May 13, 2024

What is Upselling? 

Many businesses find it difficult to make recurrent sales from customers. This article highlights what it takes to upsell and make recurring revenue which is every
What is Upselling? 
Shawn Khorrami
What is Upselling? 

For any business, increasing sales and revenue is a primary goal. However, finding the right pricing and sales strategy to drive sales and increase revenue might not always come as easy.

Upselling is a simple but effective strategy that can significantly improve sales, generate additional revenue, and increase profit margins for your business.  

In fact, Amazon, the second-largest company when it comes to revenue generation, reported getting a 35% increase in sales from implementing upselling strategies.

For beginners, marking a distinction between upselling and cross-selling methods might also be unclear. 

In this article, we will explore in detail all you need to know about upselling, the difference between upselling and cross-selling, and how you can use these strategies to boost sales and revenue. 

Here's what we are going to look at: 

  • What is up-selling and cross-selling? 
  • Why is upselling and cross-selling important? 
  • 6 upselling & cross-selling strategies to increase revenue 
  • Upselling strategy examples
  • Upselling best practices 

What is upselling? 

In simple terms, upselling is a sales technique that persuades customers to purchase an upgraded or premium version of an existing product for a bigger sale. The goal of this technique is clear - to increase sales and ultimately revenue. 

Some upselling examples could be offering extended warranties on a travel bag or adding a premium feature on a car to increase the value of the product. The important thing to note here is that upselling techniques have to do with add-ons or product upgrades. However, it is only effective when it adds value to your customer. For example, the extended warranties on a travel bag could give a customer who travels often some peace of mind. 

When to upsell

Various upselling opportunities may spring up throughout the customer lifecycle. You can take advantage of these opportunities to significantly boost your profits and overall sales. Here are a few upselling opportunities you can take advantage of: 

  • Pre-sale upselling: As customers shop on your site, you can use product pages to offer a more premium version of a product at a discount. 
  • Cart page upselling: You can offer discounts for adding more items. Offering a discount on the total order if customers add more items to their cart can significantly increase the average order value. You can use pop-ups that suggest additional products or services when a customer clicks 'add-to-cart'. These pop-ups can be personalized based on the customer's actions. This strategy is effective because it encourages customers to explore and add more items to their purchases. 
  • Post-Purchase upselling: You can display offers between checkout and order confirmation. You want to personalize these offers based on cart contents or shopping history to increase conversions. Also presenting additional products or services on the thank you page after a purchase can be highly effective. Customers are in a positive frame of mind and are more likely to consider additional purchases.

What is Cross-selling? 

Cross-selling is a strategy that involves selling a different product to a customer to increase the sales value. This product is often from a different category but complementary to the existing product. 

For example, some cross-selling opportunities could be offering a laptop bag when a customer purchases a laptop. Another example could be offering a large-sized drink to go along with some French fries. 

Difference between upselling and cross-selling 

Both cross-selling and upselling strategies can increase average order value and lower the cost of acquiring new customers. The major difference between upselling and cross-selling is that upselling persuades a customer to buy a more expensive or upgraded version of a product. It's about enhancing the original purchase with a more expensive or premium option. For example, convincing a customer to upgrade from a basic smartphone model to a premium one with more features while cross-selling involves persuading customers to buy related or complementary products. For example, recommending a laptop bag or a mouse when a customer buys a laptop.

Upselling targets the same product category with a higher price point, while cross-selling introduces entirely different products that are related to the initial purchase. 

Why are upselling and cross-selling important? 

As an online retailer or business owner, using both upselling and cross-selling strategies can improve your customer's shopping experience and increase your sales and revenue. 

