Upsells & Cross-Sells

“Do you want fries with that?” asks the teenager serving at McDonalds.

You may laugh about it later as you think how corny it is but perhaps you said “Yes, go on then” or heard the person in front of you agree to this extra calorie laden but tasty food.

If so, you’ve just seen one of the most effective profit creating strategies in existence and it’s been done by a kid who might still be at school.

The tactic is called an upsell or cross-sell and increases the profit on a good proportion of transactions.

Definitions

I don’t want to be prissy about this but upsells and cross-sells are slightly different but have the same impact – they increase profit like crazy.

An upsell creates a better version of what the person is buying.

It’s what happens when you buy a car and you move from the standard model you’d decided to buy to the deluxe model because of some extra features you really wanted.

Or you add optional extras to the car like metallic paint or alloy wheels.

A cross-sell is when you buy another product which enhances the use of the first item you’ve bought.

A cross-sell for the car is the insurance you buy because it’s convenient or the 3 year service package because it seems such a great deal… and you may be able to finance it.

Or if you buy a new business suit, a cross-sell is the shirts, ties and shoes you buy at the same time.

So are the McDonald fries a cross-sell or an upsell.

It depends on what you think you’re selling.

If you’re selling burgers, the fries are a cross-sell.

if you’re selling lunch, the fries are an upsell since they enhance the meal.

What’s important is that you take action at the time of the transaction to increase your profit AND the customer’s satisfaction with what they’re buying (either at the time or later).

For convenience I’m going to shorten “upsell and cross-sell” to upsell but please keep in mind that you can introduce extra products.

The Impact On McDonald Profits

I’ve heard people estimate that this one simple tactic is responsible for doubling profits.

Can you believe that?

Let’s look at some numbers.

Imagine you go into McDonald’s for lunch because your in a hurry or in a strange town.

You order a Big Mac and a coffee which costs $3.00

Assuming the McDonald’s store makes about 10% net profit after covering all the overheads and payments back to McDonald’s themselves, then the profit on the transaction will be 30 cents.

So let’s look at what adding fries for another dollar does.

First contribution margins are going to be high – there’s no extra staff costs, premises costs or marketing.

So those fries may carry an 80% margin.

That gives us 80 cents extra profit for every customer who buys – a 266% increase in transaction profit from 30 cents to $1.10.

If 50% of customers buy, then every time the “do you want fries with that” question is asked, it’s worth 40 cents (the 80 cents multiplied by the 50% who take it up – and average profit on the transaction increases from 30 cents to 70 cents or 133% increase.

if 25% of customers take it up, the question’s worth on average 20 cents and average transaction profit is up by 66.7%.

And of course, if you say yes to the fries, you can be asked if you want a drink or one of those hot apple pies that always burns the roof of my mouth.

Not such a laughable idea now, is it.

Especially when you think how tough it would be to make a profit from a McDonald’s store if they didn’t upsell.

It’s time to get rid of some negative baggage about upselling.

How Customers Benefit From Upsells

OK if we start with the McDonald’s option, I’ve probably got to do a little bit of a dance to get you to believe it’s good for the customer.

Adding fries to a Big Mac may not be the healthiest meal around but if we ate what’s good for us, we’d be stuck with fruit, tofu and pulses.

No steak, no chocolate, no sticky cream cakes.

But all things in moderation. If we indulge ourselves with one meal then we should be good with others.

Food is as much about enjoying the experience (what tastes good and makes us feel good) as the nutritional and health benefits of eating the right things.

And McDonald fries taste good… and complement the Big Mac.

It feels good to be naughty occasionally and anyone who goes to McDonalds isn’t that focused on the health factors. And the owner of a McDonald’s franchise probably isn’t too concerned about customers fat and calorie levels – otherwise they’d have bought into a health foods business.

So what about a bar?

You’re working in the city one afternoon and have an hour and a half between appointments and you missed lunch.

You walk into a nice bar to have a drink, you look around for a lunch menu and can’t see one even though you’re hungry.

The barman serves you a cold drink and says he spotted you looking around and asks “Would you like a sandwich or a roll? Our kitchen’s closed now but Jenny can get you something.”

