Senior Sales Guide: Why upselling is vital for technology companies
With competitors on every corner, and with leads spending more and more time in the sales funnel, the time and cost of selling to a new customer is higher than ever. So, it comes as no surprise that sales teams and leaders are looking towards existing customers to increase revenue in the long-and-short-term.
Lead generation, lead nurturing, and lead conversion are difficult and expensive. The likelihood of selling to a new prospect is 5-20%, meanwhile, the likelihood of selling to an existing customer is 60-70%. Existing customers are highly valuable and more likely to buy, so it pays to dedicate resources to engaging them with new solutions.
Chief Revenue Officers (CRO) increasingly recognize upselling as vital for hitting critical revenue targets, with studies showing that 82% of companies agree that retention is cheaper than acquisition.
If upselling is approached as a key pillar of the sales strategy, and it is thoughtfully considered in every sale, campaign, ideal buyer persona, phone call and customer journey map, the effect on productivity and the bottom line can be huge.
In fact, according to Forrester, upselling can account for an average of 10-30% of business revenues.
That is a lot of potential your organization is missing out on if you ignore upselling. It should be a pillar of revenue generation.
In this article, we will discuss what upselling is, why it is vital for technology companies, the challenges of upselling and how sales development services can help on your journey.
What is upselling?
Upselling is a sales strategy that educates and guides customers to buy an advanced or better version of a product or service the customer is currently using, or intends to buy.
This typically manifests in the following ways:
- Selling a more expensive and superior version of the same product or service to a customer
- Selling a higher volume of the same product or service to the customer
- Selling the same product or service to a customer, but with addons
Remember that good upselling is always about providing more value to the customer, as opposed to unnecessary or overly expensive addons.
When upselling is done correctly, and customers are encouraged towards more effective products and solutions that your organization offers, it improves customer loyalty, as customer needs are proactively addressed. And as you might expect, informed customers that are empowered to solve business challenges through your solutions will be more loyal and spend more.
Upselling comes in many shapes and forms and works in the same way that lead nurturing does; guiding a customer towards a solution by educating them about your offerings. Here are some common upselling strategies:
- Discounts and time-sensitive offers: You can offer customers discounts on relevant upgrades to make it more appealing. Time sensitive monetary incentives are also great for creating a sense of urgency.
- Focus on customer pain points: Use customer behavioral data to identify prospects’ pain points and reach out to them through phone calls, emails, landing pages and any other touchpoint that you can personalize. You can also augment this with bespoke offers to entice customers you are trying to reach.
To understand customers on a deeper level, obtain first party and third party intent data. First party intent data is gathered from your own website, such as filled in forms and content downloads. Third party intent data is collected from other websites, such as topic searches, and can be obtained through tools such as Bombora. Both sets of behavioral data will allow you to home in on what topics are important to leads to help you better predict their behavior.
- Addons: Addons are products that are purchased in addition to the parent product or service. These are great for providing added value to the customer if the addon applies to the customer’s specific needs. Free shipping, minimum spends, temporary upgrades and complementary checkout products are also excellent strategies of this type to use.
- On screen suggestions: If your website has the capability, you can use social proof and the fear of missing out (FOMO) to nudge customers to upgrade their solution. You can remind prospects it is their choice to make, but their mileage will increase with a more premium offering.
- Timed upsells: It is vital to know your customer. Some will be more hesitant to buy more expensive products, while others will jump at the opportunity. This is where analytics will come into play. Approach the right customer at the right time for more premium services. For example, just after the customer has accomplished an important business goal or milestone through their original purchase. Or, if your solutions are supply based, approach the buyer if they are about to run out.
You can also time upsells around seasonal campaigns, financial year, new year and industry related events.
- Provide evidence and case studies: Case studies are always good to have in your back pocket when trying to upsell. When educating a customer about a new opportunity, be sure to back up your suggestions with evidence. For example, statistics from the customer’s current product usage and how a premium solution will be beneficial, or data on how other customers have used the premium solution to find success.
- Upselling common touchpoints: You can incorporate upselling opportunities at touchpoints such as product pages, shopping carts and ‘thank you for purchasing’ pages and emails. For example, when a customer adds a product to a cart, you can offer a discount for a better version. Or if the customer is browsing a product page, you can use product comparisons to showcase the features of the most impressive products. Remember, the key is to educate and guide, not strong-arm customers into buying the most expensive offering.
Why upselling is vital for technology companies
The effect upselling can have on your organization can be huge, by boosting the bottom line, customer satisfaction, loyalty and the value of each individual customer. Here are key reasons upselling is vital for technology companies.
It increases your company’s revenue and growth
According to Forbes, it is between 5-25 times more expensive to get new customers than it is to keep current ones.
Because of this, it is vital to upsell so your organization can increase the customer lifetime value (LTV) and average order value (AOV) of customers.
LTV shows how each individual customer boosts revenue for your company. Specifically, the net profit your organization can make from an individual customer over time, when taking the cost of acquiring the customer into account as well.
