Table of Contents
How does upselling work?
Upselling involves offering new services to existing customers. Examples of changes that can be made include:
- Storage space allowances
- The features involved in a package/subscription
- Onboarding managers and training
You need to demonstrate the value that upgrading will provide to a customer. Have an honest call with them beforehand and bring their goals into the equation.
• Value focus: Focus on the option that meets your customers’ needs; focusing only on money may backfire.
What are the different types of upselling techniques?
Different upselling techniques that you may see in different industries include:
- Product recommendations: Here, a salesperson will suggest a product that costs more but should meet the user’s needs. For example, if they’re on a starter subscription, you might want to offer the medium tier.
- Bundles: Offer packages (e.g. a gym and yoga membership rather than one or the other).
- Quantity discounts: Buying in bulk at a discounted price; you should consider this if you offer a direct service rather than a SaaS product.
- Add-ons: Consider utilizing this if you have a SaaS product. For example, Salesforce has an AI add-on for its CRM subscriptions.
• Combinations: Consider using more than one technique (e.g. add-ons and a higher subscription tier).
What makes upselling an effective sales strategy?
You should consider upselling so you don’t have to focus on new customer acquisition, which is often pricier.
Deep Dive:
- Builds Customer Relationships: Successful upselling can foster a sense of trust and loyalty as it demonstrates a genuine interest in meeting the customer’s needs and enhancing their experience.
- Increases Customer Lifetime Value: When customers upgrade, they often become more invested in the product or service, leading to higher retention rates and increased lifetime value.
- Enhanced Brand Perception: Upselling can position your brand as one that offers premium solutions, boosting its overall image and appeal.
Why does upselling matter in the SaaS business model?
Since acquiring new customers costs time and money, upselling is key to revenue growth. You’ll probably have tiered pricing as a SaaS product, which you should utilize in your strategy. It’s also important to measure your average revenue per user (ARPU). Examples of companies that upsell in the SaaS space are monday.com and Salesforce.
• Adoption: Customers don’t always use all of a product’s features, so upselling can be one way to get more of them to do so.
What is upselling in retail and how to use it effectively?
In retail, cashiers and sales associates may offer a different warranty or a product. To upsell in retail, you must train your staff and hire people with industry experience.
Ads, emails, and pop-up notifications are examples of upselling tactics used online.
Example:
In retail, a cashier might ask you if you want to buy a warranty for your new pair of headphones or a household electronic item. Another example is when you buy a computer or smartphone; the cashier may ask if you would like to purchase a case.
• Incentives: Think about commissions and other staff incentives if you want them to upsell.
What is the difference between cross-selling and upselling?
The differences to understand between upselling and cross-selling are:
- Cross-selling: Suggesting products related to something that a customer will buy. For example, you may offer running socks if someone is about to get some running shoes.
- Upselling: The aim is for a customer to buy an upgraded product rather than something completely different. For example, someone buying a streaming subscription might get one without ads.
• Balance: Give your customers a reasonable amount of options.
What are the ethical considerations in upselling?
When upselling, you need to think about being transparent. Moreover, you should only offer upsells when you can provide value.
Tell customers what the extra costs will be, but explain the benefits. You should then let them make a decision in their own time.
• Customer Satisfaction: Focus on getting results for the customer first and foremost, and don’t obsess over the money.
How can businesses measure the success of their upselling efforts?
Metrics you should measure when upselling your products and services are:
- Conversion Rate: The number of customers you upsell to.
- Average Order Value (AOV): How much money customers spend with their transactions.
- Customer Lifetime Value (CLTV): The amount of revenue that a customer is responsible for while they’re part of your company.
• Feedback: Ask customers that you upsell to for feedback and whether they have any suggestions for you.
Conclusion
Your primary aim is to deliver value to your customers, and this must be clear in the way that you upsell. For example, you need to be transparent about offerings and pricing and provide services that your clients will like.
Think about your upselling strategy and use different tactics if you don’t know where to start. Once you have an idea of these, you should then look at your customers to determine when you should upsell. Measure your results with different software, too.