That’s an upsell – just like McDonalds – but the barman did it with your best interests at heart. He spotted the opportunity to help you.

Or what about if you’re buying a new  business suit – and you hate buying clothes.

You find a couple of suits you like and you’re not sure which one to have. Both fit well and make you look smart and professional but they are a bit pricey.

The shop assistant says something like “The suits are $500 each but we have a special promotion and if you buy them both today, I can do you a special deal. $850 for them both.”

So you buy both – justifying to yourself that you really needed two suits but you couldn’t face more shopping… and you did get a bargain.

[Let’s quickly look at this transaction from the shop’s perspective, assuming a contribution margin of 50% and a normal net margin of 10%.

Buy one suit – contribution 50% on $500 = $250 and a likely net profit of $50 (remember it was 10%)

Buy two suits – contribution 50% on $1,000 = $500 less the $150 discount = $350

An extra $100 on the transaction from having the flexibility to offer a deal to a customer who’s wavering unsure which to buy… and may not buy either but no extra costs – no more staff wages, no more rent and no more electricity.]

It gets even better when the shop assistant asks if you’d like some help to find shirts and ties which go well with the suit because it’s easiest to get the best match when you have everything together in one place.

The shop assistant is still helping you – a sensible suggestion and he or she probably has much more clue about what looks good together than you if you’re a reluctant clothes buyer.

By the end, you finish up by two suits, three shirts and six ties for $1,185 and you walk out feeling good. It was a nice, helpful experience. You know you’re going to look great… and you don’t have to buy another suit for at least a year.

The Theory of Why Customers Feel Good About Upsells

How can I say this nicely?

Buyers don’t know what they want or need and can be grateful for all the help they can get.

Or they may think they know what they want – in terms of a few broad criteria – but they’re unsure when their ideas come into contact with the physical products.

In most markets, you know much more about the product or service than the buyer – how it works, what it can do… and what it can’t do, and the effects of all the little extra gizmos and services on the higher priced items.

Even when a buyer is informed and knows exactly what they want, there’s still the difficulty of asking for it in a way that can be understood.

In your mind, you may know the new kitchen you want but can you explain it to someone else? Can you explain it to your husband to check they agree or to the salesman?

Then there’s the issue of price.

The price they’d like to pay.

The price they’re willing to pay which is more than they’d like to pay.

The price they can afford to pay.

It all works out as an uncertain area with a range of possibilities. Going back to the value for money graphs in Pillar 3 there’s a quality or value level customers are not prepared to go below and a price they’re not ready to go above (unless really tempted).

But this place has room for lots of different options and that’s where the opportunity for upselling comes in together with correcting any misconceptions on what a product can do.

It’s wrong to look at buying as a black and white issue because it’s full of compromises and judgements, even if the customer asks for a specific make and model.

And it’s wrong to deny customers the right to making an informed decision when they understand the options available.

Why Many Businesses Don’t Use Upsells

Here are the reasons why many businesses shy away from uising upsells:

  1. They don’t recognise the tactic when it happens to them – remember I talked about the white zone people walk around in, unaware of what’s happening – so they don’t see it as something they can do.
  2. They don’t recognise how insanely profitable it can be to bump up the profits on a high proportion of transactions.
  3. They don’t recognise that upsells can be good for the customer.
  4. They think upsells are sleazy or cheesy.
  5. They don’t know how to do an upsell
  6. They haven’t selected suitable product opportunities and prepared scripts
  7. They haven’t trained staff – or if online, they haven’t put the idea into action.

1 and 2 I’ve already dealt with. I’ve explained what an upsell is and how they can make a huge impact on profit.

I’ve talked about 3 (that upsells are good for customers) and  reason 4, thinking upsells are sleazy can stop you from using this great tactic to increase profit.

Following the Strategy of Preeminence, you are committed to doing whatever you can to put the customer’s well-being first and part of that means making sure your customers have the information, guidance and support needed to help them to make the right decision.

If you don’t offer an upsell or cross-sell then potentially you are short-changing your customers and letting them leave you with something that is not their best, most preferred solution because they don’t know about it.

