For many businesses, once they reach a certain size, it is easier and more efficient to generate additional revenue from current customers than from new customers. It’s good from a business perspective, upsell also increases your customer LTV and then improves cost-effectively across the board. However, if you focus on the wrong value proposition and your customers view it as a money grab, you end up spamming customers, losing trust, etc. Therefore, we will share exactly the means of upselling, the main benefits, and tactics to make upsell to increase profit and customer lifetime value.
1. What is upsell?
Upsell is a sale technique to persuade 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. In the eCommerce world, upsell comes into play when you have different versions of an item all at different price points. For example, you convince a customer to spend an extra $200 to buy a larger television.
You can use upsell tactics in three steps:
- Before purchase: display recommendations at the bottom of the product page or in the sidebar
- During purchase: display recommendations using pop-ups, in the shopping cart, on the checkout page, or in the abandoned cart email.
- After purchase: use personalized follow-up emails to attract customers to come back for more.
2. The main benefits of upsell
Upsell helps retailers build deeper relationships with customers
Upsell will become an effective tactic if it focuses on delivering more value to customers through premiums, upgrades, or add-ons. This can make them feel like they got the better deal. It will turn out to be a customer happiness tactic that also generates additional revenues.
It’s easier to upsell to the existing customers than to obtain new ones
Lead generation is an expensive practice. It is easier and cheaper to optimize the sale to the existing customers than to new prospects who have never heard of your brand. Because the existing customers are persons who have bought something from you than they already trust you and purchase your products again.
A study shows that you have a 60-70% chance of selling to existing customers. And only a 5-20% chance of selling to a stranger. Therefore, it’s an easy win for eCommerce businesses to make use of upselling to accelerate their growth and improve the bottom line.
Upsell leads to increased customer lifetime value (CLV)
Customer lifetime value is the net profit contribution that a customer makes to your business over time. You can divide your customers into three main categories: not profitable, profitable, and very profitable. Higher CLV means each customer generates more revenue for your business without investing anything extra. Upsell is one of the most effective ways to turn shoppers into very profitable customers and keep them coming back.
3. Some criteria to make upsell effectively
- An additional offer should be a suitable match to the front-end product and actually add value to it
- An upsell shouldn’t be just a sale tactic. It should be a customer happiness tactic. This builds customer retention and loyalty. In addition, upsell should make both the seller and the buyer feel like winners.
- An upsell should be personalized at least to some extent based on the product itself or the customer’s history.
4. The upsell tactics to boost eCommerce revenue
Shopping cart upsell
One of the most common upsell methods you can use is shopping cart upsell. It means that you can suggest additional items or services to customers who entered the shopping cart to confirm their purchase. In addition, based on the content of customers’ shopping carts, you suggest suitable and valuable items to them. For instance, if a customer is buying a new bike, you can give a suggestion that they should also get a helmet and a pump.
If a customer gets a product that may require an additional setup, you may offer it as an additional service. Moreover, any paid warranties or extended support for products the customers bought are also a perfect way to upsell in a shopping cart.
Premium services- upsell
You can offer a premium service in addition to the plan such as faster support, coaching, advanced personalized training, consulting, etc. This can help you steal your competitors’ clients by making it easier for them to switch to your platform. You offer personal assistance as an add-on service. That is a common tactic that the hosting providers use to offer various advanced services like migration help as upselling to their lower-tier packages and free add-ons to their higher-tier packages.
Payment plans upselling
If you are running a service with several plans, you can use the power of suggestion to upsell your more expensive plans. Let’s say you have three pricing plans: cheap, normal, and pricey. Providing a plan comparison is also a nice way to upsell your services. You can show your plans side by side to get the customers thinking.
Upsell through customization options
Another way to increase your revenue through upselling is by providing paid customization options. Basically, you allow the customer to fully customize the product to fit their needs exactly. For example, you allow the customers to pick the color, the interior materials, and the little details when buying a car.
These paid customization options are not included in the price tag. However, if they are reasonably small, customers won’t mind them. From a business standpoint, all these little increases in price add up and can significantly boost your margin.
Offer substitutes for upsell
What happens if your usual upsell item is out of stock? You can’t stop offering the upsell. Instead, you should have an alternative. For instance, if your upsell for the particular phone is upgrading the memory from 64GB to 128 GB and you are out of the upgrade. Therefore, you should suggest 128GB phones in different models from the same manufacturer.
5. Conclusion
The great thing about upselling is not higher profit margins. Through an upsell, you also retain the customer longer. Customers who buy more, stay longer. Then you not only earn more profits from superior sales but also retain customers and combat churn. As long as you are adding value with your superior product and strategic upsell, you are going to have some very pleased customers. Now, firstly let’s improve the user experience on your website with our Magento Website Development service. And starting with the upsell strategies successfully, contact us now!
