How to Use Upsells to Boost Revenue and Lift Customer Loyalty

Dec 20, 2017

upsells

Even if you’ve never heard the phrase “upsell” in your life, you know what one is.

Chances are, you’ve been upsold on small and large purchases alike at some point in your life. You may have even engaged with someone today who tried to get you to spend more money at their store or place of business.

This, essentially, is what upselling is all about:

Presenting an upgraded or enhanced version of a product or service to individuals who show a high probability of making a “baseline” purchase.

To illustrate upselling in action, let’s look at a few common examples:

  • A fast-food customer orders a medium soda, and the cashier asks if they’d like a large for just twenty cents more.
  • A salesperson at an electronics store sees a customer checking out a 2TB external hard drive, and points his attention toward the 4TB version made by the same brand.
  • A car salesman explains to a customer who’s all but committed to buying a vehicle that an extra $7,500 can get them the same car with x, y, and z features added.

(Note: Though the two terms are often discussed within the same conversation, upsells and cross-sells are two separate animals. In the most basic sense, upselling refers to selling enhanced versions of a product, while cross-selling refers to selling additional products that supplement the initial purchase. We’ll be talking about cross-sells in an upcoming article.)

For the salesperson (and their company), a successful upsell is, of course, good for business. But the benefits of making an upsell go far beyond simply making more money from a given transaction.

For one thing, getting a current customer (or, as the case may be, a prospect right on the cusp of converting) to upgrade their purchase is much cheaper than acquiring and nurturing a new customer from scratch. A 2015 report by For Entrepreneurs and Pacific Crest Securities found that acquiring a new customer typically costs companies 68% more than upselling to a current customer does.

Upselling is not only cheaper than acquiring new customers, but it’s also easier, as well. According to data collected by Paul Farris, Neil Bendle, Phillip Pfeifer, David Reibstein for their book, Marketing Metrics, while the probability of selling to a new customer maxes out around 20%, the probability of selling to an existing customer hovers around the 60-70% mark.

Another not-so-obvious factor to consider is that a single successful upsell can potentially increase a customer’s lifetime value many times over. For example, say a customer walks into a coffeeshop for the very first time considering ordering a medium coffee for $1 - and is upsold to a large for $1.25 - which subsequently becomes a daily purchase. It might not sound like much, but this 25% increase in revenue per transaction - for a single customer and single item, mind you - can lead to huge gains over time.

Going along with this last sentiment, successful upsells allows companies to reach a break-even point (with regard to ROI from individual customers) fast. According to a study by InsightSquared, for example, a select group of SaaS companies recouped their investment into upselling within a single fiscal quarter (compared to almost the average 1.25-year period it took them to recoup the cost of acquiring new customers).

Lastly, upselling inherently increases the value you’re able to provide your customers - in turn making them more likely to return to your company in the future. Of course, this is assuming you focus on using upsells to give your customers the most “bang for their buck” - not just a way to squeeze as much money from your patrons as you can.

Which is exactly what we’ll dive into throughout the rest of this article.

Best Practices for Implementing Upsells Into Your Sales Playbook

Simply put:

There’s no guarantee that your upselling initiatives will be successful.

In fact, depending on who you ask, the typical success rate of all upsell attempts ranges from about 10-25%. In other words, getting one out of every four of your customers to purchase an upsell is considered more than decent.

That being said, the way in which you approach the process of upselling plays a huge role in whether or not you’ll be successful in your venture. While the decision to purchase an upsell, of course, lies in the hands of the customer, there’s a lot you can do to nudge them closer to making an upgraded purchase.

In the following sections, we’ll discuss three main tenets to keep in mind when attempting to upsell a customer. We’ll also discuss some tried-and-true techniques with regard to these tenets, and provide examples of some companies that have used these techniques to perfection.

Let’s get started.

Focus On Your Customers’ Needs

Okay, hopefully this one is a no-brainer - but it’s worth discussing, at any rate.

When attempting to upsell a given customer, it’s essential that you focus on their specific needs, goals, and desires. They came to you with a problem - and they want you to help them solve that problem. Your upsell offer, then, should enable them to solve their specific problem more efficiently and effectively; everything else can take a backseat.

Consider the following scenario:

A customer is browsing an electronics store, looking at different types of Bluetooth-enabled speakers. After conversing with them for a moment, you discover they want “something with good sound with a long battery life.” Though they had been focused on a speaker with 12 hours of battery life, you introduce them to a similar one that offers 20 hours of battery - that costs a mere 10% more than the original version.

Generally speaking, this is a textbook example of an effective upsell: You kept their exact needs in mind and found a product that exceeds their expectations and doesn’t break the bank on their end. Still, by selling the enhanced product, you’ve brought in more revenue to your company than you would have had you sold the original product.

