Have you ever ordered a meal at a restaurant and been asked by the waiter if you'd like a salad to go along with it? Or, just as you're ready to buy a 42-inch flat screen TV, the salesman informs you that for just a few dollars more, you can get the 50-inch model? And, oh by the way—how about a deluxe surge protector to go along with that?
If you answered yes, then you were the subject of two well known, but infrequently used sales techniques: cross-selling and upselling.
Simply put, cross-selling offers a product or service that is related to the original purchase (the salad). Upselling moves the customer to a higher-priced transaction. And both can add substantial revenue to any business.
Best leads: your existing customers
Since you've already spent time and money to build your house list, cross-selling and upselling to previous buyers is more cost-effective than acquiring new customers. You can leverage their loyalty and your established credibility.
"Your customers are your most valuable asset, no matter what size your business," says Pat Friesen, who runs a Kansas City-based business strategy and copywriting agency. “Someone who knows and trusts you is more likely to buy again, buy more, and buy more often.”
For those who think that these techniques are only effective during flush times when businesses have excess capital to spend, Friesen disagrees.
Over the last couple of years, while some companies chose to hunker down and wait out the recession, a lot of smart marketers turned to their list of lapsed or inactive buyers and went after leads that they had not converted yet.
As an example, she found that insurance companies who pursued all their inactive policyholders (including lapses, cancellations, and unconverted prospects) generated handsome returns. Moreover, since they already owned the names and weren't working from cold lists, their prospecting costs were lower.
"They'd already paid for these customers/leads. There was already a relationship of some sort established, even if it was minimal," Friesen says. "If people were going to spend money during hard times, they wanted to make sure they trusted the people getting their money."
Dispelling the myths of cross-selling
Businesses that are reluctant to embrace these techniques often fall back on outdated excuses about their suitability. A big misconception is that a business will come across as pushy, trying to coerce a sale that the customer doesn't want.
"The benefit in the long run is that you can help your customer by offering additional services and products that they may not be aware you have," says Kelley Robertson of the Robertson Training Group, an Ontario, Canada-based sales training and coaching company.
Robertson practices what he preaches by offering a CD or a book whenever he does a training session. It's another way to stay on a customer's radar screen and earn extra income for his own small business.
Another myth is the fear that businesses will over-communicate and turn off their customers.
Not so, says Robertson.
He will typically send out weekly emails over the course of three weeks to announce a new product or service, changing only the subject line. Even though he may turn off some subscribers, he has found that he more than makes up for it with new revenue he generates.
"As long as you continue to provide some type of value to your customers, they'll listen to your sales letters or your sales pitches," Robertson says.
Put a program in place
Often, sales people stop selling prematurely. One way to counteract this is to put a sales training system in place that makes it easy to learn from successes and failures. To lay the groundwork for an effective cross-selling and upselling culture in a company, Robertson recommends a simple, three-step plan.
First, create a checklist of add-on products and services. Then link them to other relevant offerings in your inventory so your sales team can see the potential universe of additional sales.
Next, instill the idea that upselling or cross-selling actually benefits the customer as well as your small business. Your customers get solutions and you generate extra revenue.
Lastly, ensure your sales people are asking enough questions to find out the goals, objectives, and problems of your customers. Once they have that information, they can better match your products and services to their situation. Hidden opportunities can often be uncovered with some targeted probing.
Robertson experienced this serendipity himself recently. During a casual conversation with one of his clients, he mentioned that he had a particular expertise that the client was in need of—and unaware that Robertson provided.
"It was one of those things that I hadn't thought about because we had never had a conversation about that," he recalls. "Don't underestimate what your customer might be looking for. Take the chance. Make that suggestion."
Whether your small business sells plumbing supplies or time management software, there are a number of ways to start the conversation:
- "Mention what the customer has bought in the past, especially if there is a direct tie between the original product and what you are now offering," Friesen says. "Also thank your customer for his/her past business. Thank you is a great way to start a letter."
- Bundle different items into one package (think McDonald's Super-sizing) and offer it at a price that is lower than the combined price if purchased separately but more than if the customer just bought one item.
- Use expert recommendations to influence behavior and drive sales. Amazon uses this method extensively, which is one reason their revenues surged over $10 billion in 2011.
- Set up an auto-responder program or pop-up window on your website that automatically offers cross-selling and upselling opportunities.