“Would you like fries with that?”
That phrase is the most familiar example of upselling in the world. As cliché as the phrase made famous by McDonalds may be, it still strikes at the heart of the add-on issue. A report from Forrester Research states that on-page recommendations create 10 – 30% if eCommerce revenues, and as much as 35% of online retail titan Amazon. You might say add-ons are a big deal!
The basic concept is that while selling your big ticket items, once you’ve clinched the sale and you have the customer in “buying mode,” you offer him or her something else.
Of course, there’s a good chance you are not selling hamburgers, so your best add-ons may not be quite as obvious a fries. What’s more, McDonalds’ French fry offer is actually a bad sales manoeuvre, as it uses a closed-ended question, leaving customers able to say “no” with great ease.
You can add a wide variety of items to customer orders to increase your profits – much more than simply obvious add-ons, like fries. You see, the reason McDonalds offers the fries isn’t just because they go so well with “two all-beef patties, special sauce, lettuce, cheese, pickles, and onions – on a sesame seed bun.” Fries are cheaper to make than burgers, thus they have a higher profit margin.
McDonalds does not release its costs as public information, but you can assume that the company is driving down the cost of the items it sells whilst leveraging its massive selling volume in a way that simply won’t apply to most businesses.
That’s why, in this essay, we are focusing on how you can add high profit margin items to your sales to increase your profitability exponentially.
Although all of the types of products we’ll discuss in this essay loosely qualify as “add-ons,” we’re going to break it down further and sort them into five distinct categories.
To help you make the most of add-ons in your business, we’ll cover the following in this essay:
- Traditional add-on offers
- Cross Selling
Let’s dive right in a find out how using add-on tactics can increase profitability!
Growing profits with added items per sale tip #1: Traditional add-on offers
There are some much better add-on examples than McDonalds’ (often, half-heartedly delivered) fry offer. Big box electronics retailers have been using add-ons to increase items per sale (IPS) on low-margin consumer electronics items for years.
Apple exercises tight price controls on its popular products and implements a minimum advertised price (MAP) for merchandise it sells to other retailers at wholesale prices. Apple also offers only a tiny wholesale discount (thought to be less than five percent) off its own retail prices. This means retailers are left with few options for marking up the merchandise when selling items like the iPhone – and no options for running a strategic loss on Apple items.
This is why the store wants you to purchase an iPhone case, an automobile charger, and a set of ear buds when you buy an iPhone. Those items increase the shockingly low profit margin associated with selling an Apple product. Other smartphones are even more profitable, as mobile device insurers like Asurion offer add-on insurance (which we’ve discussed at length in another essay recently) for Android devices but not iPhones (because pricey iPhones are often subject to insurance fraud).
Since, as Slate points out, an item like a protective iPhone case can carry as much as 45% margin, and can sell for $40 or so, you can figure that, assuming 5% profit on a $600 iPhone ($30), plus 45% margin on the case ($18), results in roughly $48 profit dollars, or a 60% increase in this transaction’s profitability. That, of course, involves a doubling of the IPS for our hypothetical iPhone reseller. Such a store would need only to do this for one in every ten transactions to align with our prescribed 10.24% increase in IPS to help you on your path to doubling your profits, as described in our 7 Levers of Business framework.
To add-on to your own online sales, you have to think about the accessories you have to offer. If you sell a big ticket item, what are the logical add-ons you can offer before the customer proceeds to checkout? If you sell guitars, you should be offering strings.
If you sell wristwatches, how about watch straps? If you sell video training products in the digital space, consider selling some of your time by offering paid Skype consultations to go with them. The sky is the limit when it comes to adding-on to sales.
Growing profits with added items per sale tip #2: Upselling
Upselling is the most challenging caveat on “adding on” to the sale in this essay. You see, upselling isn’t really adding on at all, per se.
Upselling involves compelling the customer to buy a more expensive item in place of the one they have opted to buy.
Upselling is hard to do because it requires you to softly backtrack on an already solidified purchasing decision. That’s hard to do in person, but it’s actually easier online.
This is done with comparison tables. Anyone who clicks on “Purchase” at the site shown in the picture below, Dabset, is taken to a page highlighting the companies various packages.
Regardless of which package visitors are after, they are presented with the three potential up-sells from Dabset. All it takes, is a well-crafted table!
Growing profits with added items per sale tip #3: Down-selling
Now that the hard work of upselling has been discussed, let’s turn our attention toward the comparatively easy task of down-selling.
Here are a couple of really simple examples of how this might work.
