Many marketers cringe at the idea of upselling, believing that the whole concept is unethical and based on ‘fooling’ customers. On the other hand, there are those who relish the idea, knowing what it could mean for sales and revenue.
Before proceeding, let’s first be clear about one very important point: upselling is anything but unethical. In fact, doing it right can lead to increased customer satisfaction, retention and happiness, as we will discuss later in this article.
According to Sucharita Mulpuru, Forrester research analyst, product recommendations (or upselling) account for anywhere between 10 and 30 percent of ecommerce site sales. Just think about this for a minute: way back in 2006, when ecommerce as an industry was still just emerging, Amazon confirmed that almost 35 percent of their sales were a direct result of a combination of upselling and cross-selling efforts.
Imagine how much money you will make if each customer who purchases from your portal pays you an extra $2. Let’s suppose your ecommerce site makes 500 sales per month, and an upsell adds an extra $2 per purchase to your order – that would be an additional $1,000 for your business every month, or an additional profit of $12,000 each year.
Think about what you could do with an extra $12,000. You could spend it on marketing, which would result in even more sales. You could spend it on improving customer experience, which would help you retain customers and increase loyalty. Or, you could spend it on enhancing your logistics, saving yourself a lot of money in the long run.
In whatever way you choose to spend your money, the strategy of upselling is going to take your ecommerce business to the next level. These and so many other reasons should be enough to encourage you to add upselling into your marketing mix and reap the rewards that come with it.
What is upselling?
In the simplest terms, upselling means persuading a customer to buy a more expensive/upgraded version of what they are about to swipe their card for. The product that you are recommending the customer buy instead could have better features, better specifications or it could be in higher volume. In the offline world, we have all too often heard sentences like, “For only 99 cents more, we will upgrade your side meals to a large cola and large fries. Would you like that?”
The idea here is to persuade the customer to spend more money than they originally had in mind. Some of you might be thinking, ‘It is unethical.’ Well, it’s not. The key here is to offer products and services that add value and somehow improve a customer’s experience/life.
Upsell works with a small portion of your customers, but it’s more profitable than you think
A study conducted by Predictive Intent on their ecommerce customers showed that, on average, upselling will work with only 4 percent of your customers.
The important point to understand about this statistic is this: upselling is targeted toward a small subset of your customer base that does not mind buying expensive products, or that wants only the best.
The same study by Predictive Intent also confirms that cross sells have average sales of less than 0.50 percent, which is almost 20 times less than upselling.
So, if you’re still wondering whether you should add upsell or cross-sell to your online store, remember that upsell is the winner by a huge margin. While I say this, please bear in mind that testing both tactics on your online store will be the best way to move forward, before you decide which option to use.
Important points to remember about upselling
Once you’ve decided to implement upselling on your website, remember that not every product can be upsold. There are always some products that are better than others. Here’s what you should do:
- Upsell only your most reviewed products, because 90 percent of customers say their buying decisions are influenced by reviews.
- Upsell your most sold products, which means they are the best, the most attractive and the most relevant ones in certain categories.
- Upsell products that are relevant to each buyer. Of course, this is easier said than done, considering that you will have to decide which product is most relevant to each customer according to what he is purchasing right now. This can be done manually, but there are plugins available that do this process automatically.
If you are a small ecommerce retailer who uses platforms like Magneto, BigCommerce or Shopify – then you are lucky to have some plugins to automate the process of upselling on your website.
Shopify has plugins like Product Upsell, Unlimited Upsell, Linkcious Related Products, and Receiptful. Magneto includes extensions like Mass Product Linker, Featured Product 3, Mass Product Relater, Customers who bought this also bought and Customers who purchased. These will help you automate the process of upselling to your customers.
Using the above plugins can take your sales through the roof!
How can your business benefit from upselling?
There are many ways your business will benefit by implementing the right upselling strategy.
- Upselling can help you strengthen relationships with your customers
Sales maestro Jeffrey Gitomer puts upselling into perspective for us perfectly by describing it as ‘helping your customers win.’
One reader asked Gitomer for advice on how she could upsell him a credit card that was more expensive and valuable than the one he was currently using. His answer was very simple: “Tell me how I win.”
When you tell your customers how they can win, you both win.
A friend of mine recently checked into a hotel room with his wife. Before the check-in, the receptionist asked them if they would like to add breakfast for two to their stay. The price was normally $40, but she was offering a special rate of $25.
My friend accepted without hesitation, happy to save $15. Both parties mutually benefited from the agreement. The customers were happy for getting a discount, and the hotel made extra profit. It was a win-win! This is exactly what an upsell does.
In other words, giving your customers more value for their money is the recipe for success. It’s going to make them happier, and they are likely to do business with you for a very long time.
BMW has mastered this technique to perfection! The BMW site enables users to configure their car online before the purchase. This is an amazing way to upsell to customers. Everything from the seats to the wheels can be customized for an additional cost, while customers can see live what the changes will look like.
- It is easier to sell more to existing customers than to new ones
An interesting study done by the authors in the book Marketing Metrics revealed something fascinating: “The probability of selling to a new customer is 5 to 20 percent. The probability of selling to an existing customer is 60 to 70 percent.”
This is an opportunity that is lying right in front of us, but we are not making enough use of it! Think about it for a second. Who would you rather buy from: a company you haven’t bought from before, or a company you have a history with?
Not only is upselling to existing customers easier, it will grow your company and help you reach your goals much faster. Without understanding this basic fact, many ecommerce and SaaS companies gear all their efforts and resources toward selling to new customers – which isn’t always the best strategy.
Your Upselling strategy should include these 3 elements
- Keep recommendations limited
When you are upselling, you need to keep your recommendations limited. More choices don’t necessarily lead to more sales. In fact, the result could even be the opposite of what you expect simply because of the sheer number of choices that can overwhelm buyers, who will end up buying nothing at all.
So, in this case, like in most others, success will come with keeping things simple and solving problems – not creating more problems for your customers.
GoDaddy does it well by limiting upsell options to three. When a customer orders a domain name, the system will ask if the customer is also interested in web hosting, domain privacy or email hosting.
- Don’t forget the rule of 25
Always remember this very important rule: do not try to upsell items that cost more than 25 percent of the initial order. That means you cannot sell a Ferrari to someone who wants to buy a Toyota. In this case, you would only want to sell the buyer a car that costs just 25 percent more than the Toyota he wants to purchase.
By sticking to the rule of 25, you will avoid the pitfall of making outlandish suggestions to customers, and you will simultaneously increase your odds of making a sale.
- Sell in ‘bundles’
Bundling can prompt positive buying behaviors in customers. It is a wise idea to package items together in bundles, rather than selling them separately.
For instance, you could sell WordPress templates, plugins and logos all together as a bundle. The chances of a customer purchasing all three of these items in a bundle increase dramatically, as opposed to three separate items. This technique alone can boost your sales and revenues to a huge extent.
Upselling has as much to do with human psychology as it does with intelligent marketing techniques. Drawing people in with low-priced options and then showing them a more advanced, more sophisticated or chicer version of what they are about to buy – while you have their attention – is the key.
Enjoy it while you’re at it. Try different methods of upselling and see what works best with your target audience. Then do more of that.