How to Increase Revenue with Upselling Techniques
“Do you want fries with your burger?” It’s a question probably as old as hamburgers themselves, and the sandwiches date back to the 1750s. It’s also one of the most common examples of upselling techniques that can increase a retailer’s revenue as quickly as the question is asked and answered.
Many fast food joints have altered the question to “Do you want a meal or just the sandwich?” which adds a drink to the upsell. But the effect is the same, essentially doubling the ticket price for the customer while adding convenience and a slight discount. The upselling technique is as tried and true as the first day it was spoken.
Upselling, and its fraternal twin “cross-selling,” benefits merchants by more than just increasing profits from added sales. If done correctly, Salesforce, a customer relationship management (CRM) platform, says upselling has many additional benefits.
Upselling Techniques Can:
And provide an avenue to recommend the correct products
Allow sales associates an opportunity to get to know a customer’s needs and preferences
Build customer trust and loyalty
Upselling also saves a business money. It’s common knowledge in retail that it costs approximately five times as much to attract a new customer as it does to keep an existing one happy. So, by building trust and loyalty through effective upselling techniques, store owners are investing in customer loyalty and saving money on customer acquisition.
“The goal is compounding profit by using the momentum of a purchase. My model in upselling is to earn 30% or more of the business’s profit from upsells,” marketing guru and best-selling author Neil Patel writes in Forbes. “Build upsells into your business from the very beginning, and design your marketing approach around an upsell strategy.”
Shoppers are bombarded by so much information today they’re quick to both sense and ignore a sales associate’s attempt to upsell a product. So, merchants and their sales people need to make upselling part of customer service. Salesforce says upselling needs to work both ways: for the merchant and the customer. Customers need to know and trust that they’re getting something for their decision to buy and that it will benefit them in the long run.
How to Build Trust:
Make customer service the top priority. The goal is to sell, but the ultimate objective is to give the customer an outstanding shopping experience and send them home with the products that will solve their problems and make them happy.
Have employees with strong product knowledge, not just of what they’re recommending, but also of related products.
Suggest products based on the customer’s need and preferences.
The easiest way to get to know what customers want or need is to listen to them, ask pertinent questions and formulate a sound recommendation. This can range from saving a customer a few dollars by suggesting the purchase of a toilet flapper over a complete valve kit, to saving them thousands by recommending a contractor to replace a septic system.
By asking the right questions and using the proper upselling techniques, sales associates can not only get a feel for what a customer is looking for, but also what they’re willing to spend. This allows them to make a good recommendation. Without knowing the customer’s situation and desire, it would be like a car salesperson trying to sell a college student a new luxury sedan, or a banker a used beaten-up jalopy.
Getting Intimate Knowledge:
Ask open-ended questions and listen intently to the responses.
Consider the best approach to solve the problem. Is it something a do-it-yourselfer can handle on their own, or do they need professional help?
If they can handle the job, consider a range of products that will make their work easier.
Research online if necessary. Customers are generally impressed with sales people who go the extra distance to find the right answers if they don’t have them.
Store owners and sales associates can get to know their customers better, even if they don’t have regular interaction with them, by studying their purchase history. Those past purchases can be called up from a comprehensive point of sale system that has customer relations features or integrations.
Digital business solutions cannot only keep track of a customer’s purchase history, one with a rewards program feature can also entice them to buy more by sending them special offers on products they purchase regularly or associated items.
More intimate knowledge of a customer’s preferences allows sales people to make better upselling and cross-selling recommendations.
Hardware Retailing says the best way to make good recommendations is to have thorough product knowledge. With tens of thousands of products in a typical hardware store, it’s probably not realistic for a sales associate to have intimate knowledge of every item and its use. But stores can improve customer service and increase sales by educating their sales people on typical projects their customers might bring them. Examples would be a toilet repair, HVAC filter replacement, on the lower end, to deck building and landscape installation on the high end.
Thorough product knowledge is an important piece of providing expert recommendations. Every retail business needs to establish a product hierarchy of good, better, best and develop sales associates who can analyze a customer’s needs and offer a recommendation based on those needs. They should be able to explain the advantages of buying a Rolex when a Timex is just as functional, why Levi’s are more desirable than generic jeans, and why a luxury sedan is better than the base model.
When making those recommendations, upselling techniques can include cross-selling, which is offering supplemental products related to a customer’s purchase. If somebody is building a backyard deck, offering information or products for deck lighting, deck furniture, outdoor grills, canopies, et cetera, is a way to provide good customer service and sell some complementary items.
What’s in it for Me?
One of the main objectives of upselling is to nurture relationships with customers, and some of the keys to making them happy are delivering on a promise and taking away the risk of buying the recommendation. Patel says sales associates can deliver on their promises by making the upsell relevant to the customer’s original purchase and by discounting the upsell item, which can make the transaction seem like a no-brainer that adds value.
Going back to the burger joint, if you sell burgers, you sell fries and soft drinks and probably milkshakes. If you sell golf clubs, you sell all kinds of accessories from balls and tees to shoes and bags. If you have a pharmacy, you sell over-the-counter medicines and other healthcare items. If you sell hardware, you often sell paint, lumber, lawns and garden accessories and such.
The reason for offering the upsell at a discount, Patel says, is because the upsell shouldn’t sway the customer from their initial decision to buy.
“Customers can smell an upsell. They are going to think about the upsell from one main perspective: How much does it cost?” Patel says. “If your upsell is too expensive, they won’t bite. If, however, it’s a discounted upsell, they will be more interested.
“Here’s a rule of thumb: The upsell should be half the cost of the original purchase (or less). The customer is trying to rationalize the price. They’ll think, ‘Well, I’m already buying this, which costs $100. I might as well buy this, too. What’s another $50 anyway?’”
Online Undercover Upselling
Everyone who shops online is a target of upselling techniques or cross-sell inquiries each time they check out. Pop-up screens featuring additional items and phrases like “Frequently Bought Together,” “Customers Who Bought This Item Also Bought,” and “Compare to Similar Items” are as common as website pop-ups.
For online stores, even if customers don’t purchase the additional items, the upselling techniques keep them on a website longer which builds product interest and customer retention.
Upselling/Cross-selling with Merchandising
In a hardware store, end caps and center aisles can be strategically used to group supplementary or complementary items. Hardware Retailing says these shelves can be used to remind both customers and sales people of associated tools or materials that are needed to complete a home improvement project.
Good merchandising cross-sells all the time. Grouping seasonal items like beach towels, inflatable pools and toys, umbrellas and sunscreen together in the summer, or wool socks, gloves and hats, snow shovels and handwarmers in the fall and winter are classic examples.
Retailers of home goods can upsell and cross-sell items by creating and decorating faux rooms, displaying furniture, pillows, artwork, home electronics and more together in a cozy setting. Hardware businesses can build outdoor patios and display pavers, outdoor grills, lawn and patio furniture, umbrellas, and potted plants from the garden department. These displays also spruce up stark outdoor areas normally used for storage of building materials, or to cross-sell building materials or patio accoutrements in a garden department.
It’s All About the Customers
Even though the objective of upselling and cross-selling is to increase the bottom line, a valuable byproduct is that the effort will improve a store’s overall customer service. Done correctly with the customer in mind, using upselling techniques is an easy way to build relationships and nurture customer loyalty.