Management strategies: upselling

NatWest Business Builder: Revenue Streams

Upselling is integral for many business models and is considered to be up to 10 times cheaper than acquiring a new customer.

Upselling (inviting customers to buy a more expensive or upgraded product or service) and cross-selling (inviting them to buy something that complements their purchase) are the lifeblood of many businesses because they require a fraction of the effort and cost of acquiring a new customer.

Handled badly, however, and both practices can be clumsy and off-putting; they can even inspire a previously happy customer to abandon you entirely. We asked SMEs and experts to share what they consider to be the golden rules.

1. Link the upsell to solving a problem

If you don’t want your customers to feel like you’re simply trying to squeeze more money out of them, sales expert Alex Moyle says it’s vital to explain how the upsell you’re proposing will help them solve a problem. “The doctors we like most are the ones who spend time understanding not only our illness but how our illness is affecting our lives,” he says. “It’s only once we’ve had this conversation that they start talking about treatments. The same goes when you have a new product to talk to a client about.”

While you may want to jump in and say: “Look at this shiny new widget,” Moyle says you first need to pinpoint the problem it solves that will justify its expense. “Doing this will mean your customers see your intent as being focused on helping them rather than just growing your revenues,” he adds.

Hanna de la Torre, manager of sales at the interactive presentation platform Mentimeter, agrees. “A golden rule in upselling discussions is to focus more on the added value for the customer, rather than pricing and discounts. How can you create more value for them? Which internal targets could be more easily met due to expanding the use of the tool/product within the organisation?”

While upselling is often an easy win for software-as-a-service (SaaS) businesses like Mentimeter (fear of missing out on the bells and whistles that come with an upgraded service can be a great psychological driver in getting customers to move up from their entry-level option), de la Torre says it’s far better to build trust and look at a user’s long-term relationship with your business. A customer for life at £100 a year is better than a disgruntled one paying £500 who leaves after 12 months.

2. Educate your clients about the different ways you can help

Whatever you sell, people often only come to you for one thing – when in fact you’re capable of delivering a number of products or services that they may not know about. It’s your responsibility, says Moyle, to make sure your customers are fully aware of the other things you can do.

“A golden rule in upselling discussions is to focus more on the added value for the customer, rather than pricing and discounts”
Hanna de la Torre, sales manager, Mentimeter

“Clients actually like using one supplier for multiple solutions,” he says, “but one of the main reasons they use other suppliers is they simply don’t know you can solve other problems as well. Because of this, what you talk to your clients about will determine what problems they think you can solve.”

Neville Louzado, head of sales at cloud-hosting specialist Hyve Managed Hosting, adds: “Once you understand your customer’s business, you can map out areas that you can sell into. You may have sold to the IT department, but what about HR, finance and operations as well?”

3. Make sure your upsell makes financial sense

Before you embark on any upsell, it’s important to crunch the numbers. For example, Nicola Lando, co-founder of Sous Chef, an online store for cookery professionals and keen amateurs, says nudging a customer towards a slightly more expensive order may not be in your favour if they suddenly qualify for free postage, for which you foot the bill.

“We always have to consider our £35 free shipping point when setting product prices,” she says. “As a result, we sell very few products that are around £35.”

4. Consider if a ‘downsell’ may seal the deal

The widely used ‘you may also like’ area at the bottom of a web product page can serve both to encourage trading up to a similar item of higher value and also to help potential customers discover items in your store they might not know are there.

But it has a third function, too – one often used when people are clearly interested in a particular type of product but seem reluctant to commit. “Customers often come to our site through a page with a very large and therefore expensive version of a product, perhaps more suited to professional kitchens,” says Lando, “so we’ll often also show a smaller-sized product to help convert home cooks. Better that they purchase a cheaper version than none at all.”

5. Have a well-defined strategy

Upselling and cross-selling techniques come in many guises. It makes sense to look at your website or service through your customer’s eyes. Options for adding value could include highlighting related products, telling people how much more they need to spend to get free delivery or putting together bundled products.

6. Understand that unwarranted upselling can kill a relationship

Will it genuinely benefit the customer? As with most good business practices, this really should be the first and last question.

Companies that treat upselling as a quick win, selling people something that’s not right for them, risk sacrificing their relationship with that customer. This ultimately affects a business’s long-term performance and even its survival.

Further Reading

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