The art of the upsell and why for eCommerce

The first rule of upselling is TO DO IT. The biggest obstacle to upselling is just doing it in the first place. Even poorly thought out upselling will have some effect as long as it is executed. To often I here...we are getting to it, we just need some more time and need to get our traffic and sales sorted first... What the hell, if you start and execute upselling you might not even need more traffic.

That type of thinking reminded me of a young no it all salesman full of excuses I had working for me. Aaron he says '...there just aren't enough customers coming through the door..'. Oh really I say let's look at the stats. John has spoken to 2 customers and sold 4 items to one of them for $3000 sales, Philip has spoken to 3 customers and sold to 2 of them one was 6 items and $6000. You young salesman have talked to 22 people and sold to one, just one item for $1000. You young salesman need a better strategy. This is a similar story to what I see online.

While it is key to have traffic to generate sales. You have to keep in mind generating traffic is generally not free. Generating traffic cost money at the end of the day, whether that money comes from; advertising, social media, Viral, news worthiness, innovation it all costs somewhere on the bottom line.

Normally those costs increase exponentially compared to somewhat bell curve shaped sales. Therefore to maximise your return on investment you need to maximise the volume of sales from each visiting customer.

Volume consist of:
Total percentage profit per sale.
Total number of individual items per sale.
Total number of multiple items per sale (very important).
Total dollar value per sale.

I'll illustrate why I highlight each one of these points.

Total percentage profit per sale There is a sweet spot for every product where the profit is high enough to get the volume you need to maintain and improve quantity discounts. The amount of profit to make it worthwhile to stock and be profitable. What I mean by being worthwhile is every product has a cost to be stocked and sold. That cost to stock and sell needs to be covered and then have a profit margin on top to be profitable. So for example Product A costs $10 to stock, $10 to sell and makes $30 Gross profit so it's profitable. Simple, but where it can get tricky is calculating the cost to stock it. Having an automotive background, this was a common error dealers would make and it often confounded owners when I pointed it out. For example:

A Business might cost $50,000 to run each month to sell one product (shipping, handling, stocking, marketing, sales, refunds, errors, faults, screwups, staff etc)
A Product may cost $1000 to buy and when sold make $1000 per sale gross which is a nice healthy profit per sale. You could even half that profit and it would still be a nice percentage profit per sale. However for every business and product their is a finite limit to the volume of sales you can do at the one point in time. So let's say for our product that limit is around $80,000k total sales. Nice work $40k profit from selling your product... but oh know your $20K in the hole at the end of the month. a prime example of going broke making a profit. You need to make sure products are truly profitable!

Total number of individual items per sale

With regard to online sales, volume counts in most cases. Most online stores are selling everyday products at a discount over bricks and mortar. Users trade mild inconvenience for a discount. At the end of the day it comes down to an arms race for market share to buy in bulk to get better discounts to hold on to thinner margins.

One of the easiest ways to improve your profit margin is to buy your goods cheaper. Good leverage to maintain good relationships with suppliers and twist their hands to provide bigger discounts or exclusivity is to buy more and by more, more consistently.

Total dollar value per sale

Every dollar a user spends with you is another dollar they won't or can't spend somewhere else. This keeps them captive to you and keeps you ahead of your competition and most obviously improves your bottom line.

So how does upselling help

  • Percentage profit per sales
  • Buying customers through loss leaders is commonplace in the supermarket industry and big box stores. But know one can survive on giving stuff away for little or a loss. just like the supermarket will sell beer or milk at a loss to get you in the door they also bombarded you with upselling all the way to the back of the store to the front. As they know every extra bottle of milk sold is more leverage to increase supplier discounting to maintain profit or reduce loss, but it is also likely that if they upsell they will increase their total sales, total item volume per sale and total dollar turnover.
    You can do the same. Make those upsells relevant to the product you're presenting them with. This works best if you don't display products that people have always bought together as its likely they will buy that anyway. The best items are the little extra ones that get deleted at the checkout, the ones users come back for or the ones you know they should have but for some reason never buy.

  • Total number of individual items per sale

  • Just do it. Not trying to upsell guarantees failure. If you think about it often business sink or swim on a margin between 7-15% at the end of the financial year. Adding upselling can be the difference between smashing it, making money, breaking even or being nowhere. Selling just one extra item to 10% of your traffic can translate to massive profit increases for very little capital cost.

  • Total dollar value per sale
  • We it doesn't take a genius to workout that selling to items instead of one is a guarantee of success. Think about this example.
    If all you did was upsell a double product sale to your users and 10% accepted it how much would that add to your bottom line!

    Even if you are a small business and your only turning over 100,000 per year and you increase that volume by just 10% that makes a big difference an extra $10k as an owner could mean you get to go one a good holiday, upgrade some equipment to increase efficiency, pay that over time for a staff member so you can take a break.

    summary

    The man thing I want readers to take away is YOU HAVE TO DO IT. No excuses, it doesn't have to be perfect, you just need to get it started. The less time you have to do it right the more important it is to get it started half assed. At least the ball will be rolling some potential for increased profit at the status quo is in play. You can you the next little bit of time you have to improve it. If you are or were a sole trader, startup, small crew literal every extra dollar you make with the same amount of effort frees you up to make another extra dollar somewhere else. I can honestly say upselling is one of the lowest effort things you can do to increase profits.

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    Senior Developer at Mebsites on the Gold Coast, Queensland, Australia. Mebsites is an acclaimed Magento and Custom Framework Web Software coding house.
    Gold Coast, Queensland, Australia Website