Upselling

From Infogalactic: the planetary knowledge core
Jump to: navigation, search

Lua error in package.lua at line 80: module 'strict' not found.

Upselling is a sales technique whereby a seller induces the customer to purchase more expensive items, upgrades or other add-ons in an attempt to make a more profitable sale. While it usually involves marketing more profitable services or products,[1] it can be simply exposing the customer to other options that were perhaps not considered. (A different technique is cross-selling in which a seller tries to sell something else.) In practice, large businesses usually combine upselling and cross-selling to maximize profit. In doing so, an organization must ensure that its relationship with the client is not disrupted.

In restaurants and other similar settings, upselling is commonplace and an accepted form of business. In other businesses (e.g. car sales), the customer’s perception of the attempted upsell can be viewed negatively and impact the desired result.

Why should you upsell?

Upselling is a common practice for service providers that offer different service classes such as airlines (cf. Bohutinsky, 1990). According to “the journal of business and industrial marketing; written collaboratively by Michael J, Sheehan and Paul R, Prabhaker “It is five times more expensive to get a new customer as it is to hold onto a current one.[2]” Selling to a new customer would mean having to start the sales process from the very beginning thus having to establish a new relationship with a different customer. This can be time consuming and often not very effective. Upselling to a customer that you have already built a rapport with, means that they are more likely to buy from you, listen to your suggestions and opinions and trust you. Selling to the same customer can lead to loyal customers and repeat sales. Upselling brings up the profit that the business makes and the value of the sale. However it is important to understand that although your main objective is to bring up revenue and increase the amount of the sale, a customers experience and their time with you influences future decisions that they make.[3] An upsell can be beneficial to both the seller and the consumer if relevant products are being shown to the customer. For instance, if you had a strict budget of $20,000 for a car, you would not want to be sold a car for twice the amount.

Upselling vs Cross-selling

Upselling is the practice of persuading customer's to see value in purchasing a higher-end product, upgrade, or adding an additional item in order to make a more rewarding sale. For instance an employee may influence a customer into purchasing an iPhone 5s rather than an iPhone 5, by creating a perceived value of the upgraded product to the customer. Similar to this marketing technique is cross-selling, whereby the sales person will try convince the customer to purchase a product that is in relation to the product they are already purchasing. For instance if a customer was purchasing a cake, the sales assistance may persuaded them to also buy candles or icing. It is beneficial for businesses to use both techniques in order to provide a valued consumer experience and boost revenue. Although research from Predictive Intent has shown that upselling is generally more effective than that of cross-selling (Lazazzera, R.,2015, March 4).

Examples

  • suggesting a premium brand of alcohol when a brand is not specified by a customer
  • selling an extended service contract for an appliance
  • suggesting that a customer purchase a faster CPU, more RAM or a larger hard drive when servicing that customer's computer
  • selling luxury finishing on a vehicle, such as leather upholstery
  • suggesting a brand of watch that the customer hasn't previously heard of as an alternative to the one being considered
  • suggesting that a customer purchase a more extensive car wash package
  • asking the customer to supersize a meal at a fast-food restaurant, or adding extra toppings to a pizza
  • using mobile check-in services to send upgrade seat or service offers to flyers[4]

Simple Techniques to Consider when Upselling

Know Your Product

It is essential for a salesperson to be familiar with their products, in order to generate a sale that is best suited for each individual customer and their needs. Being able to compare other products, provide success stories from other clients, and demonstrate knowledge is a key part to making the up sale. Other techniques include researching customer databases, looking at previous and most frequent customer purchases, as well as what add ons they have purchased (Maximizer., 2015, June 24).

Observe Your Customer

Listening to a customer allows a salesperson to anticipate customer aspects, such as how much they are willing to spend, what they are looking for, what other products interest them, their personality, what problems they have etc. By understanding the customer a salesperson is able to adjust their pitch, product or service in order to create a smoother relationship as well as experience and avoid any misjudgments; the upsell should always consist of items that benefits or suits the customer (Low, J., 2015, May 12. & Hoovers., n.d.).

Limit Recommendations

When upselling it is important to not overdo it, sticking to no more than several well-targeted recommendations that suit customers' needs and preferences is the best way to generate an effective sale. As well as limiting recommendations, it is important to be cautious of the amount a customer is willing to spend. , A rule commonly used is to never try upsell a product that is more than 25 percent of the original item. Anymore than this can often overwhelm customers, causing them to abandon the sale completely. If it is noticeable a customer is starting to feel overwhelmed, incentives may be offered such as a money-back guarantee or a free trial. This is most likely to boost their confidence in the product and encourage them to invest in the upsell (Low, J., 2015, May 12).

