How to Master the Art of the Upsell

October 12th, 2015

Much like the old saying that compares new friends to silver and old friends to gold, current customers are often your best customers.

Unless you’re a monopoly or a bloated government agency, logic dictates that you must strive to keep your current clients happy. After all, the only thing that spreads faster than good news is a bad reputation. Treating existing customers right is key to getting new business in the first place. Naturally, upselling existing customers should be a key part of any business plan. 

Before we continue, it’s important to distinguish between cross-selling and upselling.

Cross selling is selling a client supplementary services or products that can help satisfy a need that previously went unfilled. An example would be an IT firm offering a client an overhaul of their databases in addition to network security services. On the other hand, upselling is convincing customers to upgrade to another, pricier option. An example would be the very same IT firm offering to simultaneously overhaul and upgrade the database capacity of their client company—for a higher price.

Read on to find out why upselling current customers is a viable, proven business strategy—and how to finesse the upsell without annoying a valued customer.

Upselling is Easier Because Customers Already Trust You

Since you’ve spent time building up a relationship with this client, there is already trust between client and provider. As our hypothetical IT firm shows, satisfied customers already know they’re capable of great database overhauls and are satisfied with their work—but they might not be so sure about their network security services.

Conversely, upselling is a delicate balancing act. No one likes the feeling of being cheated or milked for their money, which is exactly why upselling is built around finesse rather than dogged determination. Upselling is usually a soft sell, with the promise of discounts, incentive programs, exclusive offers, and special pricing.

One excellent example would be a referral discount (10% off a mainframe upgrade if you refer another company to use our network security services), or perhaps a brand loyalty program, where customers can earn points to apply to upgrades.

Cross-Selling Can Complicate Things

While closely related, cross-selling and upselling do have differences; specifically, upselling is an upgrade, while cross-selling is the addition of a related service which may (or may not) be cheaper.

However, because cross-selling may involve more than one department of a business (refer back to the example earlier about our hypothetical IT firm), client accounts can become more complicated internally. While synergy is a common byword, the reality is that synergy within a department is hard enough to achieve—to say nothing of synergy between departments.

Indeed, there may be mistrust or suspicion, or perhaps just basic miscommunication, between the various parts of the company working on a single account. One mistake by one department may scuttle the entire account for the rest of the company, so it is understandable that account managers are reluctant to share a client with whom they have already built a strong, trusting relationship.

Upselling Customers Can Lead to Negative Churn

Churn is the percentage of customers who cancel their memberships for a certain period of time; this is generally measured in months, though some companies may measure it in quarters. Upselling, if done correctly and subtly, can lead to negative churn, which is what every business strives for.

Essentially, the revenue generated from upgrading existing customers cancels out (or, ideally, exceeds) the loss of revenue from customers who break off their contracts. However, note that this requires a careful assessment of customer needs and priorities, as well as a deft hand. As mentioned previously, pushing too hard too fast will lead to disillusionment on the part of customers.

It’s Much Easier to Leverage Existing Data to Your Advantage

Businesses can predict what existing customers will go for and what other products or services they might desire through a variety of means, from conversations and feedback to buying preferences and analytics. This is called marketing automation, and Amazon is the pioneer of the industry. Not only does the ecommerce giant constantly suggest additional, related products, but it also encourages customers to acquire other, more expensive options.

For instance, if you view a Google Chromebook (an inexpensive, barebones laptop that runs Google’s Chrome OS), Amazon will also mention that 93% of buyers also purchased other products, such as a Macbook Air (brand name, higher price) or perhaps an Intel Ultrabook (a line of Intel-based laptops that are thin, light, and designed to compete with Macbooks at similar price points).

Because existing customers already have an account (and have their preferences logged and monitored), it is much easier to sift through their data and tailor a specific, highly customized approach to target each of them. Needless to say, this also means that companies can save money on market research. All the information they need is already there, in the form of past purchases and buyer history.

Certain Upselling Processes Can Be Automated

Acquiring new clients is incredibly difficult, as any sales rep will tell you. For every ten leads, it’s difficult to imagine even a skilled salesperson closing more than half (if that many).

Fortunately, this energy and time commitment is not required when it comes to upselling existing clients—if you’re doing it right. A good deal of the upselling process can easily be automated with a number of marketing best practices. These automated triggers and tools take many forms, but perhaps the most common one would be targeted emails. For example, pending a customer purchase of Option A (less expensive), an email arrives in a customer’s inbox offering a special limited time offer—a discounted upgrade to Option B, or a discounted service extension for Option A.

Upselling is Simply Better and More Profitable Than Cross-Selling

According to a number of sources, specifically Econsultancy, upselling can generate up to 4% of sales, whereas cross-selling generates approximately 0.2% of sales. The disparity is huge—the difference is as much as 2000%. The reasons for this are quite clear: Cross-selling accessories and the like can only take you so far, but by showing clients similar but more expensive options, it is easier to persuade consumers to upgrade a service they’re already satisfied with to something even better.

In the end, even though it has been proven to be easier to sell to existing customers, you should only sell to them when your upselling will help them upgrade and reach a new, expanded goal. Without a doubt, loyal customers are worth keeping, and should be rewarded for their relationships and patronage rather than annoyed and driven away.

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