Here are a few reasons why upselling and cross-selling is important: 

  • Firstly, both upselling and cross-selling help to deepen customer relationships. When done right, upgrades, premiums, and add-ons add value to the customer, improve satisfaction, and ultimately generate more revenue.
  • Secondly, cross-selling and upselling to existing customers is cheaper and easier than selling to new prospects. Research reveals that you have a 60-70% chance of selling to existing customers while you have a 5-20% chance of selling to a new prospect. Also, according to Harvard Business Review, it costs five times more to win a new customer than to keep current ones. This is an easy way for ecommerce business owners to accelerate growth. 
  • Both upselling and cross-selling significantly contribute to revenue growth. According to a survey by HubSpot, of over 500 sales professionals, 72% of those who upsell and 74% who cross-sell report that these practices drive up to 30% of their revenue. 
  • Next, both strategies help increase Customer Lifetime Value (CLV), which is the average profit a single customer will bring throughout the business relationship. A higher CLV means your customer generates more revenue for your business. It also means you don't need to invest in acquiring new customers. 
  • Upselling and cross-selling are not just about increasing sales. They are also about delivering value and meeting customer needs. By offering upgraded or premium versions of products or services, you can provide a better customer experience, which in turn builds trust and fosters long-term relationships. 
  • Upselling and cross-selling improve customer retention which ultimately increases revenue. 

8 upselling & cross-selling strategies to increase revenue 

Here are a few tips and techniques for upselling products and services to increase revenue on your online store: 

  1. Understand your customers
  2. Choose an offer 
  3. Consider price margin 
  4. Upgrade or add complementary products
  5. Personalize your offer
  6. Provide social proof 
  7. Offer free shipping 
  8. Create a sense of urgency 

Understand your customers

The first step in any successful upselling or cross-selling strategy is to understand your customers. Knowing their needs, preferences, and pain points allows you to personalize your offerings to meet their specific requirements. Before implementing any upselling or cross-selling strategy, use customer data to identify patterns and trends, such as frequently purchased items or services that complement their initial choices. This insight will guide you in creating targeted upselling or cross-selling opportunities.

Choose an offer 

There are various types of ecommerce upsell and cross-sell that you can offer: 

  • You can ask customers to get a version upgrade of a particular product. It could be a bigger or faster version of your product. 
  • You can offer a product protection plan that allows customers to extend their warranty to safeguard their product. For example, you could offer a 12-month shoe repair warranty. 
  • If you're upselling services, you can offer extended service periods. For example, you can offer a discount for early renewals. 

Consider price margin  

An overpriced upsell offer can ruin the customer experience and the overall objective. For example, if a tote bag is $20 and you upsell the product to $40, your customer might be completely turned off altogether since it's two times the initial price. 

But if perhaps the price falls to $30, your customer will more likely purchase the bag since there isn't much of a price difference. 

We suggest that you keep your price margin at least not more than 30%

Upgrade or add complementary products 

If you’re upselling, you want to encourage your customers to upgrade to a more premium version of the product they're interested in. Highlight the added features and benefits of the premium option to justify the price difference. For example, you can encourage customers to switch to a newer version of an exercise app for a higher price by highlighting the added features included in the app. If you’re upselling, you can add complementary products that can be used alongside the main product. For example, you can encourage customers to add camera lenses or a camera stand to their cameras for a discounted price. 

On Amazon, you would usually see this strategy displayed as “Frequently bought together”. You may also see “You might also like” or “People also viewed” sections. 

You can also recommend seasonal collections. For example, beachwear and some sunscreen to go with it for the summer. 

Personalize your offer

Personalization is key to a successful upselling or cross-selling strategy. You want to tailor your offers based on your customer's past purchases, browsing history, and preferences. This makes the upsell offer feel more personalized and relevant, increasing the likelihood that your customers will accept it. 

Provide social proof 

Social proof lets your customers know that the product you're offering is valuable. It acts as validation and helps remove any objections potential customers may have. Sites like Amazon utilize this so well. They show recently viewed products with good reviews that other customers are buying. 

Ensure you add positive customer reviews to the products on display. This increases your upsell opportunities and encourages customers to purchase more products. 

Offer free shipping 

9 out of 10 online shoppers say that free shipping is a major incentive for shopping more online. You can add a cart limit for customers to qualify for free shipping. This will increase upsell opportunities and make customers buy to reach the threshold. Additionally, you can add reminders that show the customer the cart value threshold for free shipping. 

Create a sense of urgency 

One way to increase the value of your upsell is to create a sense of urgency. You can add a timer to a special discount you are offering. If your product is valuable and customers know they will miss out on an offer, they will otherwise purchase the product immediately. For example, "Buy now and get 20% off our premium model!" This type of promotion can encourage your customers to choose the more expensive option immediately.

