchase is finalized is too pushy.
Reducing the Choice
Making a decision takes energy and time. That’s why offering too many choices can be paralyzing for a customer.
The famous jam study
showed that consumers were 10 times more likely to purchase jam on display when the number of jams available was reduced from 24 to 6.
However, a study by Kellogg researchers at Northwestern University
pointed to when reducing choices for your customers is most likely to boost sales.
The authors concluded that the rule is applicable in the following situations.
- When people want to make a quick and easy choice (effort-minimizing goal)
- When making the right choice matters/you are selling complex products (the decision task is difficult)
- When you show options that are difficult to compare (greater choice set complexity)
- When your customers are unclear about their preferences (higher preference uncertainty)
So, less choice - more sales, doesn’t always apply, but if you can meet these criteria, you should definitely try it.
The Bundle Technique
Very related to the reducing choice technique is the bundle technique. In fact, the problem of too many choices can be solved by creating a bundle of products or services.
According to Jason James
, a bundle will work if you follow these rules.
The total price of the bundle must be slightly less than buying the products or services separately.
One big-ticket or larger item with a few smaller and related items make a good bundle. The smaller items are almost seen as “free” while the big-ticket item is the product the customer was looking for.
Base bundles around your most popular items (that big-ticket item).
What can you not love about bundle when it offers you more items, for a better price and one transaction? Definitely worth trying.
Learning from Customers Behavior
Your customers are telling you what they really need. When the browse your website, they are telling you what they are interested in.
Amazon and Booking are using this technique widely. If you have ever used their services, check your emails promotions and you’ll see what I’m talking about.
But, there are many other sources apart from your customers browsing history. For example, you can find out a lot from your customer support team. Behind the complaints, there is usually a real need.
Product, Price, and Timing
Upselling requires answering three basic questions about your offer.
- What to offer?
- What price to set?
- When to offer?
So here are the answers about the product, price, and timing.
The main thing about upselling is relevancy. The upsell needs to be relevant to the original purchase and to improve it.
Now, the best option is if the customer can realize that there is a need for improvement of the product or service he got from you.
This is where educating your customers about all the features and benefits helps a lot. It’s not unusual that they didn’t know all the possibilities in the first place.
Of course, this improvement has to be possible only by increasing purchase from you, not by replacing you with your competitors.
When it comes setting a price, it can be tricky. Your customers will probably recognize your intention and will consider their costs of the whole package.
That’s why a discount is often advised. For instance, Neil Patel
The upsell should be half the cost of the original purchase (or less). The customer is trying to rationalize the price. They’ll think, “Well, I’m already buying this, which costs $100. I might as well buy this, too. What’s another $50 anyway?”
Remember, customers, think about the value they get, or how it’s showed on the picture below what is in there for them - WIITF.
Choosing the right time to upsell can be a tipping point. In fact, trying to upsell too early can do more damage than not to upsell at all.
Imagine if the waiter offers you a desert during your main meal? That would be some timing, wouldn’t it?
Cart abandonment rate is one of the biggest issues in e-commerce, and increasing price before the original purchase is one of the main reasons why it’s happening.
So, wait until the purchase is over, and maybe even a little bit more. When customer digests the purchase, he could find out that some improvement is needed, and that way set the pitch for your offer.
Upselling With Marketing Automation Tools
When a customer purchase from you, it’s essentially important to send him an offer for an upgraded version. However, it’s extremely hard to do this manually.
That’s why according to Kissmetrics
, upselling automation is a must because entering upsell items manually makes it impossible to scale and adjust to customer browsing behavior.
Luckily, there are marketing automation tools that can do the job. The good news is that these tools are responding automatically, plus they can make personalized offers.
I suggest using the following tools for upselling automation.
This is the set of digital marketing solutions, including organizing and personalizing your marketing content.
Based on insights about your customer's behavior, you can make the right offer to the right customers.
This tool is used by many giant companies like Nissan, Hotels.com, News Corp Australia and others.
InfusionSoft is awarded automation software, focused on small businesses.
They’re in the business for more than 16 years. Also, they have more than 125k clients, so these guys know how to do it right.
They offer some really useful stuff like detailed reports and stats. No mistake here.
Just like the first two tools, Evergage allows you to provide relevant and personalized experience to your customers.
With advanced machine learning, you can interact with the customer in a real time.
With the E-commerce optimization, demand generation and content publishing they offer a holistic approach so that you don’t need other tools.
Bottom line: To provide relevant and personalized experience for your customers marketing automation tools are must.
You saw it what upselling is all about and how to upsell. Keep in mind that these tips are general directions based on statistics and best practices.
In other words, you should try different variations to see what works for you. Suggested tools will be helpful here because they allow you to measure and to automate your upselling.
By all means, don’t make assumptions that the majority of your revenue should come from upselling. That would mean that you’ve stopped growing.
Rather consider upselling as a way to maximize your revenue from your existing customers, while keeping your focus on getting new ones.
Let me know what you think.