But what if, instead of offering the speaker with more battery life, you introduced the customer to a smart speaker that offers a variety of interactive features? Sure, such a product might be “cooler” from a technological standpoint...but it’s not what the customer asked for. Heck, it could cook the customer breakfast for all they care; if the battery doesn’t last more than 12 hours, they won’t be interested.

(Now, if the smart speaker did have an extended battery life - and still fell within an affordable price range for the customer - that might be a different story. We’ll talk a bit more about this later on.)

So, to reiterate, a proper upsell requires that you:

  • Learn exactly what the customer plans on accomplishing by making a purchase
  • Analyze the products you offer to determine which product or upgrade will allow them to accomplish this goal most effectively
  • Ensure the customer understands just how the enhanced offer will provide more value for them (with relation to their initial goal)

On the flip side of things, there are two main ways of upselling that will show your customers that you’re more interested in making a sale than you are in providing for their needs:

  • Offering a boilerplate upsell of what you consider to be a superior product
  • Tacking on extraneous features that don’t have anything to do with your customer’s goals

In both of these cases, the implication is that you either assume your customer doesn’t know what they want, or that they’re easily sold on flashy (even gimmicky) features - even if they don’t have any use for them. Needless to say, this is not the way you should approach your customers at any time - let alone when trying to get them to spend more of their hard-earned cash.

Needs-Focused Upselling in Ecommerce

As an ecommerce company, you inherently have much less of an opportunity to actively engage with prospective customers in order to make recommendations for enhanced or superior products.

But that doesn’t mean it’s absolutely impossible to do so.

One way to upsell your online customers is to showcase related (and more valuable) products directly on a given product’s page.

 

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Here, Nordstrom showcases three pairs of jeans that other customers have either browsed or purchased along with the featured pair. Note that each of the suggested pairs are also slim fit, as well; in other words, Nordstrom’s suggestions are directly related to the original product in question - not just three random pairs of jeans the company has in stock.

You can also offer upgrades to your ecommerce customers directly on your product page, as well.

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For the purpose of this article, let’s focus mainly on the “Pick an Upgrade” option (as the offer of different vases, technically, is a cross-sell).

Really, there’s not much more you can do to enhance an offer of flowers other than to offer more flowers at a discounted price. Depending on your offer, though, you might choose to point your customer to a number of more valuable products that meet a variety of needs (since you most likely don’t know their specific needs, given the nature of ecommerce browsing).

For example, if a customer is checking out a specific laptop, you might showcase three other laptops from the same brand on the product page - one with additional storage, one with additional RAM, and one with a higher screen resolution. This way, the customer is able to see what else is available before they decide to purchase the more “basic” product.

(Note: It’s also possible to tailor the suggested products being displayed based on a user’s browsing history, using automation to systematically narrow down your customer’s exact needs. We’ll save this more advanced topic for another day, though.)

The main idea to take away, here, is that you can’t simply hope to upsell your customers just because you have a more advanced or technically superior product to offer them. If they have no need for the enhancements you’re offering, they have no reason to spend more money. At best, they’ll still end up purchasing the baseline product; at worst, they’ll simply walk away empty-handed.

Give Your Customers Direction and Options

Okay...so we said earlier that you should never insinuate that your customers don’t know what they want.

What we meant, in that situation, was that it’s insulting to assume your customers don’t know what they want to accomplish. They didn’t just come to you on a whim; they absolutely do have a specific goal in mind.

That being said, they might not know exactly how to solve their problem or accomplish their goal - and they might not know which of your products will best allow them to do so.

This is where your opportunity to make an upsell lies.

In such cases - in which your customer isn’t focused on a specific item, but more on efficiently solving their problem - you can “disguise” an upsell as your baseline offering.

To illustrate this point, let’s go back to our example concerning Bluetooth speakers. Say that, rather than specifying that they’re looking for a speaker with at least 12 hours of battery life, the customer tells you they want a speaker that “doesn’t need to be charged often.”

(Again: they know what they want to accomplish, but they aren’t aware of the degree to which you can solve their issue.)

Here, you’d basically have free rein to present a number of speakers that have a long battery life - starting with some of your more higher-end products.

Obviously, you and your customer would whittle down their choices based on factors such as pricing and necessary/extraneous features, much as they did in the earlier example.

The difference, though, is that they’ll be comparing their subsequent options to your original offering (rather than to their initial choice, as was the case in the original example). From a psychological standpoint, this would likely make them more comfortable purchasing a more enhanced product that still isn’t quite as expensive as the top-of-the-line product you offered in the first place.

Now, you also want to be careful not to overwhelm your customers by providing too many choices. If your prospective customer falls victim to analysis paralysis, there’s a good chance they’ll walk away without making a purchase at all.

