If you’re in the business of selling, or looking to start a business that involves selling, you’ll also find yourself in the business of upselling. The practice of upselling in business can sound somewhat shady but that’s mainly because it gets a bad reputation from those who do it only to make more money. Yes, it can be a way to get your customers to pay more for things they don’t need while the business reaps the benefits. But upselling is at its best when it’s a win for both parties.
Besides your usual marketing strategies, upselling can easily be implemented to generate some extra revenue. We’re going to cover five strategies for your business to use to upsell while still getting your customers the best products at the best value. But first we’re going to cover some of the basics of upselling like what it is and why you would want to do it.
What Is Upselling?
Upselling is the sales technique of enticing customers to buy a more expensive version of what they already want to purchase, and in turn you get to increase profit margins. This can sometimes be a side effect of customers not really knowing what goods or products they really want or need, or it can be a conscious decision made by you, the business owner or salesperson.
The general idea is to increase the money earned on a sale by encouraging the customer to go for a more expensive or premium product. Think about it in terms of the latest phone on the market, you go into the store thinking you’ll get a version that’s a year or two old, and the salesperson convinces you to spring for the newest, and most expensive, one they sell instead.
Generally, you’d upsell in the hopes of making more money off of a sale. But it can be done with more in mind than making money, it can also be done with the customer’s best interest in mind, as well.
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.
5 Tips for How to Upsell
We’re going to go over some good tips on how to upsell without feeling like you’re duping your customers or putting their best interests to the side.
1. Get Personal With Customers
When it comes to upselling, it’s key to make a personal connection with the customer, even if it’s over something small. “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. The true art of how to 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 foodservice 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 four 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.”
2. Think One Step Ahead of the Customer
This is perhaps the most classic example of upselling, but no article 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.”
3. Offering Personalized or Specialty Items
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.
4. Recognize Opportunities to Create New Products
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.”
5. Understand the Perceived Value
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 … 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.
The Bottom Line
“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. 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.