Techniques

Many companies teach their employees to upsell products and services and offer incentives and bonuses to the most successful personnel. Care must be taken in this type of environment to thoroughly train employees. A poorly trained employee can let slip the incentive program and thus offend a regular and loyal customer. There is a level of trust between the customer and employee and once broken it may never be re-established.

A common technique for successful upsellers is becoming aware of a customer's background, budget and other budgets, allowing the upsellers to understand better what that particular purchaser values, or may come to value.

Another way of upselling is creating fear over the durability of the purchase, particularly effective on expensive items such as electronics, where an extended warranty can offer peace of mind.

Upselling Benefits

Upselling can be beneficial for the consumer as they can get a 'better deal' a common example would be if an item usually costs $3, they may offer a deal such as 2 for $5, meaning the consumer will gain an additional product and get a discount of 15% off on each item. As well as this the salesperson has made an extra sale, that they were unlikely to make without the deal. In contrast the consumer may not of needed the extra bottle at the time, which can lead to consumerism. This leads to the complex effect that upselling has in feeding consumerism in todays society.

Another benefit from upselling is that often the consumer may need help choosing the right product to suit them, by using the technique of upselling and cross-selling the consumer is more likely to end up with a product they can rely on, as well as any extra items they may need in conjunction with the product (Lazazzera, R.,2015, March 4).

Many companies offer incentives to their employees such as a bonus or a cut of the upsell to drive employees to get the sale. This can lead to competition and lack of employee welfare, when targets are not met. It also allows contracts which pay their employees a low salary rate, with the promise that the employees will make up for it with their bonuses from their commission from upsales. This is not always the case as these types of sellers are usually desperate to upsell often putting a buyer off.

Overlap with cross-selling and Add-on sales

It can be hard to divorce all three techniques from each other, given that the difference in each technique is minor. All techniques adopted and effectively practiced within firms are important strategies that are used for increasing revenues among current customers.[5]

An add on sale can simply be defined as a sale of additional goods or services to a buyer. In practice an add-on sale can be seen in a retail scenario; a customer could be buying a suit for a new job, after the sizes and colours are to the customers satisfaction the seller would assume that they would also need shoes, socks, a waistcoat and a belt to go with. This is a sales technique where by the seller is trying to encourage or persuade the customer to buy something extra, that may or may not be more expensive, but will still bring up the total amount of the sale. An add on sale is much more simpler than a cross sell or an up sell, this is because the new item that the seller is exposing the buyer to may cost less than the product they are purchasing, however the downfall of this technique is that saying “no” to the product being presented is more frequent. Usually two for one deals or “buy one pair and get the second pair half price” deals are the most common ways to transition your sale to that of an add on. From a customers point of view, adding on can be seen as the seller trying to make the buyer spend more money to bring up the point of the sale. This is why adding on can be difficult, familiarity and relevance of suggestions is important, you want to make sure that the items being shown still match the customers’ initial thoughts and ideas. If they do not there is a high chance of losing the sale.

As told in the Journal of Relationship marketing by Kamatura Wagner cross selling is valuable selling technique used by salespeople to increase the sale by transforming single product buyers to multi product buyers.[6] Cross selling is a technique by which the seller will attempt to increase the value of a sale by suggesting an accompanying product. Suggesting related products or services to a customer who is considering buying something. Cross selling is mostly seen in restaurants or fast food joints, the terms “would you like fries with that?” or “would you like to up-size your order?” are examples of the cross-selling technique. Cross selling can be most effective when a customer is requiring assistance – where they come to you for the purpose of cross-selling. Since the customer has initiated the sale, the mind set would have already been on the firm and its products. This would make it easier for the salesperson to conduct the technique and have it be successful.[7]

An example of an over the phone cross sell could be that a customer has just switched banks and is getting her account set up with her new bank. After the account is created the bank teller would offer her the cross sell of signing up to their internet banking app that would allow her to access her account details and pay her accounts online. If cross-selling is properly done, it will be viewed as a service, rather than a sales pitch.[8] A downside to cross selling can be seen as the same as that of up-selling. This main draw back is known as “over-touching” the customer which in simpler terms means, giving too many cross selling options can result in the customer ignoring the efforts given, and can desensitise the customer to future cross selling offers.[9]

