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Upselling Definition and Meaning

By
Joshua Weatherwax
Table of Contents

Every business owner wants their business to grow, whether  you want to get more wholesale customers or  to increase eCommerce sales. More sales means more money, right? But, you can actually achieve the same result by increasing the value of the orders you already get. 

Take a look at this formula for revenue to get a better grasp of what we mean:

Revenue = Orders x Average Order Value (AOV)

So, you don't necessarily have to grow the number of orders to increase revenue, you can do that by increasing average order value. That's why it's vital that you understand what upselling is and how you can use it to grow your bottom line. This simple activity can help you turn a small purchase into a much bigger one without having to invest the time and money in eCommerce marketing to attract new customers.

Keep reading to learn what upselling is, how to do it, and some strategies for getting the biggest return on investment when upselling.

Upsell Meaning: What Is Upselling?

Upselling is a sales technique used to convince a customer to purchase a newer or more expensive version of the product they were planning on purchasing. Essentially, it's a way of convincing customers to spend more money in a single transaction and increase profit margins without having to try cross selling other products.

Upsell Synonym

While there are no direct synonyms for upsell, there are a few terms that do a good job of explaining it. Words like "promotion", "higher-quality", and "higher-value" all come close to meeting the idea of upselling.

Upselling Examples

To further clarify how upselling works, let's take a look at a couple of examples.

Let's say you run an electronics retail business:

You routinely get new products in, but you notice that an older model of television is still one of your biggest sellers. While you're still making sales, you're not getting as much revenue as you could. To solve this issue, you use a widget on your headless eCommerce platform that adds a popup on the older TV page that advertises a newer model. Some customers will click through the popup and purchase this model, increasing your revenue and sales of high demand products with larger margins.

Upselling Example

Or, maybe you operate an online meat wholesaling business:

You've chosen BlueCart's online marketplace for your storefront, so you've got access to more than 92,000 customers. Looking at your average order volume, you find that you're currently making $150 per order. You'd like to increase this to $200. So, you add a section in the cart that highlights pricier cuts of meat that the customer may want to purchase. Though not every customer will take the bait, those that do increase their order value significantly, bringing up your average order value across the board. You grow your revenue without having to spend time and energy on acquiring new customers.

How To Upsell

Upselling may seem like a simple task, there's actually a lot that needs to go right for it to work. The most important thing to remember is that you need to focus on quality. You're always looking to make more money, but you shouldn't just shove high-margin products in your customers' faces. Upselling works best when the product you're offering is a better version of the one they are looking at. Keep upselling within the same product category and make sure to keep your eye on long-term relationships by never offering low-quality products.

With that in mind, let's delve into the techniques and strategies you can use to get the most out of upselling.

Upselling Techniques

Upselling only succeeds if you approach it in the correct way. The best upsellers tend to use a few tried-and-true techniques to increase their revenue.

Here are a few techniques you can use to get the most out of upselling:

  1. Use discounts. This may sound counter-intuitive, but one of the best ways to upsell is to add discounts to the higher-cost product. This discount should be low, but enough to incentivize the customer. It will keep your profit margin higher but still feel like valuable savings to the customer. You can also try to use kitting as a means to increase the value of the product being sold and add cross selling into the mix as well.
  2. Let your products sell to themselves. What does this mean? Basically, you make sure that the gap in quality and usefulness between the two offerings is so apparent that the customer naturally chooses the more expensive one. This is often called decoy pricing, and it is a great way to make one product look better than ever by comparing it to a much lower-quality product. This practice is often used in the tech world, where data limits or storage differences are so large, most consumers jump at the chance for more, even when the price is much higher.
  3. Use widgets and popups. In the best eCommerce business ideas, upselling is usually done on product pages and in the cart. You may have seen things like “frequently bought together” or "you may also like" when shopping. These terms signify a cross selling opportunity, but you can also use these tools for upselling. Instead of "you may also like", try a phrase like "Would you like to upgrade" and highlight a more expensive product with better features. This can easily be done by using widgets built into your chosen DTC to B2B eCommerce platform.
  4. Create a sense of urgency. Rather than just trying to offer a more expensive product, try to set a time limit on the offer. If your pop-up says something along the lines of "For a limited time only" (LTO), you're more likely to convince the customer to make the purchase. Pairing this with a small discount will further increase your chances of converting for the higher-value product.

Upselling Strategies

When upselling to customers, the most important thing is to avoid coming across as sleazy or manipulative. Your offer should be based on the benefits your customers will get by buying the more expensive model, not simply on increasing your revenue. With that in mind, here are the three best strategies for upselling.

First, make sure to set measurable goals for your upselling. By looking at your sales data and establishing eCommerce KPIs, you can get a much clearer picture of what is and what isn't working. It will also highlight areas where upselling will have the biggest impact and can even help you avoid dead stock and improve your inventory control.

Second, start with the low-hanging fruit. Don't roll out upselling widgets for all of your products at once. This will take too much effort upfront and won't necessarily succeed. Customers don't want to be constantly bombarded with sales offers. Instead, target products that already have strong sales, but aren't of the best value to your business. You can determine what these products are by performing an ABC analysis on your inventory and picking some "B" products. Then, just try to upsell them to "A" products.

Third, be transparent. Increasing order value is only successful if you don't lose the customer after a single purchase. Don't try to be slick with your upselling and hope to get money in a duplicitous way. Be upfront with the price differences between products, but tie it to the added value. If necessary, you can even have your sales team speak to the customer to help facilitate the sale. Whether you run a dropshipping business, sell DTC, or B2B customers expect honesty and support.

Frequently Asked Questions About Upselling

Now that you've read all about upselling techniques and strategies, you may still not be convinced of its value. To help, let's take a look at the most common follow-up questions people have.

What Is the Benefits of Upselling?

The biggest benefits of upselling are that it increases your customer lifetime value (CLV) and average order value (AOV). Together, increasing these two numbers can have a drastic effect on increasing your revenue and maximizing your margins.

What Is Cross-selling and Upselling?

Cross-selling involves trying to sell related products to customers, while upselling involves trying to sell better versions of what's being purchased. Most businesses use the two techniques together to increase both the value and quantity of products being sold to each customer.

How Can I Improve My Upselling Skills?

The best way to improve your upselling skills is to experiment. Start by trying to upsell products with price points that aren't too far apart. Once you've gotten used to the process, move on to bigger upselling challenges.

What's Upsell, Doc?

Whether you use the B2B business model or sell direct to consumer, upselling is a great way to increase your revenue without having to invest a lot of time and money. Use the tips above and start adding upselling to your sales tools and watch your bottom line grow.