Up-Selling and Cross-Selling:
The Fastest Way to Increase Profits
If you've never heard about up-selling and cross-selling, it's not because you've never experienced them.
At a restaurant have you ever been asked, "Would you like cheese with that? It's only fifty cents more." You've just been presented an upsell.
Or have you ever shopped on Amazon? Do you recall the display that appeared below the description of the item that you shopped for? The display probably read something like this: "Others who have bought this product also bought …", followed by a picture of related items.
If you're shopping for a camera, the pictures may include tripods and electronic flashes. If you've searched for a printer, the pictures may depict scanners or computer monitors. This technique is a cross-sell.
Up-Sell and Cross-Sell Techniques
An up-sell occurs when a customer "buys more of the same." A waitress who persuades you buy fries with your hamburger is making an up-sell. So, too, is the car dealer who offers premium upgrades at a discounted price.
Cross-sells involve purchasing an item in an altogether different category from the product that you are prepared to purchase. The two categories are connected, however, because someone who wants an item in the first category probably needs products in the second one.
When I buy potted plants at my local nursery, they always ask, "Do you need potting soil to go with your new plants?" Potting soil and potted plants are two entirely different product categories. But there's a high probability that a person who buys plants also needs potting soil.
Any well-designed sales strategy includes a purposeful design to facilitate up-sells and cross-sells. These sales tactics routinely raise profits significantly. A ten percent increase is not uncommon, and in some businesses the added profitability can be several times that amount.
Catching Customers in a Mood to Buy
Three basic principles govern the use of up-sells and cross-sells. The first is to put an offer before a customer while the customer is still in a mood to buy. We've all told a store clerk, "No, I don't need any help. I'm just looking." In other words, we're not currently in what marketers call a "buying state" of mind.
Once you make a decision to purchase, however, you've already demonstrated that you like the store's merchandise and trust the business to give you a fair price. Therefore, you're more receptive than normal to an offer to sell you something else of value.
For example, there's a major shoe store near my home. Behind the checkout stand are displays of shoe polish, shoe laces, and shoe trees, along with a host of other shoe-care products. It's all but guaranteed that as the clerk is processing the sale, he or she will make a gesture to the display and ask, "Do you need shoe polish or maybe shoe strings for another pair of shoes?"
Think of the psychology of this. Imagine that you've just bought a pair of shoes that cost you seventy or eighty dollars. You're proud of them and can easily envision how good you will look in them. At that moment, don't you want to keep them looking nice? So spending a bit more for a can of shoe polish and a good shoe brush seems like the logical thing to do.
Or maybe your eye spots the shoe trees, which the clerk did not even mention, and you think, "These shoes would last a lot longer if I had a good set of trees for them." Once your mind starts down this path, the clerk is well on the way to a profitable cross-sell.
The second principle behind up-sells and cross-sells is that it's easier to maximize profitability with an existing customer than to find a new customer. You've already expended the marketing and advertising investment to get the current customer in the store, to your website, or on the phone.
Thus, there is no additional investment in marketing or advertising to effect the up-sell or cross-sell. That's one reason why these techniques are so profitable. Moreover, in an up-sell or cross-sell, people will often pay more for an item than they might otherwise be willing to consider.
Let's go back to the shoe store. As you look at the price of the shoe polish, you suspect that you could buy it cheaper somewhere else. But you would then have the expenditure of time and the cost of gasoline to make a trip to buy it. So you're willing to pay a bit higher price for the convenience of buying here. Once more, the store owner has added to the profit level.
Offering Perceived Value
The third principle behind up-sells and cross-sells is that the additional item must have a perceived value significantly higher than the incremental price of buying it. You want to create the impression in the buyer's mind that this deal is simply too good to pass up.
To do this, you may want to make the special price one that's available only if the up-sell/cross-sell item is bought at the same time as the underlying purchase.
In addition, the item which you up-sell or cross-sell must be of substantial quality. If the customer buys this add-on item, only to be disappointed by its quality or performance, you've severely damaged your credibility in the customer's eyes. You've greatly diminished the likelihood that this buyer will be a repeat customer.
In a word, up-sells and cross-sells should always enhance the perceived value which the customer attaches to a purchase from you.
A Strategy with Options
A good up-sell/cross-sell strategy is also adaptable so that you can generate a variety of opportunities for additional sales. Returning to the shoe store, what if you just bought a pair of athletic shoes rather than dress shoes? You have no need for shoe polish.
But near the cash register is a display of athletic socks. Now, instead of gesturing to the display behind the checkout counter, the clerk motions toward the socks. This time the clerk says, "Today we're offering three pairs of socks for the price of two when someone buys a pair of these shoes."
This wording cleverly achieves two things. First, it clearly sets the cross-sell in motion. And second, the word "today" means that the customer cannot return to the store later and have this same buying opportunity. The unspoken message is, "Take advantage of this offer now, or lose it forever."
Keeping Your Costs Down
It's hard to think of a business that cannot make use of up-sells and cross-sells. You simply need to invest a little creativity in the right strategy.
Where possible you want to have as much margin as possible in the product that you up-sell or cross-sell. Digitally-delivered products are superb in this regard, because the production, warehousing, and delivery costs are so minimal.
For instance, if I'm contracted to deliver a keynote speech, my proposal may include an offer to provide a one-hour follow-up webinar for everyone in the audience at an additional fee of only $500. (Anyone with a business built around coaching, training, or consulting can offer something similar.)
And here's the key. The webinar has been pre-recorded and designed in such a way that I can use it with a variety of keynote topics. With the webinar ready for prime time, my only cost to deliver it is the small webinar hosting fee.
Thus, every time that someone accepts my offer, I add almost $500 to the profit line. Plus, in the webinar I can "plug" my other services in a way that might be out of place in the keynote itself.
A Special Request
What I would like to do is to spark reader imagination about ways that we can all use up-sells and cross-sells. Could you help me with this? Would you be willing to share with our subscribers how you are up-selling or cross-selling products in your startup? Or if you've not implemented up-sell and cross-sell strategies yet, would you share what you're considering?
I will then make comments like yours available to all of my subscribers. In effect we can all stimulate one another to envision new options for increasing profitability. To offer your contribution to this dialogue, just click on this link to email me your thoughts and ideas.
This article first appeared in Encore Entrepreneur inbox magazine on March 18, 2014.