The Growing Advancements to Upselling Techniques

Due to an increase in technology, upselling as well as cross-selling has advanced, with the marketing technique now being used not only in store by employees but through online websites, android apps, emails, and even social wifi (Lazazzera, R.,2015, March 4). This increase in technology has allowed customer interaction and connection with the business and their employees to grow and become more accessible. Pop-up ads, notifications, and online help desks are now commonly seen when browsing online or through an app. Businesses are now able to hack into wifi systems, as well as track recent searches on worldwide internet browser's, with technology continuing to expand it is likely this marketing technique with change rapidly over the coming years (Colman, S., 2010, July 14) (Kearney, J., 2016, February 2).

Ethics

When upselling for higher cost items or add ons to customers for goods and services it is advised not to push the sale as it may become unethical. There have been cases where pushing a sale onto customers have caused legal problems as some retailers may use confusing terms or say half truths so sell products while the customer is unaware of this happening. In New Zealand there is an act "Consumer guarantees act 1993", which states that if the customer is unhappy with the service or the good they are entitled to a refund or the business in question has to compensate for the troubles caused[10]

See also

Successful Up-selling

Successful Upselling

For a successful upsell to take place, the sales person must be properly equipped and prepared. In a business sense, a sales assistant must know their product. Because the seller is representing the company or organization; a customer expects a sales assistant to answer their questions and provide solutions to their problems. If a seller is unable to do so, it could result in a damaged relationship with the customer, a tarnished reputation for the brand and can also influence the sale negatively. Customers are more likely to trust sales people who are confident in what they are selling.

Offering the up sell at the right time is a crucial part of the technique. More often than not, the best time is when the customer has decided to make the purchase. This is when they are open to suggestions for product and benefits of the product. If you expose the customer to new options that they have not considered while in the middle of their decision process, it can influence the customers behavior around you, assuming that you are trying to up the sale simply for your own benefit or incentive.

For an upsell to be successful, a seller must give a detailed demonstration, to show how the product will benefit the customer. An example could be seen as booking a hotel room for your family, then being offered a premium package, which is although more expensive includes breakfast and dinner for the entire family. This would mean that they would “save” by not spending money on fancy restaurants and take-outs. The benefit is given to the customer answering the question, “why should they change their minds?” And the total amount of the sale increases.

Upselling is an established and widely utilized sales tool employed by service companies in order to increase the purchasing value of their customers (Kamakura, 2008). For instance, calling centers can be known to adopt both upselling and cross selling because the consumer has reached out first, thus meaning they are more open to suggestions.

Upselling can be seen as an extended conversation, if you never learn or even bother to ask about what the person is doing or what their objective is, then you will not be in much of a position to expand the relationship with your customers.[11]

This means that before an upsell can take place a sales person is required to develop a relationship with the customer. The term probe is used when a sales person uses open-ended questions to understand the clients’ situation and can draw conclusions on how to approach the customer when trying to sell a product. Probing helps get the customer talking about their opinions and promotes critical thinking. It generally happens during the open conversations with a customer, this stage is critical it places the platform for the sales person to uncover the needs and help provide solutions.

An upsell can be seen when a TV commercial asks you to call a toll free number and the customer – after placing an order – responds positively to purchasing a different product of higher value and more features.[12] According to the article written by Larry Levine; the result of properly implementing cross and upselling techniques is not only more sales, it will also help create better relationships with your customers, thus making them loyal customers and generates a larger scale of satisfaction.[13]

It is important for the seller to keep in mind that less is more. Sticking to a few recommendations that run parallel to the customers needs can be seen as more effective in comparison to exposing a customer to too many options, resulting in confusion and more questions. Thus the conclusion of – the more options you give, do not necessarily guarantee an increase in the chances of a higher sale .

References

  1. ↑ BusinessDictionary.com
  2. ↑ (Paul R, Sheehan, & John I, 1997 )
  3. ↑ (Lazazzera, 2015).
  4. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  5. ↑ (Robert C. Blattberg)
  6. ↑ (Wagner, 2008 )
  7. ↑ (Wagner, 2008 )
  8. ↑ (Wagner, 2008 )
  9. ↑ (Wagner, 2008 )
  10. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  11. ↑ (Schiffman, 2005 )
  12. ↑ (Schiffman, 2005 )
  13. ↑ (Levine, 1996)
Retrieved from "https://infogalactic.com/w/index.php?title=Upselling&oldid=719914693"