Cross-Sells and Upsells: Why They Matter
April 21, 2016
Every company would love to see higher profits. Unfortunately, many are so confused they think the only way to achieve this is by simply finding more customers. While there’s nothing wrong with trying to attract more prospects, many companies miss the opportunity to use product or service cross-sells and upsells can help boost your profits having the expense of finding a new customer.
What Are Cross-Sells and Upsells?
The goal of any sale is to make a profit. Lose sight of that and your company won’t be around for much longer.
However, with cross-sells and upsells, the goal is to sell even more. Both are focused on taking an initial sale and adding to its total. Hopefully, you can already see why they are both such powerful tactics.
Upsells and cross-sells are very similar. In fact, many people use the two terms interchangeably. However, it’s important that we distinguish between them for the sake of this piece, so let’s jump into their definitions.
Upselling is where a salesperson convinces the customer to upgrade their purchase. For example, if a customer buys an 8 GB iPhone, the salesperson may get them to up their purchase to a 16 GB version. They took a customer’s original decision to buy and got them to increase the amount they would spend.
Or, in enterprise software, an upsale can occur when an organization has, say a subscription of 100 licenses to your software, and after year one, you are able to convince them to purchase 200.
With a cross-sell, the salesperson is still ensuring a larger purchase, but this time, they’re getting the customer to buy a related item. So, again, pretend a customer is buying that 8 GB iPhone. The salesperson may cross-sell them a pair of headphones to go with it or a case to keep it safe.
Again, in other industries such as software, a cross sale may be adding in additional components that the customer doesn’t have today. If you’re buying CRM software from Salesforce, you’re likely to be a target for Pardot, their marketing automation software.
Of course, salespeople can do both too. Whatever the case, the tactic – when done right – can increase profits and customer satisfaction. Provided they’re not pressured into spending more than they wanted, customers will often appreciate that they got a better product and some valuable accessories to go along with it.
Now that you understand what cross-selling and upselling is, you may be tempted to implement it at your company and begin seeing bigger profits in the process. However, before you do, it’s important you understand how to use these tactics effectively. Otherwise, these strategies can easily backfire and cause more problems than they’re worth.
The Recipe for a Successful Up/Cross-Sell
No matter the industry you are in or your distribution channel, if you’re going to begin upselling and cross-selling, you need to know which ingredients lead to success. In short, they are:
- Added value – if an extra item won’t actually add value to your customer, then don’t bother. Therefore, you must truly understand what your customers’ unique needs are. Should they sense you’re just pushing a product on them for more profit, expect the entire sale to fall apart.
- Appropriate timing – these sales tactics only work when an initial sale has already taken place. If someone calls your company for help and the person who answers tries to get the person to make a purchase, customer satisfaction is going to suffer in short order.
- Skilled associates – in the hands of inexperienced salespeople, these tactics will be fumbled and executed poorly. You’d be better off prohibiting salespeople from using them at all until they know what they’re doing.
- Educated associates – just as important is having an educated sales force. If they try getting someone to spend more money on, say, another piece of software, there’s a good chance they’ll face questions about it from the customer. An associate who can’t provide sufficient answers may lose the entire sale.
What works best for your company will depend on your organization’s unique needs and features. However, it’s vital that you cover the above elements before trying to cross or upsell at all.
Teach Your Team to Be Flexible
One common dilemma faced by companies that understand upselling and cross-selling is which one to choose. Although we mentioned earlier that you can actually use both during the same sale, this isn’t going to be extremely common. Usually, you’ll be fortunate to land just one tactic or the other.
So which should you go with?
Well, according to Predictive Intent, upselling beats cross-selling 20:1 when it comes to product pages. This will be different across industries, but the ratio is a good place to begin making your decision.
This result shouldn’t be too surprising either. Cross-selling depends on the scope of the customer’s needs. To go back to our earlier example, I may want a smartphone, but have absolutely no interest in using it to listen to music. Ergo, trying to get me to buy headphones is useless.
However, if I want an 8GB iPhone, then I’ve shown interest in something very similar to a 16GB version. All you’d have to do is prove the value to me of the latter.
Of course, cross-selling can still be a successful tactic. As with upselling, it will mean having a team of sales professionals who understand how to use these strategies. So let’s cover that next.
View Additional Sales as Huge Opportunities for Customers
As we touched on before, your additional sales actually have to add value to your customers’ lives. Otherwise, a salesperson will look uninformed and, worse, unconcerned with their customers’ needs.
A great way to look at this is that your sales force should be trained to help your customers gain big wins. They should be excited about being able to introduce customers to other products because it means they’re going to be even happier with their experience.
Again, to use the iPhone example, a salesperson should show true enthusiasm for introducing their customer to the 16 or 32GB version because it means the customer will walk away with a far superior product and a better life because of it.
Never Make Assumptions
This is good advice no matter what, but it’s especially important when trying to add items to your customer’s cart. You can’t assume that just because your customer wants 100 licenses to your software that they will have a need for 200. However, once you have established a use case and benefit for those 100 users, you may be able to help them justify the additional subscriptions later on. You don’t have to wait for a full year to do it; the closer your sales team stays to the customer, the more likely you will be able to show them the value of what they are using.
A word of caution: sometimes on larger transactions, like enterprise software, your customer may be rubbed the wrong way enough that they walk away if you push too much too early.
Train your people to take an active interest in each customer. They should learn everything they can about a potential buyer so they can make appropriate suggestions – and at the right time – about cross and upsells.
If you are a consumer product, you are at least one step removed from your customer so you need to develop proper training and incentives to ensure proper cross selling or upselling is happening.
How to Incentivize Your Sales Team
Which brings us to the final question, how do you incentivize your people to upsell and cross-sell? There are a couple ways you can do this. The most obvious is through commissions. Your employees will naturally try to sell more if they know they’ll be receiving more come payday. How you structure this type of bonus will vary on your organization.
You can also implement certain expectations that make upselling and cross-selling a necessity to hit their numbers. This can be combined with a commission system as well. In that way, you have a carrot and a whip pushing your staff to use these tactics.
Without some type of incentive, though, you’ll most likely find that your salespeople don’t bother with trying to get your customers to buy more.
Cross-selling and upselling are too important and profitable to be ignored. Make them a regular part of your company’s sales approach and your company will begin receiving higher growth and higher than average returns.