The upsell is the secret sauce that makes sales profitable. Depending on the industry and the market, the sales of products and services beyond the product or service that drove the initial sales inquiry can amount to 20 to 35 percent of the total revenue of the deal, and can be what pushes those deals into immediate profitability.
That’s why it’s important that salespeople know how to focus on upselling when it’s appropriate to do so in the course of a deal. That used to be fairly easy when businesses had simple and straightforward product mixes – if you sell X, be sure to offer Y. The variables were limited and it was easy for salespeople to keep track of the right upsells to go with their various flagship products.
But times change, and a more complex – or even custom – mix of products is becoming the order of the day. High-tech, life sciences and custom manufacturing have long faced this trend, but increasingly other B2B and even B2C companies are realizing the challenge of this new, more complex and more customer-focused approach to business. Now with more products and more permutations offered, the sales person has no easy upsell – he or she needs to use skills at understanding buyer pain points, then sell the right product, and then suggest the appropriate upsell.
While understanding the buyer is a critical tool, it then puts the salesperson in a nearly impossible position of trying to connect those buyer problems with items in an ever-growing product list that would be appropriate upselling suggestions. Keeping track of those items in the salesperson’s head is no longer possible, which leaves two possibilities. One, the salesperson continues to try to upsell using the information in his or her head, meaning only a few items – the ones the salesperson is familiar with – are ever offered in upselling; this results in poor matches to customer needs, fewer up-sells and poorer results. Possibility two is the use of technology to guide the upselling process – often delivered through a configure price quote (CPQ) solution, which is pre-configured to deliver the right up-selling suggestions based on the customer needs and to do it when the salesperson is creating a proposal or quote.
But how do you configure CPQ to deliver the right up-selling option? That requires some sales smarts at the managerial level. The customer’s pain points needs to be considered, and the sales manage needs to become a subject matter expert about his products – especially new products – to help configure the system for maximum effectiveness. Selling last year’s best upselling options will not result in optimum results this year, nor will selling them to customers based solely on their main purchase instead of on the problems that motivated them to make that purchase.
Some argue that criteria need to be included that may restrain a salesperson from offering an upsell at times, too. V. Kumar and Denish Shah made this argument effectively in a Harvard Business Review article, stressing that automatically-generated upselling attempts made outside of the context of the customer (i.e., purely software generated) can backfire, damaging the customer experience and threatening customer loyalty.
The two authors also point out that one in five cross-buyers is highly unprofitable – meaning that you may be realizing more revenue from them but, because of the nature of their spending or their behaviors, you end up losing money in selling to them (and the amount of money is proportional to the amount of cross-buying they do). While it may mean a slight drop in total revenues, identifying and shifting the emphasis away from these customers is a useful way to add points to your margin.
In any of these scenarios – whether it be selling at the right time to promote loyalty or selling to the customers that will deliver profits - the right approach is for the sales talent and the sales technology to work as a team. CPQ can serve up the best options based on the data, but then it’s up to the sales talent to determine whether the time is right to upsell the customer or whether doing so is going to backfire. That may be assisted by mores sales technology analyzing the buyer’s behavior, recent history and other information – information which would otherwise be hidden without technology to record and manage it for the salesperson.
To learn more about CPQ’s power to deliver the right upsell at the right time, read our CPQ Buyer’s Guide, or learn some practical lessons about what CPQ can deliver through our report 3 CPQ Lessons from Smart Companies.