It’s not sleazy asking your customer whether they need something that goes with your product, it’s helping.

I’m old enough to remember as a child when toys and batteries were sold separately and regularly experienced the disappointment of having a present which wouldn’t work because the shop assistant hadn’t bothered offering batteries.

Or what if you see someone struggle into your chemist, obviously suffering from bad back pain and clutching a prescription for anti-inflammatory pills.

Your customer wants the pain to go away.

Not in three days when the tablets have had a chance to work but now, when every movement sends pain shooting through his body.

If you also suffer from back pain and swear by heat pads to take away the pain quickly, the nice thing to do is to say how good you find heat pads and ask if he’s given them a try. If not, you have some he can buy.

That’s doing right by your customer and helping your profit.

Or what about when your car has its annual service and the mechanic spots that something has about four month’s wear left in it. Wouldn’t you rather be told now so that you can get it replaced immediately when it’s convenient or at least be forewarned so you can book it in again in 3 months time?

It’s better than having a breakdown just because the mechanic held back in case you think he’s trying to milk extra profit from you.

Points 5, 6 and 7  – the practical elements of making upsells – will be the focus of the rest of this Hidden Profit module.

Why You Should Use Upsells

  1. It’s good for the customers when you give them guidance and the chance to say Yes or No. Deciding for them could stop them.
  2. It’s great for your short term profit. You’ve spent the money to attract the customer to you so it makes sense to get as much contribution margin as you can in each transaction while staying true to your ethics and values.
  3. It’s great for your longer term profits because you’re looking after your customers. You’re protecting their interests, making things easy and making sure they don’t waste money by buying the wrong thing, just to save a few dollars.

It’s time to start developing your Upsell strategies and tactics and we’ll base it around the what, when, where and how.

What Can You Upsell?

In my experience, the opportunity for upsells is pretty easy to see… in other people’s businesses.

Why?

Because you’ve had experience as a customer and you know the problems, frustrations and uncertainties.

Fries and a drink is easy in McDonalds. And id they’ve bought the lot, perhaps they’d like to Supersize it.

Shirts and ties are obvious in a man’s clothes shop.

Chocolate bars or nibbles at the petrol (gas) station are obvious.

But what about your business?

Your options:

  1. The complimentary cross-sell (the batteries for the kids toys, the printer when you buy a PC, the case for a camera)
  2. Extra products for the implied need (snacks at the gas station)
  3. A better quality or more advanced product (the camera with a 10x zoom lens rather than the standard 4x, the deluxe version instead of the base model)
  4. More quantity (buy three months worth of vitamins at a discount, buy an extra cuckoo clock to give as a great present, pay up front for two months of weekly window cleaning for a 10% discount)

An alternative way to find upsells in your business is to look across the product/service split.

If your customer buys a product from you, can you sell a service to compliment the use of the product?

  • Installation support
  • Maintenance contracts
  • Repairs if there’s a problem
  • Training
  • Delivery
  • Insurance
  • Financing

Look around you and you will see service options, especially in the electrical store and car showrooms.

Or add products to services.

The dentist who sells you electric toothbrushes for you and your family.

The hotel who sells extra shirts, ties and underwear to executives who have to stay an extra night away from home.

The accountant who sells his new start-up clients an accounting software program.

The business trainer and speaker who sells a DVD set after he’s spoken.

The options depend on your business.

First I’d start practising spotting upsells offered to you when you’re buying and make a note. Ask yourself if you can take this idea and use it in your business?

How many cafes and coffee house owners do you think see the McDonald’s example and don’t offer the opportunity to have a muffin or Danish pastry?

Second, take a look at what your customers buy before, at the same time and after they buy your product or service.  Look for the opportunities.

Why sell a car and leave the servicing business to chance when you can wrap up a three year servicing deal in the price and put it on credit?

Remember you don’t have to provide the secondary product or service yourself if you have a joint venture partner who gives you a slice of the action.

Third, look at what your competitors are doing. Are they taking advantage of opportunities for profit you ignore?

Fourth, ask your customers if there’s anything they find it useful you sold.

Fifth, if you can’t spot opportunities for different products, better products or services, can you sell more quantity?

