How to Maximize the Value of Your Existing Customers: Cross-selling and Upselling Explained
By Eric Keiles, Instructor of the ProThink Learning online course The Cyclonic Buyer’s Journey: Marketing Tactics and Tools
It’s easier to keep a customer than to land a new one. Everyone knows that. It’s common sense.
In fact, research has found that in financial services a five percent increase in customer retention equates to a twenty-five percent increase in profit; in other industries, it’s been shown to equate to as much as a ninety-five percent increase. Staggering.
For buyers that have already bought from you, you’re a known commodity. If you didn’t mess up their journey, they already know, like, and trust you. From that perspective, focusing your time and budget on new customers instead of current ones doesn’t make sense. You’re spending more dollars to chase harder sales. But wrestling a reluctant client into a years-long contract — that’s worth paying for.
Current Marketing Trends
Despite the data and common sense purporting the profitability of consumer retention, most companies focus their marketing on acquiring new customers. Why?
Most companies operate using the sales funnel model, where:
1. Marketing teams get as many people into the top of the funnel as possible,
2. Marketing teams push as many of them to the bottom of the funnel as possible, and finally
3. The marketing team then serves them up to the sales team to close the sale.
From this angle, yes, marketing to get as many new customers as possible makes sense. Handling existing clients is sales’ job. The salespeople, however, are almost always measured by how many new deals they close. Few companies have decent incentives for selling to existing customers. Anyone can do that, right? And it’s easier to let marketing communicate with past clients anyway.
So with neither marketing nor sales teams responsible for existing clients, they get left on the backburner. This is why it’s so important to merge sales and marketing. Siloed, they focus on their respective functional skills. Unified, they focus on what should be their real goals in the first place: revenue generation.
Maximize the Worth of Existing Consumers
To shift the focus of your company’s marketing and sales teams and maximize the worth of your existing consumers consider implementing cross-selling or upselling policies.
Cross-selling is the act of recommending additional products, usually complementary items or additional services, to consumers at the point of sale — “Would you like fries or a drink with that burger?”
This is a fairly common and easy to implement practice in retail. Frontline employees are a great resource to cross-sell merchandise. Old Navy, for example, began a program to train sales associates to act more like high-end clothiers, helping shoppers piece together a whole ensemble instead of the traditional “Is there something I can help you with today?” approach.
It’s even easier for e-commerce retailers. Implement software so your site automatically suggests complementary products — “Frequently bought together” — or competing products — “Customers also viewed these items” — to browsing customers. Cross-selling online is simply a matter of code.
If you sell services or business-to-business (B2B) products, have company salespeople pick up the phone and talk to existing clients, looking to identify other ways they could provide additional products or services. How many times have your own customers bought from a competitor because they simply didn’t know that you also offered x, y, and z? Make sure your employees are well versed in all the services your company offers even if it doesn’t pertain to their division, so they can be prepared to discuss and recommend additional services to the clients they work with.
Upselling refers to the practice of suggesting to existing customers a more expensive item, a premium version of the product they own, or any other additional upgrades — “Would you like to upgrade today?” Upsells should be experienced as a convenient add-on or even an indulgent luxury with no or minimal effort needed on the customer’s part.
The online freemium model has become the classic upsell. Gmail, Dropbox, iCloud, YouTube, and thousands of mobile apps hook you with a great no-cost product, then offer the more robust premium options at increasingly higher prices. The same could be said for SaaS (software as a service) companies. When your buyer wants to add more users, extra licenses, or additional seats, they trigger the upsell naturally. Upselling is built into these companies’ DNA.
Another common approach is offering upsell opportunities within the framework of subscription services. Nowadays you can get a membership subscription for just about anything — car washes, car ownerships, HVAC services, roofing services, razor blades, perfumes, IT services, and even dog treats. Today, not only do these subscription services exist, but many offer multiple packages or levels of service. An introductory membership package offers the basics (i.e., a low-risk offer); when the buyer sees that the company meets (or, ideally, exceeds) their expectations, they often upgrade.
Be careful not to take this to the extreme, though, where the upsell becomes more of a hidden fee. Airlines are quite guilty of this. Major carriers continue to slash prices to win the ticket sale, then turn around and nickel-and-dime you to death. They’ve even started “upselling” the soft drinks and peanuts on some flights. You don’t want your buyer’s journey riddled with unpleasant surprises and gotcha fees, or else they’ll be quick to abandon you.
Leverage Your Most Valuable Asset — Your Consumers
Upsells and cross-sells are far easier than making an initial sale, but many companies — even established companies with a solid customer base — devote more of their attention and budget on acquiring new customers. Don’t make their mistake. Focus on the buyers you’ve already fought hard to win over.