For any retail business, regardless of the products on offer, the end goal is the same – to have the maximum amount of sales. More sales mean more profit and a significant boost to your branding. A successful retail business has unlimited untapped potential, you can diversify your offerings, set up a franchise, even expand online.
A great tool to improve sales is to utilise upselling and cross-selling. Although simple in concept, these tools have massive potential and when used correctly, can have significant impact on your sales. Upselling and cross-selling are not new concepts and have been around for decades. It is the implementation of these tried and tested tactics that will bring you the most gains.
Both upselling and cross-selling target customers that already have an intent to purchase. As a result, these tools can have a significant impact on overall sales. To know more about these tools and how to implement them for maximum results, keep reading.
What is Upselling?
Upselling refers to recommending more expensive versions of a product that a customer is already considering purchasing. For example, if a customer is interested in a $25 pair of jeans, you can recommend jeans that are $35. When upselling, it is important to offer products that offer the functionality as the product desired by the customer and are not extremely different in price. Continuing with the earlier example, if the customer is interested in a $25 pair of jeans, recommending jeans worth $55 is not a good idea.
What is Cross-Selling?
Cross-selling involves recommending products to a customer that coordinate well with the product the customer was originally interested in purchasing. For example, if a customer is interested in jeans, you can recommend a matching shirt, belt, or shoes. In cross-selling, the product the customer intends on purchasing does not change, but additional products are added on, increasing the overall sale value.
How to Maximise Upselling and Cross-Selling
Although upselling and cross-selling can be used independently, they can also be used in tandem. For any customer, you can begin with upselling, and move on to cross-selling. To maximise the potential of upselling and cross-selling, it is important to understand the products, the customer, and price products carefully.
- Understand the Products
For any successful sale, it is important that you have a good understanding of the products that your retail shop offers. Knowing all the specifics of the products, who the target audience is, and what products match well together, will help you convincingly make sales. For every category of products, you should have a general idea of what products can be used for upselling and cross-selling. You should be able to answer any possible question that a potential customer may have regarding products your retail business carries.
- Understand the Customer
Slightly more complex than understanding products, is understanding the customers. This includes the target audience and the customers that visit your shop. Consider what is the purchasing motivation for the customer? What are they looking for? What do they expect from a product? What is their budget like? Is their budget flexible? While it may be feasible to profile the target audience, understanding each customer that walks into your store is a skill that needs to be honed by the sales team.
- Price carefully
Many retail businesses underestimate the power of careful pricing. More than simply combining the cost of the product with your profit margin, the numbers in your price can subconsciously encourage or discourage customers from shopping. Studies have found that customers view products with pricing ending in a 5 or 9 as cheaper as compared to pricing ending with even numbers. While there may be a negligible difference between $99.99 and $100, psychologically, $99.99 will be more appealing to consumers.
Top Tips for successful Upselling and Cross-Selling
Tactics used for upselling and cross-selling have evolved over the years, as different methods have shown various levels of success based on the retail niche and expertise of sales personal. Nevertheless, understanding the top and most effective practices for upselling and cross-selling can help you develop your own sales plan, based on your products, customers, and needs.
Here are some of the top tips:
1. Identify Relevant Products
The only way to effectively cross-sell or upsell is by having relevant products available. This step is necessary before any customer visits the shop. Consider your major selling products, which items can be used for upselling? Which product would be used for cross-selling? For example, if you are a smartphone retailer identify which models can be used for upselling. Check what your store offers for cross-selling, do you have phone cases or tempered glass or smartphone insurance? By having relevant products, you can offer greater value to customers, increasing their satisfaction and likelihood of return purchase.
2. Wait for the Right Moment
There is a right and a wrong time for upselling and cross selling. The right time would be once the customer has already decided that they are making a purchase. Any sooner, and the customer may get confused or overwhelmed and leave without any purchase. Too late, and the customer has already made the decision to buy only a specific product. For example, if a customer is considering a smartphone, and you suggest multiple options, they may leave to come back after more personal research. Conversely, they may finalise a basic smartphone if you approach them too late, and not be open to discuss any other models.
3. Use Charm
The only way that a customer is likely to listen to you and follow your recommendations is when a rapport is developed. Use charm and talk to the customer, understand their needs, what they are looking for, and their budget. Expressing interest in the customer generates trust, making it more likely that the customer will accept your sales recommendations and make a larger purchase than originally intended.
4. Be Honest
Although charm is important, it is equally as important to be honest with customers. Honesty helps build trust and can help encourage customers to return to the retail shop in the future. Be honest when describing products, suggest features and inform of any hidden costs, terms or conditions. Genuine help and honesty make a lasting impression, improve brand image and encourage customers to return.
