Upselling and Cross-selling

What is the benefit of upselling or cross selling?

The logic is that it is easier to sell to an existing client than a new one. The probability of selling to an existing customer is 60% -70%, while the probability of selling to a new customer is 5% - 20% (According to the Canadian Professional Sales Association). Also According to Marketing Metrics, the probability of selling to an existing customer is up to 14 times higher than the probability of selling to a new customer.

Well, I imagine we all think it should be easier as some of the initial sales barriers are no longer relevant. You are known to the buyer, possibly trusted (If the business is going well), your services are understood, you provide some cost/time saving benefit to the customer - so it should be right? Well only if you are adding value for your customer. If you are perceived to be simply upselling your services, or even worse enticing customers with low prices initially in the hope of upselling more higher priced items you may find it more difficult - and rightly so!

Do customers spend more? Are they more likely to buy higher value services

Research has found that existing customers are 50% more likely to try new products and spend 31% more, on average, compared to new customers (Forbes). Again that makes sense, if trust is an important component, or even more important for higher value sales an existing relationship based on trust will likely make it easier to sell. However don't take customers for granted, or assume the sale. They may actually be an advocate of your brand/services but you also have to nurture that relationship and have a relevant stay in touch program. Use data, personalize communications to connect at relevant times (Lets be a little more inventive here, not just at birthdays ) and provide value in your stay in touch programs - show that you care. Not just about the next sale, but about bringing value to them and the relationship.

Do they continue to spend with you, how to avoid churn?

Well, you have to stay relevant to them, your products/services have to perform. You have to substantiate the business, show results, what has worked, what has not - and hope you can improve what has not worked, or show a plan. That level of detail will show your customers you really have their best interests at heart. You also have to monitor their changing needs. Things change, you cant assume they will continue to buy.

It's difficult, if you have a good relationship, but for one reason or another the service you provide for them does not perform. You have to look for other ideas, or provide other forms of value. I have had situations where the results have not been the best - and you have to have those uncomfortable discussions with customers and dig deeper about their expectations and where you did not perform. I have had those conversation and sometimes when you dig a little deeper the customer may concede their expectations were a little high, or though disappointing the results were in line with what they have achieved with other sources. In these circumstances I have differentiated myself by providing other forms of value provided by the business or outside the business - sometimes provided by me personally. The relationship means that much to me, you have to own it. So even though results are not the best they may still work with you because they receive other value from the relationship that makes it worthwhile, or that mitigates some of the risk they are taking - because they are taking a risk purchasing a service that has underperformed in the past.

Should you discount existing clients to upsell or cross sell?

This has to be considered case by case, of course you would rather add more value but sometimes customers want both - and that's possibly reasonable if they are buying more from you and continuing to buy its reasonable to expect more discount. Unless they are of course enjoying preferable rates which preclude discounting further no matter how much they buy. What to do if you can not discount any further? Well, that's a good test of the strength of your relationship - if its strong they will know they have pushed you as far as they can - because there is trust in the relationship and they believe what you say. They will trust and believe you have got the very best deal or arrangement for them. They may even not want to put you into an uncomfortable position with your business - they will push you but not want want to push too far.

Cross selling is it actually the same thing or different?

Well, it's different in the sense that you are not selling more of the same, but selling other possibly, related services and fulfilling different needs, but the same in the sense that you are getting more sales and revenue for a customer you already know and hopefully offering them more and different value.

A key part of cross selling will be the effective use of data, or rather having information about your customer, not so that you just understand one need but potentially many different needs. Think of the Telecom sector where you may have sold fixed line services - this would make you a very old sales person of course :) An old example perhaps, but your customer would also likely have a need for mobile, internet, tv/entertainment services/information. This kind of share of wallet growth also has the added benefit of potentially taking business away from competitors who may have supplied some of the other services you had previously not sold.

An exception to this is that not all customers are profitable or rather selling more to one customer does not necessarily generate more profit. It may well be that cross selling is not for all your customers. Not for example if they are already a bad customer in the sense that they take a lot of resource time - expanding that to other products/services will only cause a bigger drain on your resources. Some companies may also simply have a set budget for you, and will cut down other spend to compensate, again providing more costs across different services for the same vale of sale as previously

So cross selling may not be suitable for all customers and you may have to be selective or better yet have a strategy and use the data you have on customers and their full profile, (sales, returns, customer service requirements etc.) to help make those decisions.

Other resources on cross selling include:

https://hbr.org/2012/12/the-dark-side-of-cross-selling

https://hbr.org/2016/11/5-ways-to-increase-your-cross-selling