An upsell happens when you alter the mindset of the customer into purchasing a more expensive version of what they were originally intending to buy.
This tactic often adds a significant chunk of revenue to the bottom line.
Let’s say a customer walks in wanting a car for a family of four. He has nothing else in mind.
When he walks out the door, he has a car that runs on both fossil fuel and electricity. The seats and armrests are made of plush high-quality leather that would last many years.
He didn’t want any of that because he simply hadn’t thought of it. He considered those features only when the salesman showed him the value of those add-ons.
That’s the art of upselling.
The best businesses strive and excel at proffering deals that benefit both themselves and the customers.
That’s a sure-fire way to accrue loyalty—by ensuring that both sides win.
This will form the cornerstone of our upselling strategy.
In this post, I will cover the how and why of upselling and, most importantly, how to master the technique for your sales funnel.
How to upsell?
Upselling should be a value-driven strategy rather than a profit-driven strategy.
Let’s look at a few examples to wrap some meat around the idea.
JetBlue’s Even More Space— the upsell that made them $125 million more
From the beginning of 2008, JetBlue began offering customers an upgrade touted “Even More Space”. Opting for the upgrade got passengers extra leg room for a slightly higher cost.
JetBlue’s revenue from Even More Space program was up by 200% in 2014 compared to 2008 when they began the program.
The additional revenue from the program that stood at $45 million in 2008 went up to $170 million in 2013 and was projected to be $190 million in 2014.
With the success of the program, they also added another add-on called the “extra speed” that comes free with “extra space”. This add-on gives passengers quicker passage through queues and baggage.
But how did they know what kind of upsell to offer in the first place?
Data from PhoCusWright, Emarketer, CTICo Data and Google indicates that at least 48% of airline passengers are interested in upgrades and additional services.
Perhaps building on what they learned with their “extra space” upsell, JetBlue has added another offering—that of free in-flight wi-fi.
They probably got feedback from flyers or asked flight attendants what passengers’ most common complaints were.
Here’s another example.
Amazon’s upselling strategy that added 35% to the bottom-line
Upselling has proven to be particularly profitable for Amazon. You have seen it in action every time you purchase something.
Here’s a quick screenshot.
When Amazon introduced “items similar to what others purchased” back in 2006, their sales increased by 35 %.
Predictive Intent’s study reveals another interesting insight—displaying slightly higher priced options results in 4% increased sales.
The bulk of the revenue when displaying slightly higher priced products came from upsells.
In 2016, Amazon registered a 27.1% year on year growth, clocking in $136 billion in revenue. In 2015, that number was $107 billion.
In the diagram shown below, you can see the year on year growth revenue starting from 2012 to 2016.
A large part of the growth in revenue can be attributed to how Amazon continues to focus on integrating recommendations by showing customers the most relevant offers.
How do they do this?
Amazon has invested gazillions into its recommendation engine, pulling products that not only go well with the original purchase, but customizing those options with search history, past purchases, and machine learning.
This helps them pair off products that will most likely be purchased by drilling it to the individual level.
Where to upsell–the best channels?
A study from Marketing Metrics revealed the following facts about selling.
The probability that you will convert a cold lead to a prospect is between 5 to 20%. On the other hand, the probability of selling to an existing customer is 60 to 70%.
And why not?
Your existing customers already trust you. They’re past the getting-to-know-you stage and primed for conversions.
Sending a promotional mail to a customer or getting back to them with similar products or upsells via email could be one of the most profitable strategies for you.
In your email, use available data on customers like their past purchases, what they browsed, clicked on, liked, or added to wish-list.
Use this data to frame the upgrades and additions that you will offer to the customer. Personalization doesn’t end or begin with using the first name of the customer—using all the data you have on the customer is the key to the perfect personalized email.
Customers are almost always willing to give their information to websites if that results in better customized or relevant options for them.
Research from Accenture Interactive points to this very fact, in that 75% customers are more likely to use the retailer who knows their purchase history and customizes recommendations based on that history. Bonus points for retailers who address them by name.
