Oberlo, which is part of Shopify, defines upselling as, “a sales technique aimed at persuading 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.” Like cross-selling, the goal is to encourage a customer to increase her/his spend. Both upselling and cross-selling focus on the customer in front of you rather than the acquisition of new customers.
Existing Customers versus New Customers
While the temptation for you might be to focus on adding new customers, customer retention adds more value to your retail business and costs you less. “Increasing customer retention rates by 5% increases profits by 25% to 95%,” according to Invesp. They also note that attracting a new customer costs five times as much as retaining an existing one, and existing customers are 50% more likely to try new products and spend 31% more than new customers.
And how can your small business capitalize on your existing customers’ willingness to spend? Upselling and cross-seeing. A number of upselling techniques are intuitive and can easily be introduced with a bit of training and a thorough understanding of your merchandise. The following are some techniques and tips for retailers to engage in these marketing techniques.
Which traits come to mind when you think of a retail salesperson? Many people expect a salesperson to be friendly and talkative. While those two traits are important, being a good listener is key to every upselling technique. Talking with a customer, building rapport, and asking questions in order to clearly understand his/her needs and situation enables a salesperson to make suggestions that are truly helpful. Truly understanding the customer and being perceptive is critical to cross-sell and upsell success.
For example, through the course of a conversation a retail salesperson might pick up on the fact that a customer is on a tight budget. Trying to get such a customer to buy a more expensive product could be a turnoff to the customer. However, such a customer might be willing to purchase a warrantee which can be seen as a way of protecting their investment. Having salespeople who are perceptive regarding their customers and knowledgeable about the items they sell will just naturally create more effective upsell and cross-sell opportunities.
Another cross-selling and upsell technique that retailers can implement is bundling. When a fast food employee asks customers if they want fries…and a drink…with that hamburger, they are attempting to get the customer to purchase a bundle. Piquing interest in the bundle requires that the items naturally go together and benefit the customer. In a retail environment, salespeople should explain the benefits of the bundle and there should be an instore display featuring the items together. Both techniques help a customer recognize how the bundle could be used and why it would be beneficial for them.
Pricing is something retailers should consider when developing product bundles. Customers are being encouraged to spend more money, so the bundled items need to clearly add value, and be “similar in purpose and make sense to the customer,” according to DotActiv.
Some retailers save the upsell until the point at which a customer has emotionally committed to a purchase — the register
Another tip to encourage upselling and cross-selling activity is to include a bonus for customers for activating the offer. Including free delivery, money off a next purchase, or a free item, are all typical examples of effective bonus offers. When retailers utilize this upselling technique, customers feel like they are being rewarded and thus, they can more easily justify spending more money.
Think about the last time you went grocery shopping. As you were waiting in line to pay, you were surrounded by magazines, chocolate bars, gum, and maybe some personal care products. Ever grab anything just because it was there? The Houston Chronicle says of checkout upsell, “some retailers save the upsell until the point at which a customer has emotionally committed to a purchase — the register.” All retailers can utilize the checkout upsell. For example, a flower shop can merchandise greeting cards and gift cards near the register that their customers would naturally be interested following a flower purchase.
A final tip is to remember that the opportunity to upsell doesn’t end when a customer leaves the store. Small business owners can follow up with customers with personalized emails, mailers, phone calls, or texts to inform shoppers about products related to their original purchase. This outreach can also alert customers to discounts and other deals that the customer may be interested in. The Houston Chronicle further says, “The premise is that by letting a customer have a positive post-purchase experience with a base product, you have them ripe for upgrades and add-ons.”
Competition among retailers is stiff. Acquiring new customers is a tough haul that small businesses must make in order to sustain and grow. However, retailers should also consider placing effort in developing sales and marketing tactics for customers already in the door. By utilizing cross-selling and upselling techniques, small business retailers can grow their business and their bottom line.
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