The 4 Keys to Upselling for Higher Profits
Random Acts of Upsell - Part One
26 April 2017
There are two ways to make more profit: a) generate more revenue, and b) lower costs (increase margin). Every other ‘strategy’ will ultimately boil down to one of these two. Either increase the total, or increase your share of it.
The latter is a series of articles on its own – and a really good reason to have a great accountant! – but the former also deserves a lot of attention, primarily because it is often approached the wrong way in most businesses.
Many times, companies have a single strategy: pushing their team to make ‘more sales’. Obviously, you want to have a larger number of transactions happening, but the focus is then immediately shifted away from the two other factors that can greatly impact results: up-selling and client servicing. (For now, we’ll focus on up-selling, and we’ll revisit the client servicing in another post.)
Up-selling (which is known by multiple aliases) is getting a customer to purchase more than they had initially planned. The core focus is to increase basket value. If we can get the customer to purchase 5%, 10%, 20% more, it increases revenue without any additional investment in marketing – the customer is already there! If you doubt how useful this really is, consider this one example: for one clients’ business, the average transaction value went up by over 35%, just by implementing a structured up-selling approach. That means 35% more revenue, by implementing something in less than a week, and with no added expense!
So, how can you increase the value of a transaction? There are a few basic things you can do straight away:
- Management and reporting
- Increasing awareness
- Making the effort
- The $ point
In the next post, we’ll examine the last three… not because I’m trying to build suspense, but because – without the first – the others will be low impact. The importance of management and reporting of key metrics can not be over-stated. In fact, this one step alone will make the difference in results, even if you don’t focus on anything else. A good quote to remember: What gets measured gets improved. If the average value of each transaction is tracked, it will probably start going up, just because of the additional focus on it.
Here’s how you can set the initial benchmark: (total value of transactions)/(total number of transactions). It’s not the best, but it’s an average across the board. If you have multiple distinct verticals/departments and you want to do this separately for each one, that’s fine too. Once the benchmark is established, it becomes the minimum goal for each transaction. This is tracked across all sales, and one of the learning sessions in your weekly meetings (you are doing weekly meetings with some time for learning, right?) can be on up-selling KPIs and strategies.
You may be very pleasantly surprised how well this ‘simple’ step can work.