31Jan
By: Justas Markus January 31, 2017

What is Upselling?

Upselling is a sales technique aimed at persuading customers to purchase a more expensive, upgraded or premium version of the chosen item or other add-ons for the purpose of making a larger sale. eCommerce businesses often combine upselling and cross-selling techniques in an attempt to increase order value and maximize profit.

Why is Upselling important?

Although sales techniques tend to invoke negative feelings in us, when done right, they can actually improve our shopping experience. Online retailers rely heavily on upselling and cross-selling techniques for several reasons:

  1. Upselling helps retailers build deeper relationships with customers. Upselling is not a dirty tactic if you put it into perspective. If it focuses on helping your customers ‘win’ by suggesting premiums, upgrades or add-ons that will eventually deliver more value and make them feel like they got the better deal, it will turn out to be a customer happiness tactic that also generates additional revenues.
  2. It’s easier to upsell to existing customers than to acquire new ones. Lead generation is an expensive practice. It is much easier and cheaper to optimize the sale to a customer who already trusts you and has bought something from you in the past or is about to make a purchase now than to sell to a new prospect who has never heard of your brand. The probability of selling to existing customers is 60-70%, while the probability of selling to a new prospect is 5-20%. It’s an easy win for a lot of eCommerce businesses on a mission to accelerate their growth and improve the bottom line.
  3. Upselling leads to increased Customer Lifetime Value (CLV). Customer Lifetime Value is the net profit contribution a customer makes to your company over time. You can split your customers into three main categories: not profitable, profitable and very profitable. Higher CLV means each customer generates more revenue for your business without you having to invest anything extra, which also means your company has more money to spend on acquiring more new customers. Upselling is one of the most effective ways to turn shoppers into very profitable customers and keep them coming back.

The difference between Upselling and Cross-selling

In eCommerce, both techniques are employed to optimize revenue by increasing the amount a customer spends with your business.

Upselling aims to convince the customer to buy a more expensive version of the product, while cross-selling focuses on making personalized recommendations of related complementary products.

Example:

Upselling: The customer has added a pair of sneakers from last year’s collection to their shopping basket. Exposing them to images of similar but more expensive sneakers from the most recent collection could lead to an upsell.

Cross-selling: The customer has added a pair of sneakers to their shopping basket. You could display related product recommendations on the checkout page (e.g., socks, a rain & stain repellent or shoelaces) to prompt them to buy additional items that increase the value of the purchase.

Upselling Best Practices

You can use upselling tactics in three steps:

  • Before purchase: display recommendations at the bottom of the product/category page or in the sidebar (sometimes both).
  • During purchase: display recommendations using pop-ups, in the shopping cart, on the checkout page or in the abandoned cart emails.
  • After purchase: use personalized follow-up emails to entice customers to come back for more.

Successful upselling is based on understanding your customers’ needs and making the shopping experience more enjoyable. Remember, a good upsell always leaves the customer feeling like they won. Here are some of the best practices to try:

  • Incentivize upsells and reward customers for spending more money on your site (e.g., offer free shipping or a discount on future purchases).
  • Use side-by-side comparisons to demonstrate the value of the more expensive version of the product.
  • Ensure the product you’re trying to upsell is within a reasonable price range. Customers will rarely pay more than 25% of what they planned to spend.
  • Don’t be pushy. Showcase available alternatives but allow your customers enough space to make up their mind on their own.
  • Create a sense of urgency by communicating real-time updates on your stock (“only 2 items left”) or reminding them that the offer will be available for a limited time only.
  • Use customer data to personalize the offers as much as possible and suggest products that genuinely add value to the purchase.
  • Educate customers on the risks, or missed opportunities, of not taking advantage of the offer.
  • Use the right language to communicate the benefits of buying or the risks of not buying the recommended product. Value proposition is key.
  • Show a good range of similar products but don’t overwhelm your customer with too much choice.