Generating new business is expensive. E-commerce studies dating back as far as the 1990’s concluded that the cost of generating new business is often more than the original transactions performed. Common statistics quoted in e-commerce place the cost of a new customer at $50US. This will be repaid many times over if the customer trusts the site, has good experiences and is given no need to ‘shop around’ or buy associated products and services from elsewhere. In an increasingly educated market place, up-selling is pivotal to success.
Up-selling, inherently entwined with cross-selling, is usually defined as ‘a sales strategy that encourages opportunities for a customer to buy associated products or services’. Although cross-selling encompasses the most common types of up-selling (such as an extended warrantee), it excludes some of the more subtle types of up-selling, ie; selling a more advanced or holistic service from the intended purchase.
The increasing knowledge of consumers means that it is harder to up-sell in the first instance. The old notion of perceived convenience when buying all from one place has rapidly dispersed with the increase in ecommerce quality and the mobile nature of the internet. Google data has shown that a staggering 90% of Google users will switch between devices when sourcing products or services, indicating that consumers are spending a significant amount of time researching and investigating potential purchases. Slick marketing is not enough to up-sell, as the customer usually approaches the point of sale with a strong sense of confidence in their choice of purchase.
Traditional Methods of Up-selling
Amazon’s “you might also like…” suggestions were heralded as the industry leading way to up-sell online for many years; an online version of keeping sweets by the supermarket cashier. In 2006, Amazon reported that an astonishing 35% of its total revenue came from this simple method of up-selling alone. Never has there been a clearer example of the power of up-selling. Providing a clear set of relevant products, the customer is encouraged to make a choice. Paradoxically, the fewer the options the more likely the purchase, as customers can be paralysed by choice, resulting in no product being selected. In Amazon’s example, the products being up-sold are readily available within the site. However, being highlighted as a ‘yes or no’ option in isolation to the vast range of alternatives, the answer is more often ‘yes’ than when the product is part of a larger choice.
In the ever evolving industry of ecommerce, this remains an excellent method of up-selling in a simple ‘e-catalogue’ style enterprise. However, for products and services the real value added up-sell is a more intricate tightrope. Understanding the customer is vital.
Understanding the Customer – Up-selling’s start
Small investments in either time or money, will create large rewards when it comes to gaining a genuine understanding of your clients’ needs. Whether the conversation produces leads for immediate up-selling to that specific customer, or adds to the overall understanding of the general industry requirements, information and understanding is key to a successful up-sell. It has been shown by studies from the Harvard Business School that standard, pre-set up-selling packages perform far less effectively than bespoke ones. Their study into the sales of games consoles with offered games packages saw a 20% decrease in uptake when additional games were pre-bundled, against sales where customers could choose their own additional games.
Knowing what your customers are trying to achieve, even if they are not entirely sure themselves, provides unrivalled opportunities to up-sell. The products you sell are only the start of the process. Once a customer has enough confidence in your brand to make an initial purchase, most of the hard work is done. As long as related services are not force fed, leaving the customer feeling like they are being preyed upon, it is comparatively easy to gently push them towards a more holistic service.
When it comes to up-selling, it is always advisable to think through the customer’s point of view. An up-selling strategy that starts with the question “What else can we sell?” is going to be much less successful than an up-selling strategy based on the question “What else might the customer need?”. Consumers are much more experienced in online marketing techniques, and obvious attempts to up-sell will not only fail, but will also reduce customer loyalty.
Training yourself to think like a customer is hard, but essential. If a customer bought web design services from us, what does that tell us? It tells us that the customer feels that they require a set of skills that they do not have in-house or a sufficient knowledge of online marketing. Therefore, it may be even more effective to offer ongoing search engine optimisation services to take the responsibility of website maintenance and marketing off their hands. In offering genuine benefits and extended support to that that was originally desired, this method results in an ongoing relationship (income), providing further unspecified up-selling opportunities in the future, as opposed to simply a customer that will return if they ever feel that they require a similar result.
In getting to know your customer on a personal level, via genuine conversations and through offering advice without an attempt to sell, the customer builds a genuine relationship. This means that your company becomes their only source of help and advice. The benefit to you is that you retain their business and their loyalty. It is this perception of genuine comradery that will build the most loyal, lucrative business relationships in which up-selling becomes a natural feature. Relationships are the key to up-selling.
Creating an up-selling strategy
In an increasingly educated market place, consumers are conspicuously aware when they are being targeted as a source of income. This behaviour will undoubtedly switch the consumer off. There are now far too many options available, as geographical influences on spending behaviour are reduced by technology. Instead, the best upselling strategies result from those occasions where the consumer is almost unaware that they are being upsold.
This is an important point. Up-selling must start before the initial sale has been made. There is nothing worse as a consumer to complete a purchase, then note as the vendor’s eyes gleam with potential as their mind darts about for something to add to your basket. By setting out an initial sales strategy to discover more about the clients actual requirements for a product or service, the opportunities for upselling are both obvious and natural during the initial purchase. This natural move towards supporting or supplementary products and services will yield far more positive results, with customers not feeling like they are prone in the centre of a sales cross hair.
By offering potential remedies to problems identified by individual customers, especially if the customer identifies them themselves during conversation, the potential for upselling is enhanced greatly. The customer has approached you as an expert for the initial sale, and by proving your expertise and uncovering a concern that they may not have consciously identified before, you are reinforcing your reputation as an expert. The alternative is to offer your fantastic range of products – an alternative that all too often fails to meet the customer’s specific requirements or desired results, as the customer does not see what issue or concern that the product will cure for them.
Upselling must not be an automatic part of a close. “Thank you for the purchase. May I interest you in a warranty?”. Not only are consumers well aware of the strategy, it weakens the sense of individuality to the purchase, weakens the relationship so carefully nurtured during the sale, and if the attempted upsell doesn’t clearly add value to the purchase just made, it damages your image as a knowledgeable, understanding brand. Not only will it not work, it may damage the change of future transactions. To this extent, surveys show that around 40% (dependant on the survey) on consumers are acutely aware and annoyed by upselling attempts.
As with marketing, SEO and product strategies, an upselling strategy should evolve to continue producing results. Analysis of sales patterns and upselling results will further focus the strategy. Knowing which situations commonly result in an upsell will allow you to understand your customer base further. A/B testing can be a huge benefit to this end.
Sell the benefit, not the product
At the point of sale, the customer is already committed to the product. By suggesting a benefit, for example, a laptop that has the same operational specifics but is more mobile, a customer may recognise that need and explore further. It is unlikely that they will be tempted to investigate a different laptop, simply because it is offered. The decision has already been made. E-Commerce is a rapidly changing beast, which has seen more developments and preference shifts over the last ten years than traditional commerce and marketing strategies. Without a face to face transaction, trust is even more important online, and the best way to do that is through content marketing and a genuine attempt to understand the customer. Only with valid information and genuine engagement will long lasting, profitable business relationships be made, and upselling possible.