How to Grow Your Business By Increasing Average Transaction

MindStorm, New York’s #1 Boutique Strategy Consulting Firmhas created a series of articles that spoke about the 3 main ways to grow your business:

1.    Get more customers

2.    Get customers to spend more per transaction

3.    Get customers to make purchases more often

In this piece we will discuss the second- how to get customers to spend more money per transaction. Today we are going to discuss 3 great strategies that can add millions to your revenues. The 3 strategies are:

1.    Upsell

2.    Cross Sell

3.    Bundling

The most famous cross-sell comes courtesy of McDonalds: “Would you like fries with that?” The next time you go to any fast food restaurant I’d be shocked if they didn’t try cross-sell or upsell techniques on you. Others you’ve probably heard countless times include “Would you like to make that into a combo?” (cross sell) and “Would you like to upsize your meal?” (upsell). But what’s the difference and how can you apply these to your business? Fact is that most small to medium sized businesses don’t have a system in place for upselling and cross selling their customers. When I say system, that means every single employee use the same approach with every single customer on every single transaction. Think about how many sales that you’re company is missing out on by not offering other complimentary products or bigger packages on every single sale.

Amazon reported that cross sell is responsible for 35% of their sales- and that was 2006 so you can imagine what that is worth to them today!

The definition of Upsell is suggesting that your customer buys a product which is higher in quality or quantity to their original purchase. This could be the more expensive model of the same product or service; or that they add a feature that would make it more expensive. With upsell you’re suggesting they pay more in exchange for a better product or service. Or simply- just buying more of it.

Some examples of this are:

•    Buying a 42” TV instead of a 40”

•    Upgrading from economy to business class for a flight

•    or even buying a second juicer at a deep discount to give as a gift

Cross Selling is when you suggest your customer buys additional products or services from a category that is different to the product or service they are purchasing but should be a good compliment to the original purchase.

For example:

•    Purchasing paper to go with a printer

•    Buying a hands free car kit to go with a mobile phone

•    Adding insurance or a warranty

The third strategy you should use to increase your the amount your customers spend is bundling. Product bundling is offering several products or services for sale as one combined package deal. Bundling is the combination of upselling and cross selling. The power behind bundling is that it triggers an intense motivation to buy the package because it is cheaper than buying each piece in the set individually. The best part is that there doesn’t need to be deep discount to motivate the customer on taking the bundle. Combo deals also make it very convenient for people to buy and convenience is a big motivator.

But before someone would be interested in your upsell, cross sell or package, you have to fully explain the benefits of having these other items. You can’t assume that the customer understands why they should get the insurance that you’re offering for example. You should educate the customer on how often spills happen or how often people tend to break the product and what the costs of these repairs will be if they don’t have insurance. This helps your customer completely understand the value of that warranty instead of just asking “Would you like the protection plan?”

So in order to get maximum results let’s discuss the most effective strategies.

Upsell works better when there’s a small difference in price between what you’re suggesting and the product they’re buying. For example “This model has a bigger screen, the technology is newer so the quality is better, and it’s only $100 more.” As a rule of thumb we found that up to 40% of the time you can upsell for up to 40% more than the initial purchase price. Each market, industry, product, service, and sales person is different so test to see what your numbers will be.

We have found that cross sell also follows the 40/40 rule- 40% of the time you can sell other products or services that complement the original purchase. The total of these products or services should be less than 40% of the main purchase. Cross sells not only increase the customer spend but this is an opportunity to offer things that have higher profit margins. One business model is to offer a deep discount on the main equipment to sell high margin supplemental supplies. You often find computer printers discounted to sell high margin toner. Gillette used this strategy offering a discount on the razors so they can profit on the blade refills. What supplemental services or products can you offer?

Now let’s discuss when to do what. Before increasing someone’s order you have to make sure there is an order in the first place. Upsells and cross sells only works once a person has made a decision to buy in their mind. Once they are sold on the purchase then and only then should you offer additional items. At the point which they decide to buy and they are checking out right before giving you the payment you can say “Would you like an additional juicer for only $40 to give as a gift?” But if a person hasn’t figured out that they need one. They definitely won’t need two regardless of the discount.

Once a person decides that they are making the purchase now it’s time to upsell and cross sell. But which do you do first? There are exceptions but the rule is upsell first then cross sell- then bundle. You deal with the main product first and maximize that sale before you recommend the supplemental products. You can’t start with a printer, then offer paper to go with it, and then now go backwards and ask if they want a bigger printer. The whole reason why cross selling works is because in the buyers mind they are already done with the main purchase and this is a little extra. If you put focus back on the main purchase then it’s not complete. At that point you’re actually risking losing the main purchase. So to recap:

1.    Help the customer find exactly what they’re looking for. Many times they have an idea in their mind. You can offer higher options but only to help the customer find what they’re looking for. Don’t make it too confusing trying to push higher too fast. Your main priority is to make a customer commit to any purchase. From that point you go higher.

2.    Now that they are committed to making a purchase introduce them to a higher model or offer more of that product for a volume discount. This should be done as they are checking out for maximum effect. Volume discounts have a high ratio of success at the point where the customer’s credit card is in the sales person’s hand. Your goal is to make the offer attractive enough where it wouldn’t make sense not to do it.

3.    After you upsold the customer it is important that you make them realize that it wouldn’t be complete without the other items that complement the product. Remember as a kid when you got a brand new toy for Christmas but you couldn’t play with it because somebody forgot to get the batteries for it?! Focus on the experience that your customer was looking for making the initial purchase. What good is buying a beautiful 80 inch high definition flat screen TV if you’re not going to use HDMI cables to see the true picture? If your cross sell makes sense, people will buy.

4.    And finally..bundle packages. Now your customer is excited about the bigger tv, they’re buying the other products that will be a great supplement to the tv and for X amount of dollars they can get the whole shebang. This package should have more cross sells opportunities where they can get everything and it will be cheaper as a package. They can be excited about buying everything (remember people like to buy) and they can justify buying more items with the fact that they received a discount for doing so. Again, people buy on emotion and justify the purchase with logic.

If you follow these four steps on every single transaction you will dramatically increase the amount of money customers spend in your business and they will feel great about doing so.

MindStorm is New York’s #1 Boutique Strategy Consulting Firm. If you are interested in learning how you can dramatically increase sales by incorporating these principles in your sales process than call today and ask to speak to a business consultant.

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