Meanwhile, AOV shows how much value each customer produces when the customer spends. It is all about convincing customers to spend more. Again, upselling can help increase this figure substantially, boosting customer awareness of offerings and ensuring they walk away from purchases, feeling like they made the most informed decision.
By operating with different product tiers, complementary products, pricing structures, services, addons, and more, the money each customer spends will be higher and you can increase CTV and AOV. Through upselling and improving these metrics, you drive revenue and profitability, and ultimately, more funds to gain new customers.
Upselling boosts customer confidence and improves retention
Upselling educates and builds confidence for customers in how they interact with your brand when making a purchase.
By offering flexibility, choice and convenience, you provide a more satisfying buyer’s experience. And if you have the capabilities to offer relevant products and services at the right time, customers will feel more informed to buy more premium solutions.
It pays to show that you understand customer business challenges, and you are invested in solving them. By suggesting premiums, addons, upgrades and more, you help your customers extract more value out of your solutions, while also generating revenue for your organization.
In addition, upselling is one of the best methods of convincing customers to keep coming back for more. The familiarity they have with your product, the amount of money they have already invested, and the success that has been achieved will factor into their decision making when it is time to make another purchasing decision.
Upselling puts your solutions in the spotlight
One last reason upselling is vital to the sales process is because it brings in new customers and keeps customers simultaneously. Studies show that when companies engage in upselling activities, customer churn is reduced. In fact, according to this study, 62% percent of customers that were not upsold within their first three months churned within two years.
Upselling simply offers sellers and customers the opportunity to engage in meaningful ways. By providing more avenues for engagement, and ensuring the customer thinks about upgrades regularly, retention will increase. The same study showed that customers who engage weekly with sellers have a 26% higher retention.
Common upselling challenges
Customers will steer towards the cheapest option. So it is up to your organization to show how better solutions will outperform. After all, studies show that customers will choose a more effective option compared to a cheaper option when they have the right information. You just have to provide it.
Here are some roadblocks that upselling strategies face.
Customers are too familiar with your brand
The longer you have a customer, the more cognizant they are of how your organization approaches the sales process. Consider a customer that has purchased solutions from your organization for many years. They will anticipate engagement from your organization and use those opportunities to reduce the cost of fees. Likewise, longer term customers will also use these opportunities to remind you of the difficulties they faced during their experience with your solution.
While frustrating, in these instances, it is always important to remember your upselling strategies should never feel like a hard sell. If customers feel like they are being pushed, they will simply go towards a competitor.
You also have to keep your overall brand image in mind when upselling. Poor upselling strategies will change how your organization is perceived by leads. For example, an organization that is growing at scale and has a reputation for providing a handful of low-cost products will be at risk of alienating customers if it suddenly tries to upsell with new products at raised prices.
Customers are happy with their original product
Another challenge you can face is when the customer is comfortable with their original choice. Consider a scenario where your solutions are already providing results for the customer and their targets have been achieved. Here, the customer may not see a reason to upgrade for a better product, because in their eyes, the product is already solving all of their business challenges.
Here, the key consideration is to take the focus off of your product and shine a light on your customer’s stretch goals. Remind them of the value proposition of a better solution and the potential that your premium offering can have on their long-term or strategic goals.
Similarly, customers may simply be overconfident in their first decision and resistant to change. Customers spend more and more time on research before making a purchase, consuming between 11 to 50 sources of information prior to buying. The research has helped them eliminate other options, meaning the customer is cemented with their first purchase.
On the flip side, customers may simply be highly cost conscious and resistant to a more expensive purchase. There is no getting around the fact that many customers make purchasing decisions based on cost and cost alone. They will be hard to sell to, especially if the added value of the more premium solution is slight.
Upselling with the wrong products and the wrong time
Much like lead nurturing, for upselling to work, it has to be strategic. That means approaching buyers with the right products at the right time, while focusing on their unique business challenges.
This is perhaps the most common upselling mistake we see. When upselling isn’t approached strategically, customers receive recommendations for services they are highly unlikely to be interested in, especially if it doesn’t align with their immediate business needs. Studies show that a huge 91% of customers say they are more likely to purchase from brands that provide them with relevant offers and recommendations.
In addition, upselling at inconvenient times is a way to push your customers away. For example, overly pushy emails when a customer has purchased a product. Or pushing every product and service in your catalog, which can be paralyzing.
The secret to overcoming upselling challenges? Sales development
We’ve discussed what upselling is, the benefits, and challenges. We see many organizations that want to master upselling, but stumble at common hurdles such as data management, upselling at the right time, personalization – and even resource and team management.
Upselling tasks are typically shouldered by the marketing or sales teams. This is rarely the best choice, as the former is skilled at lead generation, and the latter in pushing deals through the door. But, as we have discussed, upselling is a lighter touch approach compared to traditional sales, and has more in common with lead nurturing. Chiefly, educating, building relationships and guiding.
Therefore, many organizations turn to the sales development department to take the lead on upselling, and not increase the burden on sales and marketing who have their own duties. This way, upselling can be approached as a core function with dedicated resources, and not an afterthought.
