Every business is looking to find an advantage that will help edge out the competition and add to the bottom line. One of the best ways to do this is to improve your sales division so that you can clearly see added profits as they come in.
Many of us have negative opinions when it comes to “sales techniques,” largely because they have gotten such a bad reputation from disreputable salespeople who are trying to push out inferior products on an unsuspecting populace. How do you improve sales while increasing the value offered to your customer base? The answer is with upselling and cross-selling.
What is Upselling and Cross-Selling?
Upselling starts with a customer looking to make a purchase. During the sales process, a salesperson may persuade the customer to upgrade their purchase to a more expensive, premium version of that same item.
Cross-selling is when a customer is making a purchase and the salesperson sells a different product as an add-on. Here, the items are packaged together as a means of increasing the total sale.
What’s the Difference?
Although you’ll often hear upselling and cross-selling interchangeably, there’s a big difference. Upselling takes a purchase and adds in a bigger profit by convincing the customer that it would be a better deal for them to buy something more expensive.
Let’s look at a basic example: Let’s assume that a customer contacts you and wants to order 100 basic quality work shirts for their employees. For the purposes of our thought experiment, let’s assume that the shirts cost $5 per piece, which means the cost of the total order is $500. Your salesperson then talks to the customer about ordering, instead, a higher-quality shirt made from a better fabric. They can do this by pointing out that for a few dollars more per shirt (let’s say $8 total per shirt), the colors will be brighter, look better longer, and will last through more washings. Now your $500 order has turned into $800. That’s upselling in action.
Cross-selling looks a little different. It’s taking a basic purchase and then convincing the customer that the item would go well with other products. Taking the same hypothetical, the salesperson decides to cross-sell related items to the customer. They point out to the client that the $8 shirts would also go well with custom lanyards or hats that could be packaged with the shirts for an additional $4. Now, your $800 order has gone up to $1,200 and you’re packaging multiple items together for your customer.
What are the Benefits of Upselling and Cross-Selling?
The obvious benefit of upselling is the additional income that you’re receiving on these successful orders. But there are other benefits as well.
One of those benefits is that it helps to create a better working relationship with the customer. If the customer honestly sees the upsell as an opportunity to help them get a better product, they’ll feel more loyalty and connection to your brand which could result in more sales in the future.
Another bonus is that upselling to an established customer is actually easier to do than selling an item to a brand-new customer. In fact, you only have between a 5 and 20% chance of selling to someone new, while upselling to an established client results in sales almost 60% of the time.
Why is Upselling and Cross-Selling so Important?
One of the biggest reasons why upselling and cross-selling can be so important for you is that they can increase your Customer Lifetime Value (CLV). This is an invaluable data point that tracks how valuable a customer is to your business, not just from the point-of-view of one sale, but from the perspective of an entire lifetime relationship.
Think of it this way—if a person has a CLV of $5000, that means that over their lifetime they should spend about that much with your company. But, if you’re spending more than that amount in marketing to try to gain their business, then you could be losing money. Instead, your repeat customer’s CLV goes up with upselling and cross-selling because you have such a strong relationship with them. You can expect to have a continued working relationship with your clients.
How Can a CPQ Solution Help You?
One of the best ways to help promote upselling and cross-selling is with a Configure, Price, Quote (CPQ) solution. Setting up opportunities for promoting additional sales or upgrading an existing order is easy with a CPQ solution. Here, the customer is given multiple opportunities to upsell a product as they are placing their specifically configured product online. They can see each of the price points (such as a basic, medium-tier, and high-quality option) as they are placing the order and don’t necessarily feel pressured into making this decision.
Additionally, since the cost for each is laid out right before them, the customer recognizes the transparency and doesn’t feel like there are “hidden costs.” This, in turn, leads to a healthier relationship with the customer and the possibility of more sales in the future.
Your sales team working with valued and potential clients will have opportunities fed to them at their fingertips. This will save you in sales training time and when your sales rep is working with clients, they can very easily see options for cross or upselling to the client. This gives your sales team higher sales totals for each sale as well as more time to reach out to more potential clients and even nurture relationships with existing clients.
Offering Your Clients What They Want Before They Know They Need It
If your manufacturing business is not actively using upselling and cross-selling as part of your marketing and sales plan, then it’s time to see if a CPQ software solution is right for you. This practice can not only net you more sales, but it can also improve your relationships with your customers.