6 upselling strategy examples 

As we mentioned earlier, upselling is a powerful technique to increase sales and revenue. You might also notice that most companies and brands use upselling and cross-selling strategies to boost sales and increase revenue.

Here are a few well-known brands that are using upselling strategies effectively: 

  1. Dollar Shave Club

Dollar Shave Club is an online company that operates by selling subscription boxes with customized items. The company offers restock options for monthly subscribers and sets reminders to alert customers when they are running low on razor blades and moisturizers. They also employ cross-selling techniques by offering additional products and creating a sense of urgency to compel customers to buy. 

  1. Amazon 

Amazon has been able to increase revenue using upselling strategies as well as cross-selling strategies. 

Using the “Subscribe and Save”, Amazon allows customers to subscribe to a recurring order of the same product in exchange for a discount. Amazon also offers Amazon Prime memberships, which provide benefits like faster shipping, access to streaming services, and more. This premium offering encourages customers to upgrade their experience and spend more with Amazon.

The benefit of this upselling strategy is that it helps with retaining your existing customers. By automatically sending a new order every month to your existing customers for a discount, customers are sure to see the value of making long-term subscriptions in advance. 

  1. Apple 

Apple uses its upselling strategy so well that they have managed to build loyal customers who purchase its new product every time it is released. 

Through Apple Premium, Apple offers products that customers want to buy but at a higher price. They also use cross-selling strategies like offering customers accessories or other products that make their purchases complete. 

  1. ASOS 

ASOS is a British company that sells fashion items. The company uses upselling strategies by offering discounts on shipping if the total purchase exceeds a certain price. They also use cross-selling strategies by recommending products each time a user views a product. 

  1. Salesforce

Salesforce offers customers its “Most Popular plan” as an upsell option, highlighting the benefits of upgrading to a plan that includes more features and capabilities. This strategy appeals to customers looking for vast solutions and encourages them to invest more to get a more robust platform.

  1. Slack

Slack prompts users within the app to upgrade to a paid plan, offering features like unlimited messages, video calls, and more. Slack effectively does this as these prompts are designed to be non-intrusive and are timed to appear when users are most likely to be considering an upgrade.

Upselling best practices 

To profit from upselling, you want to make sure that your customers do not perceive that their needs are not being put first. You don’t want to appear too pushy or ‘salesy’ as this can put off your customers. 

Here are a few upselling best practices you need to keep in mind: 

  • Seek to understand your customers and create an offer based on what they tell you
  • Make an offer that complements the initial purchase
  • Make side-by-side comparisons. If customers see the value of the upgraded product side by side with the lesser, they will be encouraged to upgrade 
  • Avoid offering products with prices too high from the products your customers have in mind. You can encourage customers to upgrade by offering discounts on your premium packages.
  • A little extra motivation can make all the difference. You want to consider offering incentives like discounts, free trials, or exclusive offers. 
  • Educate your customers on the benefits of upgrading to a particular package.
  • If an upsell strategy isn't resonating with customers, it's important to pivot quickly.
  • Leverage technology to automate parts of the upselling process. You can implement chatbots or AI-powered systems to offer personalized product recommendations based on customer interactions. You also want to utilize analytics tools to track which upselling strategies are most effective.
  • Finally, measure the success of your upselling efforts to refine your strategy and help identify which strategies are most effective. Pay attention to the sales data to see how much revenue is generated from upselling efforts. Collect feedback on the upselling process itself. Are customers satisfied with the offers? Do they feel pressured?

Final thoughts 

To attract customers, it is important to offer products and services that align with their needs. 

If done right, upselling is an effective sales tactic that adds value to your customers while increasing sales value. It also helps to increase customer lifetime value and helps decrease the cost of acquiring customers. It also builds customer loyalty as customers are likely to purchase additional products. 

Oops! Something went wrong while submitting the form.

Turbo-Charge Your Revenue!

You’ve probably already considered selling on Amazon but its way easier than you think.

Call Us Now

Enjoying our articles?

Subscribe to our newsletter to receive ePlaybooks insights directly in your inbox. Don't worry we will respect your inbox.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.