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If you’re in the business of selling, you’re very likely in the business of upselling. Upselling is the sales technique of enticing customers to buy a more expensive version of what they wanted to purchase. And in turn you get to increase profit margins.
On its face, this sounds like a way to make customers pay more for things they don’t need while the business reaps the benefits. And, undoubtedly, some businesses look at it that way. We’ve all been in situations where the salesman or owner was trying to get one over on us.
But upselling is at its best when it’s a win for both parties. If customers can get the best value out of a purchase, or find an option that suits their needs better, or get their hands on something they thought was out of reach, that’s great. If the business can make more money from that upgrade and form a greater bond with their existing customers, even better.
“The thing about selling is the minute someone gets on the phone or walks in the door, you have to make a connection,” says Ronna Pratt, who managed her family’s Pittsburgh deli and catering service, Food For Thought, for several years.
Making a connection: Doesn’t that sound way more enticing than an opportunity to upsell? Keep the following tips in mind when looking to increase your margins with each sale.
The true art of the upsell comes into play when establishing a relationship with customers. And that only works if you’re willing to get personal.
First, an explanation of what upselling means in the context of the food service industry: “Upselling for us is taking someone from one price point per person to another. So you’ve got your basic catering stuff, like a sandwich tray, and you’ve got 4 different levels of sandwich trays, and each comes with different amounts of food,” says Pratt. “That’s when you try to get customers from the most basic to something that’s a little fancier and costs more money.”
So, how does a customer go from being content with a basic option to something fancier? If they find that the business, via someone like Pratt or an employee, is as invested in the outcome as they are. That means they’ll want the event, or the party, or the simple act of eating a sandwich to go as well as possible.
“For catering, you have to ask questions about the people they’re serving, the type of event they’re having, what their needs are,” says Pratt. “Because then you can make recommendations specific to the people who will be there. Once they feel like you’re concerned about the welfare of their party or the success of their event, they start kind of playing into that. Maybe they say Aunt Sally is a vegetarian and then you can talk about Aunt Sally, and why you’d want to make sure she’s happy.”
Businesses know something here that many customers don’t: The party is more about the people you’ve invited than yourself. If they can play off of the guests, they’re ahead of the game.
This is perhaps the most classic example of upselling, but no article on the tactic would be complete without mentioning it: You can always add things onto an order to make it more complete. Here, upselling is used interchangeably with cross-selling, which is when you add on a related item (such as cups and plates for a food order, or a streaming device with a television) to round out the purchase for both parties.
“You can remind customers that if they haven’t ordered dessert, they can add dessert. If they haven’t ordered drinks, they can add drinks,” says Pratt. “Sometimes this is a pure upsell, but other times it’s something the customer really hadn’t considered. They walked in knowing they want something, but with nothing particular in mind, so you have to help them.”
Upselling isn’t always about offering a customer a better (read: often more expensive) option. Sometimes it’s about creating a better option to please the customer, without increasing your base costs too much.
“The best thing is to always make something out of things you already have. So if you have a customer looking for an item you don’t normally make but you have all the ingredients for—whether it’s making food or any other type of business—if you can make that for the customer, you can automatically charge them more for it because it’s ‘special,’” says Pratt.
You can get out ahead of this by repurposing existing items into something you can sell at a markup, but still provides great value, as a special. If that item sells well, you can work it into your regular rotation. Pratt found out about this when the deli came into a bunch of slider buns.
“When we got the slider buns, we asked ourselves, What can we do with these slider buns that won’t cost us any more money, but we can make money from? So we decided to make reuben sliders,” explains Pratt. “We already make reuben sandwiches, we have the stuff for it already. It’s not going to cost us any more money to add this to the menu, and we can charge $10 for them as opposed to $8 for a reuben. Turns out, they’re the most popular thing on the menu, everyone buys them, and we make a ton more money.”
How do you decide how to price these “special” new items? Create a labor formula you can apply to anything not originally on the menu.
“Once you start increasing the labor, you can start charging more,” says Pratt. “Based upon that, labor is usually 20% to 37% of the cost. For me, I’d take the total cost of the item, then take 32% of that cost and add that onto the item to get a new price.
“That’s just for the food industry though, where margins are pretty low,” she adds. Research how much labor should be in your industry to see how to price your time and effort.
Every business knows that managing and sourcing inventory is a major part of staying solvent. Getting upsold by your suppliers can actually lead to moments of great creative upselling for your own business as well. That’s how Food For Thought came upon those slider buns.
“BreadWorks, our bread provider, started making them. We got a whole bunch of them to sample. BreadWorks sent us these sliders as a sample—we weren’t even sure what to do with them at first—and for a very minimal increase in base cost, we were able to make a lot more money off of another product. So they upsold us,” Pratt says with a laugh.
This speaks to the power of samples as a vehicle for upselling. Pratt estimates that those who ask for or take samples end up converting to paying customers at a 50% rate.
“Some people are on the fence about buying something, so you let them sample it and then they buy it because you know it’s good,” she adds. “Then other people, you know they’re just there to eat something, just because it’s free. And that’s cool, because there are enough people that eventually one of them will try something and be convinced to buy it because it’s that good.”
This isn’t exactly a form of upselling but something to consider when selling items to customers is their perception of value. If customers feel that they are paying too much for something—even if it’s an item they know and love—they will walk away. So it’s important for businesses to continue providing value, whatever the cost.
“With the recession and inflation, our products were costing us more,” says Pratt. “But rather than decreasing the amount of food we gave, we increased the price slightly and increased the amount of food slightly so we maintained our margins. Nobody noticed, nobody complained, people still bought the food.”
On the other hand, she says, “We tend to notice when places keep the prices the same but decrease the amount of food.”
When it’s done right, a good upsell leaves both sides—customer and seller—feel like they’ve “won.” Selling to an existing customer is way easier than selling to a new customer, so keeping your existing customers happy with a high value perception is crucial, especially if you want to maintain trust and continue to sell—and upsell—to them in the future.
“Upsell” is a business word with a bad rap. If you understand that to upsell is to provide your customers with a better value—through more expensive but better products, through the creation of new products altogether, or through adding more to an order to maintain margins—then you’re probably more comfortable with the concept. And so will your customers, because at the end of the day, we buy things to make our lives easier and happier. Make a better sale, and usually you’ll make a better purchase as well.