Companies often look to sell more expensive goods. Those should bring more profit, right? Or is offering your customer lower priced products and services better for your bottom line? Truth is somewhere in between and a better way to build a customer base is considering both.
So what is the difference between upselling and downselling and how can we use them for maximum business impact?
What is upselling?
Upselling is the marketing and sales practice of offering a more expensive product instead of the one they were considering.
For instance, when someone comes to buy a smartphone try to convince them to go with the version with extra memory, higher resolution screen and better camera. Or switch from private label to a premium brand, for a premium price of course.
Very often, customers will feel more comfortable with lower price points when starting their evaluation.
Once they are a bit further along their customer buying journey an have descided to buy a product to solve their problem, the consideration of alternatives starts. A more expensive version is part of customer phychology and only when the benefits outweigh the price difference will they be persuaded to buy the more expensive version.
What is downselling?
Downselling is the opposite of upselling. Instead of the more expensive product, you propose a cheaper alternative. This is often done when interest in the pricier version is lacking. But there can be other reasons as well. Older models or out of season products are often sold at lower rates to get rid of inventory.
Benefits of downselling
Down-selling can be a great tactic and even more important to company success and developing customers over time.
- Adding entry-level products into your product range allows your brand to start developing brand awareness and brand loyalty in the audience segments that cant afford premium products at the moment, but will later grow into brand loyalists and advocates.
- Lower priced items might (contrary to what you’d expect) have better profit margins and be easier to sell in volume, so end up being more profitable. It can greatly increase foot traffic or website traffic, and gives you an edge over competitors with similar products.
- Another benefit of downselling is that it can create a sense of urgency as customers buy before prices go up when you make offers to your existing customers that are only available for a limited time or quantity. It will motivate them into purchasing again from your company because they feel more valued by the business.
Next to both upselling and downselling is the related tactic of cross-selling. Cross-selling is another way to increase sales. Suggest to add a related product to a customer. The goal of cross-selling is to increase the value the customer gets from your store.
An example of cross selling is added warrantee. This also increases brand loyalty.
Online marketers are often confused about the difference between upsell and cross-sell
In online marketing, the term “upsell” is very often used, when it’s really describing “cross-sell”. The difference is this: Say you are selling someone ear buds to go along with their phone, that is cross-selling.
When the customer comes in for a cheap model phone and they end up buying a more expensive version, that is an upsell.
The earbuds are an addition, but not the same product. They are a different product category, actually. Now this is where the confusion starts, because if the more expensive version is a package with multiple products, it is a cross-sell – even if many will call that an “upsell”.
Good to know the difference, using the right definitions projects a professional image to business connoisseurs. The terms are so often misused though, better not to start a discussion about it.
Strategic use of upselling, downselling and cross-selling
So why the focus on downselling, up and cross-selling? Well there is one reason: It can be a true profit generator. Proper use of these tactics in a right sales-mix can lead to multiples in bottom-line profit.
All advanced marketing and business strategy considers the options for upsell, downsell and cross-sell as a part of their business growth strategy. It however might take a keen product marketing manager to fine tune the exact offering, range and methods to be optimal.
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