At times, it can seem as though there are as many pricing and sales strategies as there are business industries. Certain companies down-sell, while others rely on cross-selling and upselling to match their customers with desirable products to build a sustainable business. For many CEOs, the distinctions between these methods can be unclear at first – especially in regard to upselling and cross-selling, which share some similarities.
Below is a beginner’s guide to these techniques that outlines all the information I wish I had known when I first started Varsity Tutors. As you move forward with your company’s sales initiatives, you may find that these fundamental concepts help you strengthen your bottom line.
Upselling is a popular sales strategy in many industries. Upselling encourages a customer to purchase a more expensive model in the same product family, or to augment the original model with additional features. Consider JetBlue’s “Even More Space” initiative, which allows passengers to buy seats with more legroom. This upsell was projected to net JetBlue $190 million in additional revenue in 2014 (compared to $45 million in 2008, when it first launched). On a broader scale, let us consider statistics from the travel industry: 48% of airline passengers and 59% of hotel guests are interested in upgrades and additional services, which means that you could be leaving money on the table if you neglect to research upsell options in your industry.
Once you decide on the features and/or models that you plan to upsell, develop a range of options that positions one choice as the most attractive. Timing is also critical. One great way to upsell is to ask a customer who has already committed to purchasing Item A whether he or she might be interested in a slightly more premium product that offers the same features as the basic model, plus additional functionalities. If you own a car dealership, this might mean the difference between the base model of a Toyota Camry, and one with leather seats and a rearview camera.
When upselling, the key is to keep your customer’s needs and wants in mind. A person who is looking at a $20,000 sedan may not be interested in a $50,000 sports car. However, that person may be interested in a $23,000 sedan. Be sure to align your upsell with the underlying needs and wants that drew this customer to the original product.
Cross-selling is a technique that entices a customer to supplement his or her initial purchase with products that complement it. Amazon attributes up to 35% of its revenue to cross-selling – both the “Frequently Bought Together” and “Customers Who Bought This Item Also Bought” sections promote products related to the item that you are currently viewing on the site. Another prime example is McDonald’s classic question, “Would you like fries with that?”
Business velocity is a factor that can help accelerate your business’ growth. Whether you receive payment for services and goods today, or the next month, can be a significance difference for your company’s operations. As online and mobile payment systems become more commonplace by the day, it has become relatively straightforward for startups and small businesses of virtually any size to implement them. Electronic payments can simplify your business practices and improve the user experience for your consumers, no matter your company’s particular industry. Electronic payment systems can also increase business velocity, helping to facilitate that process of receiving payment for goods sold. While Varsity Tutors has utilized a digital payment system from almost day one, you may be in the midst of transitioning a 1- or 10-year-old business to this method. If so, here are six helpful suggestions:
1. Minimize your dependence on person-to-person transactions
Consider this traditional way of depositing checks: few people enjoy a trip to the bank. There are slow lines to battle, and the hours of operation may not suit your work schedule. In contrast, the ability to photograph a physical check, and then deposit it via an app on a smartphone, fundamentally changes the customer experience – in short, banking became a little simpler and a lot more convenient. One great way to modernize your own payment system is to implement practices that enable your customers to avoid unnecessary trips to your store or having to call in just to settle a balance. For example, enabling your customers to check their balance dues, their credits, and transactions online provides a tremendous degree of convenience. They no longer have to call in to your business and catch a team member at the right time to be able to check their financial figures. Adding these digital features can also help you show how much you value their time.
2. Offer multiple options
Cash is no longer king. Options such as credit card payments, direct drafts from bank accounts, and online systems like Bitcoin and PayPal can offer your customers added convenience and flexibility. The vendor that lets customer A easily pay you may be different from what customer B uses, so you should keep this flexibility in mind when choosing which digital payment methods to implement for your business.
3. Simplify the process
The more your customer has to think about making a payment, the less likely he or she is to actually do so. Innovations like Amazon’s 1-Click Ordering (where you press a single button and your purchase is complete) or Apple Pay and Samsung Pay (where you tap your smartphone against a sensor to finish a transaction) make it easier and instantaneous to submit payments. The days of team members writing down credit card numbers, expiration dates, and three-digit security codes are long gone, as is the need to ask consumers for their credit cards in order to visually verify information.
4. Minimize repetition
Below is a beginner’s guide to these techniques […]