Upselling customers occurs in almost every industry, whether it’s offering an extended warranty on a new Mac, carry-on luggage for a flight, or social media management with a digital advertising contract.
This common sales tactic is essential for any business, and for good reason:
- The probability of upselling to existing customers is 60 to 70%, while the probability of selling to a new prospect is only 5 to 20%.
- It costs SaaS companies $0.28 to get another dollar of revenue from an existing customer as opposed to $1.18 from a new customer, making upselling 4x cheaper.
- B2B companies experience 90% of customer revenue following the initial sale.
Plus, when businesses sell existing customers, they can see an exponentially faster return on their investment than if they’d only acquired new customers alone:
Without a doubt, selling to existing customers is a guaranteed way to ensure sustainable business growth for any brand, from online retailers to digital marketing agencies.
Best of all, it’s a simple strategy that can easily be incorporated into any sales plan. By knowing what to sell, when to do it, and how to do it, sales teams can generate more profit in a fraction of the time it takes to acquire new customers.
What is the difference between upselling and cross-selling?
An upsell is anything that increases the price and functionality of the original purchase. To revisit an earlier analogy, Spirit Airlines upsells customers by offering the purchase of seat choice, an in-flight meal, or the ability to bring carry-on or checked luggage, all in addition to the base fare of the flight:
Meanwhile, cross-selling is the sale of a similar product. For example, Expedia encourages the purchase of a hotel room in addition to a flight by offering savings up to $583:
Digital marketing agency example
A digital marketing agency, on the other hand, might offer the purchase of additional content creation or paid ad placements, while cross-selling might look like bundling a website redesign with an advertising campaign contract.
It’s important to know the difference since upselling is 20 times more effective than cross-selling. While cross-selling can still drive sales as much as three percent, upselling customers is the most effective way to grow existing business.
What are the different kinds of upsells?
The upsell options available will vary from industry to industry. Here’s how to structure a few options for a digital marketing or advertising agency:
In the retail world, this is akin to offering an iPhone with more storage. For agencies and consultants, it’s as simple as offering more of the same service. An example of this might be writing ten blog posts a month instead of five or creating 60 social media posts instead of 30.
Options and customizations
Digital marketers and advertising agencies refer to this technique as “à la carte” pricing. This allows customers the flexibility to pick exactly what they want instead of having to settle for a rigid package of products or services.
As a bonus, à la carte pricing is an easy way to get potential customers closer to converting. The technique naturally requires they reach out for a quote, which ushers them further down the sales pipeline.
It’s common for high-end products like computers or cameras to upsell warranties, which would effectively replace the device for a fraction of the full price. The same model can be applied to digital marketing services. Simply offer customers an additional contract period by charging a fraction of the full value.
Sometimes new customers are daunted by large price tags. Businesses can make the cost more palatable by offering the ability to pay for services in installments, with the total price of the installments slightly exceeding the total of the lump sum payment.
Jenna Kutcher, an online marketing expert, offers a course how to grow email lists that exemplifies this technique. Customers have the option to pay for the course in full for $497, or six payments of $97. When customers opt for the financing option, she makes nearly $100 more for zero additional effort.
When is the best time to upsell customers?
It is possible at almost any stage of the sales cycle. When in doubt, a good rule of thumb is that it’s best to be persistent, but not a pest.
During the initial pitch
Delivering quotes for premium versions or options during the proposal stage is an appropriate method for upselling new customers. A well-designed sales page might also be an appropriate place to present added value, whether its a premium version or financing option.
After a milestone
Right after a customer signs, a contract might not be the best time to sell another product or service. Instead, give them time to enjoy the service, become familiar with your business, and develop a sense of loyalty and satisfaction.
Then, if a digital marketing or advertising agency has done their job well, customers are sure to experience some successes or milestones. Rather than let those successes only live in an analytics report, use it as an opportunity to offer a strategy that could take their profits to new heights, such as a premium version or options the customer hasn’t considered yet.
Think outside the box to come up with new opportunities. Chris Yeh, a Silicon Valley entrepreneur, recalls a time when he called GEICO for roadside assistance. While he waited for the tow truck to arrive, the GEICO representative on the phone used the time to upsell him additional coverage.
...15 minutes later, I had agreed to add $1 million in additional coverage for my car and home, at the cost of right around $100 per year….That means that GEICO turned a costly customer service call into an incremental $2,000 in lifetime revenue.
What are the best techniques?
Know the customer
Knowing a customer on an individual level is one of the easiest ways to implement this sales tactic. By developing a relationship with a client throughout a sales journey, marketers and sales teams can learn who is primed for a quick upsell and who is content with their current product or service.
Plus, developing such relationships increases client satisfaction and loyalty, which can also increase the probability that they will respond favorably.
Case studies, data, and testimonials are just a few highly compelling tactics for marketing an upsell.
Marketing agency Hawke Media does this by showing off a large, visible portfolio of “happy clients” and case studies. They could easily provide complementary services to existing customers by directing them to the appropriate success story.
For example, they could demonstrate the value of their paid media strategy service to an advertising client by showing off the success of another client, Petnet:
Hawke Media increased Petnet’s revenue by 80% and gross profit by 14%. With results like that, upselling the service to a customer who’s already signed an advertising design or strategy contract would be a breeze.
Limit the price increase
Limiting the price increase of the upsell increases the odds that customers will be willing to make an additional purchase. However, there is a range of suggested price limits out there, from 25% to half the cost of the original.
With no real consensus on what price limits should be across the board, Neil Patel suggests that the ultimate way to determine limits is through simple trial-and-error.
Use price anchoring
What’s the best way to sell a $2,000 watch? Put it next to a $10,000 watch, as the saying goes. This is known as price anchoring, which draws on the cognitive bias of a person to interpret value based upon another piece of offered information.
Price anchoring is often described in the marketing world as the “rule of three.” This is when three variations of the same product or service are given, but with a gradual increase in price.
Jawfish Digital follows the “rule of three” by displaying its content marketing packages this way:
Grow your business by upselling customers
Used effectively, upselling customers has the potential to be one of the most profit-driving techniques in any marketer or sales team’s toolkit. That, right alongside crafting the best elevator pitch or building an optimized landing page.
To incorporate the tactic into your sales strategy, start by picking the right product or service. Then, strategically time the pitch to suit the customer’s needs or history with the company. Finally, rely on some tried and true techniques, such as flaunting success stories or price anchoring products. Whatever the industry, upselling customers can drive profits and reduce the time it takes to see a return on investment.