What Is Upselling? How It Works, Examples & Best Practices
This article is part of a larger series on Sales Management.
The upselling sales technique, or process of suggesting a higher-valued good or service, increases revenue at a point-of-sale from new or existing customers—helping drive overall business growth. In this article, we define upselling, when it is used, how it is different from cross-selling, as well as provide examples and best practices you can use to employ this technique in your sales activities.
As your sales team incorporates this technique for your sales operation, invest in customer relationship management (CRM) software to monitor upsells on your leads. Popular products such as Pipedrive, for instance, offer notes and activity tracking in a lead profile where you can post details on upselling attempts and uncover insights on things that could make upselling more effective to them.
What Is Upselling vs Cross-selling?
Upselling is a sales practice of recommending higher-end, premium products or services compared to what is about to be purchased. The idea is that a customer is already in the buying mindset and could be easily convinced to upgrade to something better at that moment. This technique is generally used just before, during, or slightly after a purchase and provides businesses with a method for attaining more revenue.
While both upselling and cross-selling are used to obtain higher value from a sales transaction, they do so using different approaches. Cross-selling recommends additional, complementary products or services to what’s being purchased, such as when a sales associate recommends also buying a smart device with a new TV. The upselling process, on the other hand, focuses exclusively on a better version of what the customer is already purchasing.
As consumers and business owners, we are constantly being upsold on the things we buy. Though upselling may seem like a sales rep needs to be involved, the method is often utilized on other marketing channels, such as websites or in marketing emails.
For software-as-a-service (SaaS) products such as (CRM) software, it’s common to have a tiered system and upsell users using comparison charts. Zoho CRM, for instance, offers a free version plus four subscription tiers that have feature comparisons on the website.
There’s no rule of thumb as to how upselling must occur, just as long as there’s some form of communication to encourage a customer to upgrade—whether that be online, in-person, or over the phone. Other common examples of upselling in action are illustrated in the chart below:
Person goes in to buy a new iPhone
Sales associate recommends the latest iPhone, which offers newer, more advanced features
Person goes to a lot to buy a 2016 BMW
Car salesperson shows them 2020 BMW with better speaker systems
Business looks to subscribe to a free version of a web design platform
While on the website, the business owner sees the more premium subscription options compared to the free version
Person orders a small coffee
Cashier asks if they want to upgrade to a large for just $1 more
Insured business is about to purchase a business owner's policy (BOP)
Insurance agent recommends they upgrade to a different carrier that offers higher coverage limits
Pro tip: Gamify your upselling campaigns by creating friendly competitions between your sales reps. Sales gamification software like Pointagram lets you create mini-competitions with scoring criteria to get reps more engaged in their sales activities. Sales managers can then view progress on a visual dashboard to see who’s performing at the highest levels.
Upselling Best Practices
Now that you have an understanding of upselling, it’s time to learn how to use it effectively. Sales reps need to tread carefully with this technique and make sure proper sales training is conducted prior to implementation. If an upsell attempt is made without any regard for the customer’s needs or budget, you risk losing business and being pinned as “pushy.” Follow these best practices to get the most value out of upselling:
Offer a More Premium Solution
Nothing can be upsold if you don’t offer a more premium option. If you’re looking for growth strategies or are just starting a business, find ways to incorporate premium options into your product or service catalog that let you charge higher prices while yielding more value to the customer.
For food services, offer an option with larger quantities. If you’re a content developer, extend a service package option where you also manage search engine optimization (SEO). If you sell a financial product, such as insurance or an investment solution, present options that offer tremendous upsides despite being slightly more expensive.
Keep the Upsell Within Budget
It is essential that upselling always keeps the customer’s budget in mind. Pushing a product or service the person cannot afford is downright unethical. Using probing questions such as “So, what’s your budget range looking like for this type of product/service?” is a great way to find out a person’s spending capabilities.
Once you know how much they are willing to spend, you can present the upgraded options that give them the most bang for their buck. Try to find out this information early in the buying process so you don’t appear to be upselling purely based on the fact that you know they can afford a more expensive solution.
Focus on the Buyer’s Needs
Make sure your upselling lines up with their priorities and preferences in the product or service being purchased. For example, if someone goes to your clothing store to buy a suit because the one they currently have is uncomfortable, don’t upsell them on a suit that is notoriously uncomfortable despite being made of higher-quality material.
The needs of the buyer have to be front of mind. Just as you probe to find out their budget, you can use questions to discover their needs. “What sort of things are you looking to get from this product/service?” or “Is there anything (feature or product attribute) specifically you’d like to see in your product/service?” are solid questions to ask.
Utilize Upselling Near the Point of Sale
Upselling must take place around the point of sale. If you wait too long after, the buyer will have become comfortable with the purchase and feel no need to upgrade. It’s best to attempt the technique around the time they make their decision but before the transaction takes place. This ensures they make a purchase but could still be open to upgrades before everything is finalized.
Pro tip: CRMs act as a performance management tool where you can evaluate team and individual sales production. Products like HubSpot, for example, let you monitor performance in relation to a preset goal. With this feature, you can set upselling revenue goals and track how effective your team is at hitting them.
Curious if upselling is actually effective? These stats tell the full story:
- Upselling for ecommerce businesses increases revenue by 10% to 30% on average.
- Upsells are 68% more affordable than acquiring a new customer.
- Upselling works 20 times better than cross-selling.
- Studies show the rule of thumb is to not upsell more than 25% of the original order cost to a customer.
Upselling is a cost-effective strategy to increase revenue at every purchase catalyzing business growth. Those in sales management and leadership positions should find various ways to use upselling during sales and marketing activities to convince customers to upgrade to more premium solutions. Understanding this technique and following its best practices will yield more revenue and higher lifetime customer value.