The saying “a bird in the hand is worth two in the bush” fits here.

Yes if you are certain the customer is going to keep coming back to buy from you every time, then it may not make sense to offer a discount for more quantity.

A widget maker who gets a special deal to buy two month’s steel may not come back for two months.

But often it’s not so clear cut.

The widget maker may only be buying from you because his usual supplier is out of stock and you have a choice – to take one or two month’s business away from your competitor.

Or what about the gym membership – $15 for a session or $60 for a month’s membership?

From The General What To The Specific What

There’s a big leap from…

I want to make upsells (general) … to…

I want to offer an upsell of this product when a customer buys this other product.

McDonald’s is a huge business with a very small product range and only a few upsell options.

You may have a business with thousands of products which could create a mind-boggling number of different combinations.

Let’s keep things simple.

  1. Check the customer’s needs with what they are saying they want to spot opportunities for better quality. The last PC I bought started out as a desktop with a small tower because I’m pushed for space. I knew I didn’t want a portable but I didn’t know all in one PCs with everything built in behind the screen existed. This was even better and I was successfully upsold although I said No to the printer, the maintenance and the Office and anti-virus options. net result, I spent about 45% more than I was intending to spend.
  2. Focus on looking for complimentary options – your equivalent of the suit, shirt and tie and get one offer working before extending it to other categories.

Getting specific wins because it’s only then that you can design any tempting offers.

Sometimes it’s just a case of reminder the customer they need to buy something else, other times you’ll need a special offer to create a successful upsell.

I’d start by reminding customers and keep track of what happens.

If 5% go for it, then a deal may be needed.

If 25% for for it, then it will need a big increase in conversions to cover the reduction in margin.

Your numbers tell you what’s really happening and takes the guesswork out of these strategies.

When To Upsell

You can look at a purchase as a series of steps and trying to upsell too early or too late will hold back your successs.

Let’s go back to my PC salesman.

He upsold me to the all in one PC when he asked me what I wanted and I specified a desk top with small tower.

It was the right time – when I was selecting the product I wanted. If he’d have shown me a traditional desk top and I’d decided on one and we’d walked over to do the paperwork and then he’d have told me about “all in one” PC, I’d have probably passed.

Once people make a decision, they tend to stick to it.

If he’d have tried it after I’d paid as he was carrying the box through the security checks, then I’d have been irritated. Perhaps in a  pique of anger, I’d have demanded a refund and gone elsewhere to buy.

My PC salesman didn’t make his other upsell offers – printer, software and maintenance – until after I’d committed to buying. It didn’t make sense because it wasn’t a factor in that first decision and might have confused me or scared me away when I was told “there’s no software in the PC.”

Now let’s look at a restaurant example when you take a customer out for lunch (warning he is a bit of a drinker).

You’re shown to the table and given the menu to look through. You’re also given the wine list – an upsell)

The waiter asks “Would you like an aperitif or drink before your meal?” (This is an upsell – if the waiter doesn’t ask, you may or may not ask yourself and asking increases the chance of “yes go on then. I’ll have a G&T and you…”)

The drinks come and the waiter takes your order for a starter and a main course together with a bottle of Chardonnay.

While your eating, other guests are having desserts from the sweet trolley (and they look great – another upsell tactic). You’ve spotted this raspberry,meringue and cream gateaux you fancy and watch as it gets smaller.

By the time the waiter asks if you want a sweet, there are two pieces left and you give in.

The waiter clears away your plates and asks if you’d like a brandy or liqueur? Your guest wants a brandy.

What you’ve experienced in the restaurant is a very subtle series of upsells which has bumped up the bill but you’re feeling pretty mellow as you come out.

If you’d have been asked if you wanted a dessert at the time of ordering the first two courses, you’d have probably said No. You don’t want to over eat at lunch. Same with the brandy.

If you’ve just paid, you don’t want to be asked if you want another drink. You’ve made up your mind that you want to leave.

The when of your upsell needs to be as natural as possible and follow the best customer experience.  Keep irrelevant questions out of the way until they become relevant.

