What is upselling. A Marketing and Sales Strategy

This technique is widely used in all types of businesses. Currently, e-commerce can show upselling and cross-selling alternatives to maximize expected profits.

First, let’s understand the differences between these two concepts…

What is upselling

Upselling is used with customers who are already in the shopping cart or who already have the product but can gain additional benefits by adding products or services with an up-sell offer.

It adds value and functionality to the initial product.

For instance, if you’re a service-providing company, you might first offer a basic package with essential functions and then, for an additional cost, a premium account or a specific feature not included in the basic package.

If people show no interest in buying, or change their minds before making the payment, you can offer promotions, discounts, or a smaller product for a lower value than the initial offer. This is known as downselling and is usually applied after an upselling offer.

Why upselling is important

Although sales techniques often generate negative feelings, when done correctly, they can enhance our shopping experience. Online retailers heavily rely on upselling and cross-selling techniques for several reasons:

1. Upselling helps retailers build deeper relationships with customers

Upselling isn’t a dirty tactic if put in perspective. If it focuses on helping your customers “win” by suggesting premieres, upgrades, or add-ons that ultimately deliver more value and make them feel like they got a better deal, it will be a customer happiness tactic that also generates additional revenue.

2. It’s easier to upsell to existing customers than to acquire new ones

Lead generation is a costly practice. It’s much easier and cheaper to optimize a sale to a customer who already trusts you and has bought from you in the past or is about to make a purchase now than to sell to a new prospect who has never heard of your brand. As mentioned earlier, you have a 60-70% chance of selling to an existing customer and only a 5-20% chance of selling to a stranger. It’s an easy win for many e-commerce businesses on a mission to accelerate their growth and improve the bottom line.

3. Upselling leads to an increase in Customer Lifetime Value (CLV)

Customer Lifetime Value is the net profit contribution a customer makes to your company over time. You can divide your customers into three main categories: unprofitable, profitable, and very profitable. A higher CLV means that each customer generates more revenue for your business without you having to invest anything extra, which also means that your company has more money to spend on acquiring new customers. Upselling is one of the most effective ways to turn shoppers into very profitable customers and keep them coming back.

4. Customers return for more

Upselling is unique in how it adds value to customers, making them want to come back for more. By creating an easy way to make life simpler for customers, you’re ensuring they will return in the future if they need more of what you’re selling. Be sure to offer excellent customer service along with your upselling efforts to ensure happy customers, no matter what happens. 

What is Cross-Selling

Cross-selling occurs when you sell your customers offers that complement your other products or their previous purchases.

For example,

If you sell a cellphone, you can offer complementary items like quality headphones or a smartwatch that syncs with the sold cellphone.

Cross-selling can also be offered at the moment a person is about to make a purchase, with pop-ups featuring offers for products related to the initial purchase. The key is that this optional addition for the consumer should provide added value to increase the likelihood of making a sale.

When is the best Time to offer upsell

Upselling can be done at any point in the sales cycle, but there are particular moments where it can be more effective.

1. During initial contact

If you have an up-to-date and well-designed sales page, you can offer upsell deals when a person adds products to your shopping cart.

It can also be done when someone requests a quote for a service. In this case, you could offer, for example, a basic package and upgrade to premium or provide another added value you’ve identified as having the potential to promote the purchase.

You can do this by programming pop-ups or displaying notices on the site with related products.

2. After the purchase

Integrating added value immediately after people have made a purchase might not be the best timing.

But…

If you take a waiting period for the customer to enjoy your product or service, get familiar with it, and develop a sense of satisfaction and liking for the brand, you can approach them to offer that “something extra” they might be missing.

This technique is very appropriate in remarketing strategies and can be applied with personalized emails or a phone call, in which you can also inquire about the customer’s experience with the received service.

 Examples of Upselling

Every business is unique, and as we have mentioned before, there is no one-size-fits-all recipe for growing your business. However, we’ll share the best practices for applying upselling and cross-selling according to your commercial needs.

1. Offer a special reward to facilitate the purchase decision

Most of the time, users who visit your online store don’t make a purchase quickly. They often browse product features, compare with competitors, and explore your website. So, after a while, they may start leaning towards a product and might need an incentive for an impulse buy.

Using the checkout screen to share additional sales opportunities or a special offer can likely pique the person’s interest further.

Neil Patel recommends making the additional sale with a discount. Many people easily recognize upselling attempts, but an additional sale with a discount can be more appealing and motivate the purchase.

2. Include options based on customer preferences

As you learn more about your customers and their buying behavior, you’ll discover which products they’ve consulted most on your website, what they’re looking for, or which product page they’ve spent the most time on.

You can then offer cross-selling or upselling by presenting products related to what the customer is searching for.

3. Let your customers sell themselves a package

If you’re a SaaS company, this is an excellent option for upselling without it being obvious to the customer, allowing them to adjust it to their needs.

How to do it?

Create different service plans with multiple features that increase with each plan. Additionally, if you offer a discount for immediate payment or a financing plan for the most expensive package, customers can see the advantages of accessing the premium plan from the start, instead of beginning with the most basic package.

4. Offer free home delivery for a minimum purchase amount

This option, seen often in marketplaces like Amazon and MercadoLibre, involves setting a specific amount so that customers don’t have to pay extra for shipping. Base the specific purchase amount on your data about shipping costs by distance and your products to make the promotion effective.

5. Use a referral program to encourage sales

Here, the main goal is to design a referral marketing plan that allows you to reward your leads and customers when they refer potential new clients.

Ask your customers to share their shopping experience to earn more points or discount vouchers.

The rewards and point system for your customers should be truly appealing, offering a value proposition and gain for both parties. Otherwise, people might not be motivated to attract others to your brand.

This will help you not only increase your new customer acquisition rate but also reduce advertising expenses.

Companies Utilizing Upselling

• McDonald’s: Offers larger menu options, such as Happy Meals, which include a drink and fries with a hamburger.
• Amazon: Suggests additional products that may interest customers during the purchasing process.
• Apple: Offers extra add-ons and accessories for their products, like cases and chargers.
• Netflix: Sells family packages after subscription.
• Starbucks: Offers additional drink options, such as larger sizes or added flavorings.
• Uber: Provides extra ride options, like larger vehicles or a shared ride.
• Hotels: Offer upgraded rooms or additional service packages, such as spa access.
• Airlines: Provide improved seating options or additional services, like VIP lounge access.

These are just a few of the many well-known companies that use upselling to increase sales and enhance customer satisfaction.

Conclusion

Upselling is a vital sales technique that can help to improve profitability and customer satisfaction. By employing this strategy, sellers can offer additional products or services that complement or enhance the original product the customer was interested in purchasing.

Upselling can also enhance the perceived value of the product or service and create a stronger relationship with the customer, as they are being offered a personalized solution to their needs. Furthermore, it can be an effective way to increase the average sale value, leading to higher profit margins.

However, it’s important to note that upselling should be used strategically and ethically. Sellers must consider the customers’ needs and budgets and should not use aggressive or deceptive tactics to boost sales.

In summary, upselling can be a valuable tool for sales, as long as it is used responsibly and with consideration for the customers.