A menswear retailer sells made-to-measure suits. At the checkout, customers sometimes get sticker shocked when the cost of tailoring is added to the sale. To stave off customers bailing out, the store offers off-the-rack suits that are ready-to-wear and cost less.
Car dealers down sell all the time. If a customer comes to a BMW dealership and eyes the 5 Series sedan, only to decide they really can’t afford it, the salesperson will often show them a 3 Series instead.
The idea is that any sale is better than no sale (not exactly rocket science, huh?)
The challenge for online businesses is found in implementing down-selling on a website. But it can be done. A webinar put out by Autopilot Your Business explains down-selling well. In the webinar, the presenters explain that for an eBook, a down-sell might work in the following way:
“Say the customer has clicked ‘no’ for the up-sell of the audio, the next page might offer them the ‘10 step blueprint’ of the book for $5. This is offering the customer a helpful, summarized version, perhaps something they can put on the wall.” – Andrew McCauley, Autopilot Your Business
That explains down-selling online fairly succinctly. As you might infer, down-selling online works best when it follows a declined offer. So, to fill-in the blanks in the example from Autopilot Your Business, if a customer clicks the “Buy” button for a $1 eBook, you can offer to up-sell them a $9.99 audiobook to save them time reading, but if they decline, you can follow that offer up with a $5 summarized version, still in an effort to sell the benefit of saving time. All of this calls for some careful planning with regard to marketing automation, of course.
Growing profits with added items per sale tip #4: Cross-selling
Cross-selling explains why the supermarket stages candy bars, breath mints, and tabloids right at the checkout counters. No one comes to the supermarket just to get one of those items (or at least, mostly they don’t come just for those things).
For supermarkets, these are called “impulse items” – low-priced items that people will grab just for fun as they purchase their main orders. For those of us in marketing, it’s a little bit different than it is for grocers.
You see this with the “other people who bought this also bought…” statement, as well as traditional add-ons.
The example below, cropped from Amazon.com, shows the product assortment offered alongside a Black & Decker jigsaw. Note that a circular saw and a handheld sander are also offered, as well as the most logical traditional add-ons like jigsaw blades. Note that the cross-sell items are comparable in price (and slightly pricier) than the jigsaw ($29).
Keep in mind that Amazon’s tactic is markedly different from down-selling. A down-sold item is one that stands alone but costs less. Cross-selling operates on the idea that if the customer needs item “a”, they might very well be in the market for item “b”.
Growing profits with added items per sale tip #5: Upgrading
Selling upgrades is a great way to increase the profitability of a sales transaction.
For a good example we can (once again) turn to Apple, which does upgrading with great consistency on its Website. Adding any major product (like the MacBook Air shown below) to your cart immediately redirects you to a page where you can customize your Mac. In other words, when buying one of its big ticket items, Apple offers you can upgrade between the initial purchasing action and checkout.
Apple is not shy about asking for the upgrade where appropriate and neither should you be apprehensive – offering your customers the chance to upgrade will only increase your profitability.
Another place you often find upgrades is the new car dealership. The “base price” of any new car model is just that: a starting point. Premium paint, interior amenities, power and drive train enhancements, and other options are offered to allow customers full personalisation of a new vehicle.
For most of us in business, though, offering an upgrade is slightly more pedestrian, for lack of a better term. Do you sell a product that can readily be upgraded? The best time to offer the upgraded features is during the sale!
Service industries routinely do this as well. If you visit a hotel deals site and book a basic room at the lowest available price, you are often offered an upgraded room before checking out. Airlines will sometimes offer discounted business or first class rates to customers buying economy tickets, at the time of checkout.
Those industries tend to showcase their lowest prices prominently to attract customers, saving higher ticket prices for leads already proceeding through the sales funnel. That approach works well, and can easily be applied to many industries wherein an assortment of packages or “tiers” of services are available to customers.
PS – Tools can help you do all this stuff!
Obviously, for online businesses, the techniques we’ve covered call for the use of some marketing tools to make it all come together.
Here are some tools worth checking out to help you automate add-on selling in various ways:
Adobe Marketing Cloud – a CRM that makes data-driven add-ons and upsells easy.
Marketo – a solid, full-featured CRM alternative to Adobe Marketing Cloud
Compare Ninja – as the name implies, online comparison charts made simple
Evergage – an app that helps you personalise the shopping experience on your eCommerce site
Of course, you may already be using a CRM solution that can handle these tasks, as most of the major ones will definitely get the job done.