Upselling is a sales technique where customers are encouraged to purchase upgrades or more expensive products to generate greater revenue.
A strategy applied across various industries, upselling does more than raising the value of a one-time sale. Upselling can effectively increase a customer’s lifetime value, average order value, and maximize a company’s overall profit.
Understanding how to upsell, how it differs from other sales methods, and the best practices for integrating upselling into your existing sales strategy can help you find ways to offer more value to your customers while increasing revenue.
What is upselling?
Upselling is the act of recommending product or service upgrades to customers. In contrast to marketing efforts meant to attract target audiences and new customers, upselling focuses on earning more revenue from existing customers.
The upsell strategy doesn’t require high cost or time investments. Companies have already attracted the customer, who is in the process of making a purchase—upselling simply offers them higher-value alternatives that might be of interest.
For this reason, upselling is a common practice, especially among retailers. The sales tactic follows the existing customer journey and can happen during any of the following three stages:
- Pre-purchase: This occurs as the customer’s shopping, such as a targeted pop-up featuring additional products on ecommerce pages or more expensive versions of an item displayed on physical store shelves.
- During purchase: Product recommendations made as the customer is making their purchase, including within online store shopping carts and during the checkout process, or in-person upselling by the cashier at checkout.
- Post-purchase: Even after a customer makes a purchase, follow-up emails and messages can be sent to customers inviting them for an upgrade.
What are the benefits of upselling?
The main benefits of adding upselling to your company’s sales strategy are outlined in the following three points:
Lowers customer acquisition cost
Customer acquisition costs (CAC) are your marketing expenses per customer, calculated by dividing the total marketing spend by total new customers in a given period.