Quality upsells should be made before the purchase decision. When we commit to buy something, mental ownership moves and we’re all reluctant to change our minds for fear of being flaky.

Cross-sells for complimentary items and quantity upsells are best offered after the first buying decision but before payment in the offline world.In the online world, upsells are often made after payment but clever technology can make it as easy as clicking one “Yes Please” button as your credit card has already been authorised. Otherwise credit card details have to be reprocessed and this can put many buyers off.

Something happens in our brains when we decide to buy and we feel good. Perhaps it’s relief that the decision’s been made and the nagging problem will soon be fixed.

A good, relevant upsell offer can have a 20% to 30% take-up. Not everyone’s going to do it but some will and the profits can be significant.

Many will consider the upsell opportunity ended when the transaction is completed.

And they may be missing an opportunity.

Who hasn’t bought a piece of flat-pack furniture and found it more difficult to put together than you expected and decided to leave it. Suddenly that option for someone to come out and do it for you gains in appeal.

Where To Upsell

When and where are clearly linked.

Where to sell on the Internet

On the Internet, Amazon will first try to upsell you on the product page with a little deal – buy this book for $25 but buy this second book on the same subject and save $10.

Then they’ll show you “Other customers also bought this” after you’ve hit the add to cart button but before you’ve started searching for the next item you want.

Finally they’ll try to upsell you from the shopping basket and checkout screens (if you put anything in your basket you haven’t bought yet).

Finally once you’re committed you have your delivery options. Want it by 10 am tomorrow morning? Certainly sir.

Other websites will offer upsells on their thank you page after you’ve completed the first transaction.

And depending what you do, you can be taken through a series of offers.

Buy product A for $77

Offered product B for $47

If Yes, offered product C for $197

If No, offered product B stripped down for $27

I’m sure you’ve seen it and it can get irritating but you can also get some very good offers.

Unlike personal selling, the Internet can’t adjust to what you say your specific needs are.

The only way to help you to get what you want is to give you a series of options and to choose for yourself.

The easier it is for you to understand what’s on offer and complete the transaction, the more likely you are to accept.

Where to upsell offline

This depends on what you’re selling.

Just as in my PC example, the quality upsell should be done in front of the products but other upsells for maintenance and standard stuff like software can be done when we’re processing the paperwork.

It’s the same with cars. You’ll select the model in the showroom but agree to insurance and extended warranty at the salesman’s desk.

In retail you’ve got to consider placement of products.

What’s the best way to get complimentary products bought together? To put them together or at least next to each other.

So if you’ve got a men’s clothes store it makes sense that people who buy a shirt have to walk past the ties to get to the paydesk.

Or if you’re getting personal attention when buying a suit, you can be steered over towards the shirts before the salesman waves his arm to present the shirts and asks if you need any.

I hated Ikea the one and only time I visited because the store had a fixed route forcing me to walk passed everything they sold. It didn’t work on me but I guess plenty saw other stuff they wanted.

An accountant meeting a new start-up business can get agreement to the basic accounts service first and then while still sitting in the office, offer a bookkeeping and payroll service.

How To Upsell

You’ve got three options:

  1. Standard questions
  2. Standard solutions
  3. Special offers

Standard questions can be built into your sales processes – it’s the equivalent of “Would you like a drink before you order?” at a restaurant.

The danger is that it can get a little vague and that’s never appealing.

“Would you like anything else?”

“No thanks.”

Vague questions are too easy to turn down.

That’s the beauty of the McDonald’s question.

“Would you like fries?” is specific

It clearly works for McDonalds but it’s not considered to be best practice which is why you can hear “Would you like fries or a drink with that?”

Suggest one think and you force a Yes or No answer and if you ask too many, it can get irritating.

Suggest options and you increase your options to Both please, No thinks, Yes to fries and Yes to a drink.

Three of those options involve an extra purchase.

The research on these type of thing goes back to Elmer Wheeler and the Wheeler Word Laboratories of the 1930s in the United States.

In over ten years of research, Wheeler tested 105,000 sentences on over 19,000,000 customers and went on to write a popular book “Tested Sentences That Sell.”