The sales development process typically occurs in the middle of the sales funnel between marketing and sales. The goal of a sales development representative (SDR) is to take leads generated by the marketing team (MQLs) and turn them into Sales Accepted Leads (SALs) which are ready for a sales call and a potential conversion.
But besides these activities, Sales development teams also spend their time generating new business from existing customers through upselling, renewing existing licenses and subscriptions, and cross selling.
Sales development can:
- Guide leads higher up the funnel
- Maintain consistent engagement
- Keep leads in the pipeline for longer
- Accelerate early pipeline and lead generation activity
- Find new lead opportunities
- Enhance cross selling and upselling
If there is a shared thread between the various duties of an SDR and upselling, it is lead nurturing. The ability to research leads and customers with a fine-tooth comb, educate them on solutions and services, and ultimately, guide them on their decision-making journey.
In fact, according to the Bridge Group, hybrid sales development teams have become the most common, especially within organizations with higher than average prices per solution and product.
Upselling takes time and commitment. You need to know your customers inside and out, and have a firm understanding of their firmographic, demographic and behavioral information to make upselling work.
Fortunately, SDRs are equipped with an array of tools and strategies to help them upsell to customers.
How sales development uses data to upsell
The foundation of upselling is ensuring SDRs know everything about high-value leads and how best to target them. While firmographic and demographic data will help SDRs develop a high level view of a prospect, it is through behavioral data and segmentation they will be able to develop insights to target customers with the right product at the right time.
Behavior data shows how customers engage with your brand. From an upselling perspective, you can approach this by assessing the behavior of leads post-sale. For example, product usage, as well as product effectiveness. It is also important to assess if they are still showing signs of intent, such as looking at product pages and educational content.
Data obtained in these areas can help deliver a more personalized experience. Each way in which you attempt to upsell, no matter the format, needs to address a specific challenge so that the recipient will feel that their needs can be addressed by your expertise.
Besides behavioral analysis, SDRs also use predictive analysis to understand customers and get a better idea of how a customer may purchase in the future. This process entails mapping out what solution the customer has purchased, current shopping behavior, shopping frequency and demographic and firmographic data.
There are tools available that utilize AI to help SDRs determine how likely a customer is to make another purchase in the future, as well as what products and solutions they are more open to buying. Again, it is important to home in on what customer pain points and include them in your engagement strategies, to show that their loyalty is valued, and their challenges can be resolved with a new product.
Technology is at the heart of the SDR role, and there has been a sharp increase in sales development technologies and tech assisted selling. There are many tools that SDRs can use in their arsenal to predict which customers are more likely to make another purchase, including:
- Sales engagement platforms
Sales engagement platforms focus on the interactions between the lead and the SDR, and help execute processes, track and measure prospects in the funnel, and optimize interactions across multiple channels.
- Sales enablement platforms
Sales enablement platforms are tools that help educate leads at every stage of the sales funnel with relevant and personalized content. It fosters trust in the seller’s organization and its services, and its ability to solve the business issues of potential buyers.
- Sales Intelligence Platforms
These platforms gather lead information from inside and outside the seller organization and match it to relevant leads in the database
- Conversation Intelligences
Conversation intelligence tools are AI-based tools that analyze speech or text and deliver insights into interactions between sales agents and customers.
- Lead scoring
Lead scoring tools score leads based on the seller’s ideal buyer persona and engagement with your organization.
With behavioral and predicative data on hand, SDRs can determine what kind of upselling opportunities each customer will be openly applicable to. This proactive approach is key for upselling, to ensure it has an underlying strategy behind it, and it isn’t ad hoc.
Working with Foundry Sales Development Services
Whether you are selling subscription-based solutions, products based on multiple addons and services, or anything in between, it is vital that you approach upselling strategically.
Successful and sustainable upselling is all about understanding customer data and leveraging it to create personalized and informative upselling experiences, to make the customer feel satisfied in their decision making.
SDRs have the training, tools, and capacity available to go the extra mile and ensure continued customer satisfaction, so your customers will be inclined to make another purchase. However, not every organization has a sales development team, or has the resources to maintain one.
Outsourcing is a great utility for organizations that don’t have the management experience, time or expertise, to staff and train an in-house sales development team for upselling. Outsourcing provides access to skills, people, technology and expertise in a comparatively small cost package when compared to an in-house team.
At Foundry SDS, we guide each customer’s journey toward upselling opportunities on your behalf, operating as a seamless extension of your in-house business development team. Once we bring your leads to the right level of maturity, we hand them off to your sales team for final conversion.
If you outsource sales development, you don’t have to worry about setting up lead nurturing workflows, qualifying and segmenting leads, technology and licensing, office space, salaries, recruiting, training, and onboarding.
Foundry SDS are lead nurturing experts. We will create a bespoke lead nurturing program to deliver high-quality leads that fit the buyer persona of your business development strategy.
Learn more about our services here.
Get in touch: Work with us.