Upselling is a sales tactic where you offer your customers an additional product, service, or upgrade during or immediately following their initial purchase. Examples include offering extended warranties on laptops or premium features on a car. Upselling can be used to increase sales by getting customers to spend money besides the basic purchase.
How Upselling Works
Upselling works by first selling a core or primary product to your customer or prospect. Once you’ve gotten their agreement to buy and you are in the midst of the transaction, you’ll want to make them an upsell offer, which is a product add-on or extension. For instance, once you’ve sold your customer a laptop, ask them if they need additional memory, accessories like a case, or a printer. These items increase the value of the sale and are in context with their purchase.
The best time to upsell a customer is at the time of the sale, but they can also take place after the fact. Selling an add-on product or product extension is best at the point of the initial sale because the core product is top of mind. For example, it’s easier to sell laptop accessories when you’re selling your customer a laptop because they can look at it and really consider what they need.
Upselling is a strong sales tactic because it increases the value of a sale. Instead of just selling a laptop for $999, you can increase the value of the sale with add-ons. More importantly, you also have the opportunity to add value to your customers with upsell offers. If you know your customer travels a lot and is buying a new laptop because they dropped their old one and didn’t buy a warranty, offering them the best warranty for them will be much appreciated.
How Upselling & Cross-selling Differ
Upselling is where you offer your customers add-ons, upgrades, and services like warranties during a current transaction. It can also occur shortly after the sale, but it’s a product or service directly related to that particular sale. Cross-selling, on the other hand, is where you offer a different product or service because their preferences or history indicate that they would be interested in this type of product, but is not a part of any specific transaction.
Examples of upselling include accessories, upgrades, and warranties related to a product they are in the middle of or have recently purchased. Cross-selling examples include offering similar products or services, like offering a book about meditation to someone who purchased a book about yoga because you think they’ll also be interested in that topic.
Examples of Upselling & Why They Work
The different types of upsells include add-ons, upgrades, and services. While most upsells occur during the initial sale, it’s possible to upsell a customer after a sale has taken place. For example, a customer may not truly recognize the value of a service like a subscription to tech support until after they’ve tried to load software or configure settings themselves.
Here are a few specific examples of different types of upsells and why they work:
Add-ons can be products added onto the main product or they can be additional products that are independent of the main product but may be complementary. They work because buying the related product is top of mind and it’s the perfect opportunity to make an offer, especially if there’s a special, limited-time opportunity. Add-ons work best when they align with customer needs.
“As soon as someone enrolls in any of my courses, I offer them a limited-time offer to enroll in any of my other courses at a 25% discount. Since these courses are closely related, anyone who buys one course is likely to be interested in others as well.”
– Sumit Bansal, Founder, Trump Excel
Upgrades are when you offer your customers a better or more advanced product than what they agreed to purchase. This works great when the premium product is a better fit for what they actually need.
“Most sales people think of an upsell as a way to make more money. In reality, an upsell is adding more value to your customer through a more valuable product or service. We use upselling in life insurance constantly. One of the most common upsells we use is upgrading from a life insurance that is cheap but expires to one that lasts forever and has additional higher-value benefits.“
– Tomasz Alemany, CEO and Founder, Top Whole Life
Offering complementary services is another example of upselling. These services should be something that saves your customer time and money. Types of services include warranties or work like hiring a calligrapher to handwrite addresses on 500 party invitations for a special event, in addition to the purchase of the main product, which is fancy stationery.
Offering services works because your customer may want an opportunity to save time or money. If your service is an extended warranty on a car, your customers are paying for a way to save money on future repairs. If you offer laptop configuration services, where your retailer will install additional memory and software for you, you’re looking for an opportunity to save time.
Upselling Best Practices
When upselling is done right, it makes you more money while increasing customer value and satisfaction. If this sales tactic is done poorly, not only can it ruin your initial sale, it can make customers angry and make them think you’re only trying to sell them something. To implement upselling the right way, there are a few best practices you should consider.
Here are a few upselling best practices:
- Make sure your upsell offer is related to an initial purchase.
- Offer your upsell product or service while you’re in the process of the initial sale or shortly thereafter.
- Make an offer that complements the initial purchase.