That could pervade over to not only to email marketing campaigns but also on-site campaigns.
When sending an email, there could be multiple improvements you could focus on…
Set the tone right by using an informal tone
Better test whether an informal tone beats a formal one and see what applies best. In most cases, an irreverent style is going to enhance purchases.
Use a personalized email address
Even Amazon falls short here by using a “no reply” mail id.
But what if you get a mail from a real person? That makes you feel you aren’t talking to a robot.
Ditch the “no reply” to address in favor of a name, picture, and a non-threatening email address.
For instance, have a look at this is the email I received from a SaaS service I signed up for.
I replied back with a problem I was facing and she even responded. I was able to get my problem solved almost immediately, thanks to her help.
Take care of timing
Timing is seminal to get automated emails right. There’s no hard and fast rule that determines how long you should wait. It all depends on testing and then changing your strategy based on what’s most successful.
In most cases, an email promoting an upsell could be sent immediately after purchase.
Show the previous purchase
Showing the previous product reminds the customer of the purchase they made and helps them make an association with the product you’re now promoting.
A little context is always helpful.
2. Live Chat
Live chat is often filled with customers wanting to know more about the product at the spur of the moment. Since they’re often at the threshold of conversion, it can be easy to talk to them about upgrades and make a soft sell.
Why not make it a spot to upsell stuff?
Research shows that 53% of customers prefer using live chat than taking to the phone for support. The same research also shows that chat adoption has had a compound annual growth of 8.8%, rising from 38% in 2009 to 58% in 2014.
Chat beats other points of contact. 42% customers use chat while only 23% use email and even less—16% use social media.
Needless to say, live chat is popular. But how does it help with upselling?
A study from the Aberdeen Group pitted businesses that used live chat against ones that didn’t and found that using live chat resulted in a 34% increase in customer satisfaction rate and a whopping 2.4x increase in cross-sell and upsell revenue.
It isn’t clear if the businesses employed upselling tactics across live chat or if merely the presence of a live chat box contributed to the increase in revenue.
Customers are probably drawn to the chat-box because it’s much less taxing than attending a phone call and waiting in line. You’re reduced to another person in the queue while being able to do nothing.
Live chat is empowering. One can multitask.
They don’t have to stop what they’re doing to call or write an email. This relaxed state probably aids upsells.
How to sell even more? Improve perceived value by bundling products
Perceived value is the essence of upselling.
A customer who believes that he’s not getting his money’s worth will walk away from a deal, despite how good it sounds.
On the other hand, if a customer believes that he’s getting far more value than what he paid for, you’re striking all the right chords.
Things like warranties and lifetime support add to create a sense of perceived value.
Researchers from Yale looked into individual and bundled video game sales and found that while bundling reduced individual sales, the bundle sales actually resulted in more revenue that what could have otherwise been achieved.
Kumar and Derdenger from Yale University studied the Nintendo game market for four years between 2001 and 2005 to understand which sold better—individual handheld gaming consoles or a bundled package.
Game packages like Mario Kart and Super Mario Advance 4 were bundled free with the purchase of a console.
They found that bundling products resulted in 500,000 fewer sales for consoles, but increased hardware sales and revenue.
This also resulted in making customers take action into purchasing the products much earlier than they had intended to.
Most of them wait until an offer or discount, but bundling increased the perceived value of the product and egged them to purchase the entire bundle before the offer ran out.
Undoubtedly, bundling increases the perceived value, translating into more sales, higher revenue, and early sales.
Upselling is clearly as much an art as it is a science.
You clearly need to know what kind of products your customers are most interested in and what would go well with which products.
In this post, we have covered different ways by which you could increase your upselling potential and make more sales.
Upselling is a conversion rate optimization metric that lets you improve revenues without lifting a finger on increasing traffic.
What upselling tactic has helped you increase sales? Which technique that we shared today will you try next? Let us know in the comments below.
George is a professional wordsmith who’s been blogging on a myriad range of topics beginning with conversion rate optimization to cryptocurrency and cutting-edge technology. Check his latest post here.