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(Source / Caption: Ketchup, or catsup? Decisions, decisions…)

Similarly, the options you provide your customers should be as similar as possible - with the feature of value being the main difference.

For example, let’s again say you know your customer is looking for a laptop with a good amount of storage space. You show them one with 1TB of hard drive space, one with 800GB, and another with 750GB. Sounds like an easy choice, right? The problem, though, is that the 1TB laptop has the smallest screen of the three options - meaning your customer is going to need to make a sacrifice one way or the other.

Remember: your odds of making an upsell aren’t exactly in your favor as it is. In the example above, you’ve made your chances even worse by presenting a downside to the more “enhanced” option. Though you do want to provide your customer with options, you want your upsell to be a no-brainer - not just “something to consider.”

Providing Options via Ecommerce

Again, for the most part, it’s generally more difficult when running an ecommerce business to proactively reach out to customers and focus their attention on specific products.

But, again: it’s not impossible, either.

Perhaps the most effective way of providing - and narrowing - your customers’ choices is to allow them to search your products by feature:

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While this technique likely isn’t news to you, it’s worth calling to your attention the importance of fleshing out every minute detail about your products. In doing so, you’ll ensure that your customers are able to narrow down their choices to a handful of products (at most). You can then use automation to showcase the product that provides the best value to the customer - and that makes the most money for your company.

Another technique to consider - especially for those who offer subscription-based products or services - is to provide tiered options tailored to your customers’ needs.

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In the example above, Crazy Egg offers a number of additional features (along with higher bandwidth) for companies of various sizes and needs. Notice that the features added at each tier aren’t arbitrary - they’re tailored specifically to the needs of a growing startup as it begins to scale.

For product-related subscription services (such as Wine Cellars or Loot Crate), you might simply offer your current customers more items per delivery for a minor increase in price. In such cases, you almost certainly have nothing to lose; worst case scenario is your customers decline your upsell, and simply continue with their current subscription.

At any rate, though you shouldn’t assume your customers don’t know what they want, you also shouldn’t assume they do know, either. And, even if they do know what they want, they might not know exactly what you have to offer to meets their needs. This is the optimum time to blow their minds with your most valuable products or services - and upsell them in the process.

Keep Your Customers’ Comfort Front and Center

One thing we’ve alluded to throughout this article is that, while the company-facing goal of upselling is to generate more revenue for your organization, you also need to ensure your customers get maximum value out of the deal, as well.

Simply put:

Being “pushy” while offering an upsell - even if it results in conversion - can alienate customers to the point that said purchase will be the last one they make from your company. Needless to say, this will drastically reduce said customer’s lifetime value, and essentially render the upsell worthless.

With this in mind, let’s run through a list of things you should - and should not - do when upselling to your customers in order to keep them happy and comfortable:

  • Do show your customers higher-end products that enable them to achieve their goals more effectively; Don’t show them higher-end products with fancy features that have little - if anything - to do with their needs.
  • Do explain why a more pricey offer is worth the extra money for their purposes; Don’t make them feel foolish or cheap for not purchasing the more expensive option.
  • Do provide them with a selection of higher-end options; Don’t provide them with an overwhelming number of options. Also, don’t confuse your customer by offering products that vary in terms of other features.

Rule of 25%

One last thing to mention, that we mentioned before rather briefly, is the rule of 25% (which pertains to both upsells and cross-sells). Generally speaking, you should always keep your upsell offer within 25% of the price of the original offer. This goes for offers as minute as a cup of coffee ($1.25 up from $1) to automobiles ($7,500 in extra features on a $30,000 car).

While this isn’t a hard-and-fast rule (i.e., if you can justify a higher price through the value being added, go for it), you definitely don’t want to surprise, scare, or insult your customers by throwing out a dollar amount that’s much higher than their budget allows for. Again, even if it does work once, it almost certainly will be the last time it does.

Wrapping Up

At the beginning of this article, we alluded to the fact that most of us, as consumers, encounter upselling pretty often - and that sometimes, it’s pretty blatant. As we said in the previous section, these blatant instances are often the reason upselling gets such a bad rap.

 

However, there are times in which we hardly even realize we’ve been upsold on a product...and, even if we do realize it, we’re totally fine with it.

 

Though we’ve provided a number of best practices and examples of upselling done right throughout this article, take a moment now to look back in your own life and think of times in which you were more than happy to spend a little extra money in exchange for a drastic increase in value.

(Just do yourself a favor...try not to think of all the extra cash you’ve spent on Frappuccinos…)

Matt Duczeminski

Written by Matt Duczeminski

As one of our Content Superheroes here at Sales & Orders, Matt writes awesome pieces geared towards helping E-Commerce business owners get more out of their marketing.