So, you’ve created your sales funnel as follows:
(Note: If you haven’t taken these steps, be sure to check out how we direct our traffic along this path and turn cold traffic into red-hot buying customers)
You’ve done all the hard work to qualify your leads to be warmed up toward your brand and products. Now, you have the opportunity to pitch additional products and upgraded products in order to maximize your profits. This strategy is what we call “Upselling” and “Profit Maximizing.”
Both upselling and profit maximizing have one primary purpose: to offer consumers additional products in order to benefit, enhance, supplement or improve upon their purchase or experience.
Why it’s important
Business owners should care about upselling and profit maximizing because it’s far more likely that customers will increase their purchase while they’re already in a “buying mode.” These additional sales not only make the difference for any business, they are absolutely essential!
“Would you like fries with that?”
Fast food establishments aren’t the only ones to utilize upselling and profit maximizing tactics. The best part is that you can apply these strategies to any product and any industry. (The same goes for each piece of our sales funnel by the way).
Profit Maximizing offer
Profit maximizing offers do exactly that; they increase the average transaction value per customer.
Maximizing profits is really a sales 101 strategy where offering additional features, more options, or complimentary products in effect, entices customers to spend more. It’s a way of encouraging customers to purchase additional items and add to their bottom line.
The idea to get customers to purchase more than they originally intended to is not as unethical as it may sound. Oftentimes, upselling actually adds value to a consumer’s life. They simply just may not have been expecting it.
For example, think about all the times you’ve been in any checkout line and thought to yourself, “Oh! I do need tweezers!” You may even feel better about your shopping experience for having been more productive while on your errand.
Here’s a popular impulse buy that you may often find right at checkout.. All these little add-ons add up to a lot!
Or consider when you purchased your most recent cell phone. Did you also buy a case, screen protector, car charger, and extended warranty? These are all specific Point of Sale (POS) profit maximizing offers meant to enhance your shopping experience.
It may surprise you to hear that most fast food companies make almost no money on their core product. McDonalds makes almost nothing off of their core product: the hamburger. Rather, they make the majority of their profits from selling fries and soda.
Similarly, many movie theaters make the majority of their profits on popcorn and candy, not the movie ticket itself.
Disneyland makes more money on merchandise, food, and drinks than on the actual ticket to their park.
Upselling also maximizes your profits, however the focus is slightly different. Rather than trying to supplement your core product offer, an upsell strategy is attempting to replace the core product altogether. You’re hoping to replace one product with another upgraded product.
- If McDonalds were to upsell, they would suggest to “Supersize” your order. They would ask to upgrade your sides to the extra-large size rather than the standard size. Or they would suggest a double quarter pounder instead of a single quarter pounder.
- If a movie theater were to upsell, they would suggest purchasing the 3D ticket or an Imax ticket rather than the standard movie ticket.
- If Disneyland were to upsell, they would suggest upgrading your one-day pass to an annual pass for just $100.00 more.
You may have seen examples of upselling tactics when choosing a membership on a given website. Dropbox offers 3 pricing packages for business owners. They display all 3 options while, at the same time, strategically directed attention to the upgraded offer, “Business” for an additional $5.00/mo. They use color and added checkmarks to encourage the sale.
Likewise, Salesforce offers 4 pricing packages each at different prices. They draw attention to their upsell item entitled, “Enterprise” as being “Most Popular.” Additionally, they offer a bundle pricing as their highest offer as being their product with the “Best Value.” These are all upselling strategies and undoubtedly have maximized profits dramatically for both companies.
Here’s another example..
Imagine if a person went to BestBuy to purchase a camera. They had in mind that they wanted a small point-and-shoot but didn’t really know what else to look for. After picking up a base model of whatever Nikon had on the shelves for $100, a sales representative walks up to them to ask what they’re looking for.
Though they hadn’t considered it before, they walked out of the store with a larger memory card, a camera case and the $200 camera because of the additional features they didn’t realize existed. They ended up happy with their purchase and with a product that will ultimately produce higher quality images. The sales rep was able to upsell, but in a way that only benefited the consumer.
When offering upsell offers and profit maximizing offers, a general rule of thumb is to offer related or upgraded versions of products. If a person is in the market for a swimsuit, it would make sense to see a relevant ad for sunblock or beach towels pop up right before checkout. The company would make a few extra bucks and the consumer would save a trip to the store.
However, if I went online to find a bike and Amazon.com prompted me to purchase printer ink, it would be annoying for the customer as the offer would be completely unrelated.
Another thing to be sure to understand, however, is that upselling is a technique that may not work on all customers. In a study conducted by Predictive Intent, upselling was found to be effective on only 4% of all sales. This means that the majority of your target market is still likely to only purchasing what they came to buy.
By upselling you are only likely to reach a small percentage of the market that doesn’t mind paying more for additional products or higher quality products. However, this small percentage enables you to truly maximize profits and is well worth the effort.
Another thing to realize is that not all products ought to be upsold. It’s important to focus on pushing only your most popular, best-rated and most relevant items in order to be successful. When upselling, try to remember that you are in fact providing value to your consumers. This will help hone your offers to only the highest quality offer for both your customers as well as improve your own profit margins.
So what do you think?
Now that your new lead is warmed up to your core product offer and has taken the micro commitment to become a real buying customer, what profit maximizing offers and upsells do you plan on offering? Your customers may appreciate your complimentary, supplemental, and upgraded products, so give it a try! You will definitely appreciate hard work that it takes to really transform your business to the next level!
You’re Almost There!
There’s one last step to completing your sales funnel. Remember Jay Abraham’s 3 ways to grow a business?
- Increase the number of customers
- Increase the average transaction value per customer
- Increase the number of transactions per customer.
We’ve just done some really hard work and accomplished numbers 2 and 3 in our process so far. Now we want to revisit gathering traffic in order to increase the number of customers. This is a huge part of our sales funnel and just can’t be missed! So check it out!