It was Wheeler who coined the phrase “Don’t sell the steak, sell the sizzle.”

Unfortunately that’s encouraged abuses in sales and marketing with hype – lots of sizzle and no steak.

I’d prefer you think of selling the steak and the sizzle – your marketing needs to be exciting AND  the basic product needs to be good value for money.

Wheeler proved words matter and that’s why you need to think in terms of scripted phrases which trip off the tongue of each and every person in a selling position.

Let’s go back to the restaurant example and look at the different ways a question can be asked:

  • Would you like a drink while you order? I can get you an aperitif or a non-alcoholic drink.
  • Want a drink now or later?
  • You don’t want a drink before your meal, do you?
  • My boss makes me ask all our customers if they want a drink before they eat. Do you want one?

Do you think they’re going to get different success rates?

Don’t over-estimate the ability of your staff to ask in the right way. Just look around you at the service and politeness you see elsewhere.

You can dip into “Tested Words That Sell” at www.elmerwheelerbooks.com

I’ve read Peter Sun’s interpretations of the Tested Words and it’s fascinating.

If you have a bar which serves difference sized drinks, the switching from “Large or small?” to “Large?” can bump up sales significantly.

Or if you’re a car mechanic asking “Can I check your oil?” doesn’t work as well as “Is your oil at a safe driving level?”

Just as in the case of sales letters and websites, words matter when you are making upsells.

Upsells can be special offers – while you’re testing keep them short term in case they don’t work as expected but the aim is to find a long term way to increase the value of your transactions.

When you start discounting, you’ve got some arithmetic to do to make sure you’re getting enough extra profit to make it worthwhile and the more information you have about purchasing patterns the better.

You’ve got four types of deal:

  1. A bundle – buy this and get that for free or at a discount. E.g. buy this PC and get this printer for free. Certainty and control are high but the scope of the upsell is limited.
  2. An incremental offer – discount the extra item but leave the original item’s price untouched. e.g. get 33% off every shirt you buy when you buy a suit. Provided you make more than 33% contribution on the shirts at full price, you come out ahead and you have the chance to get the extra margin on any sales of ties.
  3. A qualifying offer for a product – buy 3CDs for $20, buy six bottles of wine and save 5%.
  4. A qualifying voucher – spend $100 on groceries and get $10 knocked off the price with this voucher

Going back to the clothes example, I’m sure I’m not the only one who’s looked at the outfit on a clothes dummy and bought the lot because it looked good and was was easy. The shop display is another upsell device to encourage you to buy more.

In store promotional signs can be very useful at key points to signpost any offer and reduce dependence on staff to do the selling and those impulse purchase items are not by the pay desks by accident.

Bringing It Altogether To Create Winning Upsells That Increase Your Profit

You’ve got some decisions to make in terms of how much this is you imposing the idea of upsells and how much you get your selling team involved.

My advice is to keep it simple.

Pick one kind of upsell or cross-sell to work with and master.

Decide on your offer and whether it will include an incentive.

Focus on why it’s good for the customer… it helps to have a reason ready to justify the extra offer.

Decide what to say.

Get your staff involved and give them some training on upselling because you might see some resistance, both to the idea of making upsells and cross-sells and also to being to use standard scripted phrases.

Start by asking for their ideas of what to say and unless one or two are clear favourites, I recommend you test any that appear to have merit.

Start by having them test their own favourite phrase for a week and record when it works and when it doesn’t so you can build up some statistics.

Then pick what seems to be the best phrase and ask the other staff to use it. If it performs better for everyone, you’ve got a winner.

If someone has a better performing phrase test that around the group. In fact since your sales staff will feel more comfortable asking the question, it’s worth testing the second best phrase around the group.

When you’ve got your established phrase – what’s known in marketing as a control – you’ll use this most of the time but also look for new variations to test.

If you can do it easily through your recording systems, consider whether a bonus based on results will encourage your staff and keep them using upsells when your attention switches elsewhere.

Watch or listen to what happens, people can slip into bad habits or start trying to be creative and move away from a winning question.

When you have your first upsell bedded in, move on to the next.

No comments yet... Be the first to leave a reply!

Leave a Reply