What is upselling?
Upselling is a sales technique where a merchant encourages a customer to purchase more expensive or upgrade to a higher-end version of products or services that they are already interested in buying. The goal of upselling is to increase the average order value, which can lead to more revenue for the business.
Upselling can be done in person, over the phone, or online through targeted marketing campaigns or product recommendations. In the digital world, upselling can be done by giving personalized recommendations on eCommerce websites. For example, when you purchase a laptop on Amazon, Amazon may suggest additional accessories like a laptop case or an external hard drive.
The key to effective upselling is to make the customer feel that they are getting a good value and that the higher-priced product will better meet their needs. So, the salesperson should be knowledgeable about the product and be able to explain the benefits of upgrading.
An example of upselling would be a car salesperson showing a customer a base model car, but then suggesting that they upgrade to a higher-end model with more features and a higher price tag. Or in a hotel, a receptionist might offer a room with a better view, spa access, or a room service package.
Benefits of upselling
Upselling can bring multiple benefits to a business, including:
By encouraging customers to purchase higher-priced products or upgrade to more expensive versions, businesses can increase the average transaction value and generate more revenue.
Boost in profit margins
Higher-priced products often have higher profit margins than lower-priced products, so upselling can result in increased profits for the business.
Increased customer satisfaction
Businesses can improve customer satisfaction by offering customers products or upgrades that better meet their needs and wants. Customers are more likely to be satisfied with their purchase when they feel they are getting a good value.
Upselling often leads to cross-selling opportunities. By encouraging customers to purchase a higher-priced product, businesses can also offer related products or services that complement the main purchase, like a warranty or a service package.
A better customer experience
A personalized and tailored experience can have a great impact on the customer. By upselling, you are giving them something that matches their needs and wants.
A well-executed upselling strategy can help manage stock and reduce the amount of unsold items.
How does upselling work?
Upselling typically works by presenting the customer with an opportunity to purchase a higher-end or more expensive version of the product they are currently considering. This can be done by implementing a variety of techniques which are discussed in the later part.
Upsell vs. Cross-sell
Upselling and cross-selling are related but distinct sales techniques which can be used together to maximize sales and revenue for the business.
Upselling is when a salesperson encourages a customer to purchase a more expensive product or upgrade to a higher-end version of the product they are currently considering. Cross-selling, on the other hand, is when a salesperson suggests additional products or services that complement the product the customer is already considering.
Upselling would be a car salesperson showing a customer a base model car, but then suggesting that they upgrade to a higher-end model with more features and a higher price tag.
Cross-selling would be that same car salesperson suggesting the customer consider purchasing an extended warranty or a service package along with the car they are considering.
Steps to create an efficient upsell strategy
Creating an efficient upsell strategy can be a multi-step process, including the following:
Identify customer needs and wants
Understand the customer’s needs and wants, and use this information to identify products or upgrades that would be a good fit for them.
Analyze customer data
Use customer data, such as purchase history and browsing behavior, to identify patterns and opportunities for upselling.
Develop a clear message
Create a clear message that emphasizes the value of the upsell and how it will meet the customer’s needs. This message should be consistent across all channels and touchpoints with the customer.
Employ targeted outreach
Use targeted marketing campaigns, such as email or social media, to reach customers with personalized recommendations and special offers.
Train sales representatives
Provide training to salespeople on the products and upsell opportunities, so they can effectively communicate the value of the upsell to customers.
Track the performance of your upsell strategy and use this data to make adjustments and improvements.
Time the upselling opportunity correctly, not too early and not too late. It’s important to offer it at a point when the customer is interested in making a purchase but not after the purchase is made.
Test and adapt
It’s important to remember that an efficient upsell strategy focuses on the customer’s needs and wants, and emphasizes the value of the upsell to the customer. Additionally, it should not pushy or aggressive, and it should always be a win-win situation for both parties.
Find out when to upsell
Timing is an important aspect of upselling, and there are several key moments when it can be most effective:
At the point of purchase
Upselling can be most effective when a customer is already in the process of making a purchase. This is a good opportunity to suggest a higher-priced or upgraded version of the product they are considering.
It could be beneficial to provide recommendations for additional goods or services that enhance the primary purchase after a consumer has made a purchase. The moment is right to cross-sell similar goods.
During customer service interactions
Customer service interactions can be an accurate time to upsell. For example, if a customer contacts a company for technical support, the customer service representative can suggest an upgraded version of the product or a service package that would be better suited to the customer’s needs.
At the end of a contract
Upselling can be a successful way to retain customers when a contract is coming to an end. For example, when a customer’s cable or phone contract is about to expire, the company can offer an upgrade or bundle package to retain the customer’s business.
Repeat customers are valuable assets, and they are more likely to purchase again. Using personalized recommendations to offer them an upgrade or complementary product they haven’t bought yet can be a good way to upsell.
It’s vital to be aware that not all customers will be interested in upselling, some may have specific needs or budget limitations, and some may not have an interest in it. That’s why it’s essential to always gauge the customer’s interest and always have a clear understanding of the customer’s needs and wants before making a suggestion.
Various techniques can be used for upselling, including:
The “better option” technique
This technique involves presenting the customer with a more expensive or upgraded version of the product they are considering and highlighting the additional features and benefits of the better option.
The “limited time offer” technique
This approach involves creating a sense of urgency by offering the customer a limited-time promotion or discount on a more expensive product.
The “bundle offer” technique
The method involves offering customers a bundle of products or services at a discounted price. This can be an effective way to upsell customers on more expensive products that they might not have considered otherwise.
The “add-on” technique
This technique involves suggesting additional products or services that complement the product the customer is already considering. This can be a good way to upsell customers on related products or services.
The “personalized recommendation” technique
This technique implies using personalized recommendations to suggest higher-priced products to customers based on their browsing history, purchase history, or other data.
The “value emphasis” technique
This technique involves emphasizing the additional value that the customer will receive by purchasing the more expensive product. This can include highlighting the product’s superior quality, longer lifespan, or better warranty.
The “upgrade” technique
This technique is about offering customers an upgrade of the product they are currently using, like a phone, a laptop, or a car.
It’s essential to bare in mind that different techniques may be more or less effective depending on the type of product, the customer, and the sales context. Additionally, not all of the above techniques should be used all at once, it’s best to choose the one that best fits your product, your customer, and your context.
Upselling can be beneficial to both the customer and the business. Customers may be introduced to products they otherwise would not have considered and they may be satisfied with the purchase. Businesses can increase their revenue and profitability. You can experiment with the numerous upsell and cross-sell strategies mentioned above and optimize them for more revenue using VWO.