- Get to know your customer and offer something they really want or need.
- Be sure to offer your upsell product or service at a price your customer can still afford.
- Incorporate upselling into your sales culture.
- Offer adequate training on how to effectively present and close an upsell offer.
- Offer upselling incentives to increase the likelihood of all customers being made an offer.
Adhering to these best practices will improve your chances of gaining additional business. It will also ensure you do upselling properly and strengthen your relationship with your customer because you’re providing more value.
How to Incorporate Upselling Into Your Sales Process
In order for upselling to work, it should be incorporated into your normal sales process. To do this effectively, you should plan ahead and map out how it will work. This could range from your sales team making an offer during the initial sale only, to your sales team also following up and making the upsell offer shortly after the sale if the customer turns the offer down but it is still relevant to them.
Here’s an example of a step-by-step sales process that incorporates upselling:
- Gain commitment to purchase your core product or service.
- Before you complete the paperwork that makes the deal official, go over features and benefits of the core product.
- While you’re reviewing the core product features and benefits, bring up product upgrades and relate them back to customer needs you’ve gathered during the customer journey.
- Offer your upsell product or service as a trusted adviser who has gotten to know their needs.
- If your customer decides not to buy the upsell offer, schedule a reminder one to two weeks out to follow-up with the customer on how their core product is working out.
- While following up, ask specific questions about core product benefits that were particularly important to them.
- Once you’re sure they’re happy with their purchase, make your upsell offer once again in the context of their needs or how it can add value to them.
When upselling is incorporated into how your sales team closes deals, there’s a higher probability that your average sale will increase. Your sales team will also be more comfortable making upsell offers if it’s part of their sales process and positioned as a way to add additional value to customers.
How to Measure Upselling Success
Once you’ve incorporated upselling into your sales process, it’s important to measure its effectiveness. The best way to do this is to compare the number of core product sales made with and without upsell products. This can be done manually by tracking core product and upsells with a spreadsheet. Or it can be done with automation using a customer relationship management (CRM) tool that tracks all product sales. See our CRM analytics article to learn more about sales tracking and reporting.
CRMs like Pipedrive allow you to track deals and sales opportunities. However, unlike many CRMs, Pipedrive also allows you to track sales by product, which allows you to see how many upsell products you’ve sold compared to core products. This makes it a great tool measuring results against goals. Visit their website or click here to take advantage of their free trial.
Why Upselling Matters
Upselling is an opportunity to make more money and increase customer value by meeting additional needs. Any opportunity to sell additional products and services matters because it contributes to putting your organization in a stronger financial position. When you’re able to make your customers happier, their lives easier, or save them time and money, you’re building customer loyalty.
This sales tactic also increases customer lifetime value (CLV). When customers buy multiple products from you, they are usually more loyal, trust you as an adviser, are more likely to buy additional products from you, and will be a great source of referrals. This increases their customer lifetime value to your company.
Frequently Asked Questions (FAQs)
What is customer lifetime value (CLV)?
Customer lifetime value (CLV) is the total value of a customer over the life of your relationship. It’s important because a happy customer can lead to additional sales and can also be a source of referrals. If you cultivate your customer relationships, they can be worth a lot more than the value of one sale.
How does upselling increase CLV?
Upselling increases CLV by adding more value to the customer’s core product purchase and buying experience. If the upsell product meets a particular need and offers tremendous value, the upsell will increase customer loyalty, which will increase the value of your customer relationship.
What are the benefits of upselling?
The two main benefits of upselling include an opportunity to increase the dollar value of your sale and the opportunity to add move value to your customer. When customers buy more from you, they tend to be more loyal. Also, when you add more value to their lives, their loyalty further increases.
Upselling is a great sales tactic for increasing the value of a sale while increasing the value you’re adding to your customer. It’s great for companies offering complementary products and services that closely align with customer needs. It’s also great for increasing customer lifetime value, which can lead to decreased customer acquisition costs since you’ll be able to sell more products to these customers.
To make the most of upselling, you should invest in a customer relationship manager (CRM) tool that allows you to document and reference customer needs and preferences as well as track product specific sales. Consider giving Pipedrive’s analytics and lead management features a try by signing up for a free trial.