5. Apply the Rule of 3
The Rule of 3 is a well-known concept widely used in upselling and cross-selling. In upselling, when a customer is looking for a particular product, you should show 3 options. These are the ‘requested’ product, the ‘alternative’ at a slightly higher price point, and the ‘dream’ which would likely be outside of the budget but is the best version of that particular product. For example, a classic handbag priced $15, versus a handbag priced $25 and a multi-functional versatile cross-body bag for $40.
For cross-selling, you can suggest 3 options of items that match well with the original product the customer was purchasing. In this situation, the 3 recommendations would vary based on price points and usability with the original product. For example, if the customer has chosen a pair of jeans, the recommendations can be a belt, followed by shoes, and a shirt.
6. Customise Recommendations
It may be tempting to promote your most recent or best-selling product to every customer. Every customer is unique, and while you may already have a general plan of pre-set standard recommendations, customising the recommendation for each customer is more likely to encourage greater sales. Ask customers detailed questions to understand what they specifically need, and based on the response, suggest further products.
For example, a customer is looking at an entry-level smartphone. With further questioning, you come to understand their requirement is for extra long battery-life, over anything else. Instead of a standard recommendation of a more advanced smartphone, you can customise the recommendation for a smartphone with a longer battery-life, or suggest an accompanying power bank.
7. Highlight the Value Addition
When a customer is in your store intending to purchase a product, and you want to recommend other products, it is vital to highlight the value addition of the new products. Customers are more likely to make extra purchases when they clearly understand the value and benefits the other products will provide.
Suggest an additional or alternative product that suits the customer and can be useful. Provide as much information as possible so that the customers feel confident regarding their choice. However, be careful not to make any false promises or vague statements. An incorrect description of a value addition can take away from your overall brand image and discourage customers from returning.
8. Stay within a Reasonable Budget
A customer visiting your store with an intention to purchase will likely have some form of budget in mind. It is important to keep this budget in consideration and offer upselling or cross-selling products in a reasonable price range. For example, if a customer visits your retail shop for a smartphone, it is unlikely you can convince the customer to buy an additional laptop at a significantly steeper price point.
Experts suggest sticking to a price that is a maximum of 25% more than the original product for upselling, and to include a wide price range of products in cross selling. By offering a greater variety of price points, the customer will feel more comfortable and is likely to make more purchases.
9. Use the Power of Visualisation
Visualisation is a powerful tool when it comes to retails sales. Unlike online shops, in a retail setup where the customer is already present at the store, there is great potential for further sales. Based on the customer needs, physically show the associated products, whether for upselling or cross-selling. Being able to personally see the products and feel them, customers are more likely to make additional purchases.
In upselling, customers can clearly see the differences in quality between the products and may gravitate towards the more expensive better-quality item. For cross-selling, seeing all the associated products and checking their combined impact with the original product is more likely to encourage added sales.
10. Add Rewards
A great way to encourage more sales, whether through independent products, upselling, or cross-selling, is to offer rewards to customers. These rewards can be anything from discounts to loyalty points, free goodies, or vouchers. By offering a reward system, customers perceive the products as providing a higher value.
If you set up a loyalty points-based system, then customers are more likely to return to make use of any loyalty points they accumulate. To encourage repeat visits and sales, you can combine loyalty points with other rewards, further increase the benefits for a customer returning to your shop.
11. Incentivise Sales Teams
The human touch is fundamental to sales in a retail shop. At the end of the day, the success or failure of sales tools, including upselling and cross-selling, depend upon the sales team. It is the sales team who will be directly interacting with customers, identifying their needs, making recommendations, and encouraging purchases. To increase the motivation of sales personnel to enhance sales with recommendations, it is a good idea to incentivise your sales team.
Involve the sales team in discussions planning future sales strategies and set realistic goals. Give benefits to sales teams that increase the average transaction value.
12. Utilise the POS System
A Point of Sale (POS) system is an important part of the functioning of a retail shop. Apart from managing checkouts, transactions, and inventory, it can also be used to help boost sales. The POS checkout counter is an ideal place to display small products for sale. Even without the assistance of sales personnel, customers are likely to purchase low value items they peruse while waiting for checkouts.
Furthermore, the analytical data revealed by a POS system can indicate the most popular products, which combinations of products are often sold together, and customer details. This data can help in honing and revising upselling and cross-selling policies.
Upselling and cross-selling are immensely valuable tools for a retail shop with unlimited potential to improve sales. As you are targeting customers that already have a purchase intent, it is possible to increase that intent for a higher sales volume. The process of upselling and cross-selling should be continually evolved based on performance, customer response and feedback from sales personnel.
So, use these upselling and cross-selling tips today and witness the boost to your sales!