The simple act of convincing a customer to come back and buy again can increase profits anywhere from 25% to 95%.1 While there are a lot of ways to keep customers coming back again for more, one technique we’ll explore in this post is upselling.
Upselling is a staple used across all industries for a good reason – it works. The truth is, it’s easier and cheaper to sell to an existing customer than it is to generate new customers – 60-70%2 easier, to be precise.
Successful upselling can lead to excellent shopping experiences that build lifelong relationships between retailers and their customers. These excellent shopping experiences leave customers feeling as though they’ve walked away with more value than they were expecting – even as they are spending additional money for that value.
Merriam-Webster defines upselling as an attempt “to convince (a customer) to purchase something additional or at a higher cost.”
It means giving customers a compelling proposition, or creating an environment to induce customers to buy additional items or items of a higher cost. Upselling uses the subtle art of persuasion to suggest upgrades to increase the average order value (AOV) per customer.
If you can present relevant upgrades when it matters the most, then your chances of making the sale increase. The customer will feel that you have their best interests in mind, even if it means paying a higher price. This helps you win their trust and loyalty, and could likely lead to a lasting relationship.
Many people confuse upselling with “cross-selling” and other similar terms. The focus in upselling is to increase the average order value (AOV) by engaging with customers and suggesting higher-end products or services that might better fit their needs. Cross-selling, however, focuses on presenting the customer with additional products or services that may complement the customer’s purchase. These cross-selling add-ons don’t always bring added value or satisfaction.
Rather than using cross-selling to make a sale regardless of whether or not it benefits the customer, upselling is the direct result of understanding your customer’s needs and suggesting the best fit within their budget.
For example, a customer in the market for a four-door family sedan priced between $20,000 – $25,000 likely won’t be persuaded to buy a $40,000 pickup truck or a $60,000 two-door sports car. However, they might be interested in a sedan slightly over their budget but with the added value of a pre-installed blind spot warning system.
Upselling helps customers visualize the value they will get by ordering a higher-priced item. Cross-selling invites customers to think about products they hadn’t considered, but that may complement the initial product. If done incorrectly, the customer may see cross-selling as an obvious and unwanted attempt to increase the total sale.
According to a CTICo study, more than 48% of airline passengers and nearly 60% of hotel guests have shown interest in upgrades and added services. This is only one example of upselling and cross-selling can combine for successful shopping experiences, and just how receptive consumers are to being offered added value to their purchases.
Hospitality industry upsell and cross-sell examples include offers to upgrade a hotel room with a better view (a more expensive version of the customer’s original purchase) and adding a spa package to a customer’s stay (an additional service that complements their original purchase).
With successful upselling, online retailers can increase average revenue per customer by up to 25%. Upselling also increases conversion rates in customers as they find the upgrades adding value to their experience.
Noted sales and marketing experts have emphasized repeatedly that upselling works only when the customer sees it as a worthwhile benefit to their shopping experience.
Also, upselling gets easier over time. The longer a customer is with you, chances are greater that they will become repeat customers. It’s all about creating a relationship based on mutual trust and loyalty with the sole aim to improve your customers’ overall shopping and product usage experience.
A trained sales team can upsell at any time, either before, during or after the sale, especially if the sales process requires multiple steps to be completed.
Upselling after the purchase allows shoppers to add complementary items to their order, and reduces the retailer’s risk of losing the initial sale.
In online stores, the space between the checkout and the purchase confirmation page is the best time for a post-purchase upsell once the transaction is completed. The order confirmation or thank-you page reminds the customers of their recent purchases, nudges them into additional purchases, showcases what other customers are buying, and previews offers on higher-end products.
For example, a consumer has applied for a new credit card and is waiting for it to be processed. In that case, the card issuer can use that time to upsell exclusive memberships or upscale restaurant offers.
Upselling after the sale has many notable benefits:
After-sales upselling may have some challenges that need to be addressed before implementation:
Follow these simple steps to upsell effectively: