What is upselling?
Upselling is a sales and marketing strategy that encourages customers to opt for a higher-priced or premium version of the product they originally intended to buy.
For instance, an electronics retailer might nudge customers to purchase an improved version of a phone that has additional features (such as extra memory or a larger screen).
Successful upselling is a way to increase revenue, customer lifetime value, and average order value.
Why is upselling important?
Marketers often upsell because it has a lot of potential benefits for an online store when it’s done right. Here are some of the benefits of upselling.
1. Cultivate a selective customer base
Since upselling a primary product is about offering a premium version of it, you can attract a more exclusive customer base.
Many brands try to create a reputation that sets them apart as selling the “upgraded or premium version” of a product. Apple, for example, sells a more expensive version of a mobile phone that seems exclusive.
Creating a brand reputation as a premium option is a way to boost your customer perceived value.
2. Increased customer lifetime value
Customer lifetime value (CLV) measures the total amount of revenue a business can expect from the average customer from the start to the end of their relationship.
When you’re able to increase CLV, it means you’ll generate more revenue per customer without needing to invest anything extra in acquisition costs.
Upselling leads to higher revenue because it increases the customer lifetime value and average order value.
3. Building deeper customer relationships
Upselling is a great way for your sales team to contribute to higher customer satisfaction, because it allows you to offer more value to your customers. After all, the add-ons and extra features of a premium product will make them feel like they’re getting a better deal for their money.
As a result, your current customers will be happy and come back to make more purchases.
Upselling vs. cross-selling vs. down-selling
It’s important to understand the difference between upselling, cross-selling and down-selling.
Cross-selling is a sales technique that encourages customers to buy additional products by promoting related or complementary items. For example, if a customer has just purchased a mini skirt, you might suggest a pair of tights or a top.
Down-selling is the opposite of upselling. Wait… why would a store encourage customers to purchase a less expensive version of a product or service? Because it can be an effective way of increasing total sales or getting rid of extra inventory.
4 upselling examples
Now that you have a bird’s eye view of what upselling is, let’s take a look at a few examples of upselling techniques.
1. Featured products
Promoting featured products is one of the most basic upselling techniques, but it’s also one of the most successful. These featured products can be your most expensive options and lead new customers to choose them over discounted items.
2. Highlight new arrivals
When you highlight new products to your existing customers (who probably haven’t seen them yet), you encourage sales that might not otherwise happen. Once again, the products you chose to promote can be the premium product rather than the less expensive option.
3. Recommend relevant products & sets
Sephora uses upselling by offering similar options on each of their product pages. When a customer chooses a higher-priced option than the one they were first considering, that’s successful upselling!
4. Personalize the customer experience
Creating a personalized experience for your customers is a great way to upsell to them. When you have customer data that gives you information about what each user is interested in, you can sell them more expensive versions of the products they’ve been looking into.
Amazon is great at this upselling technique.