It’s the start of the year, and you’re looking to set your revenue strategy for the next 12 months. Should you tackle new markets? Go after a competitor’s base? Introduce a completely new product?
One area that has long been regarded as somewhat of an untapped goldmine for businesses is to focus on your existing customer base for revenue growth. Research shows that the likelihood of converting a sale with a new prospect is 5-20%, but climbs to a massive 60-70% for an existing customer. Not only that, increasing customer retention rates by just 5% can lead to a profit increase from just 25 to 95%. Pretty incredible numbers!
Cross-selling and up-selling to your existing customer base in a targeted and strategic way has proven time and again to increase revenue, increase customer loyalty, and if you’re a SaaS company, accelerate time to profit.
The formula for a successful cross-sell and upsell strategy
When we look at the meta-data for our own clients, a clear formula for successful up-selling/cross-selling emerges.
Timing is about identifying a signature event in the customer lifecycle and acting upon it as soon as possible. This then acts as a trigger in your CRM or customer experience platform to deliver your message to that person.
For example, if someone’s been a customer for over a year, you could offer them a discount on a package upgrade: “Get 50% off a HD package for the next 12 months.” For a negative experience, like a prolonged service outage, you might want to offer something eye-catching but short-term, for instance: “Receive 5% off your next monthly bill!”
It’s critical to be able to prompt customers as these events happen. The emotionally charged state that they may be in at the particular moment makes customers more receptive to the offer, and the context of pre-engagement makes them more open to the offer than a random unsolicited email.
To capitalise on this situation, the customer also needs to be able to get the offer right away. If they can claim it with one click, they will, but if they need to complete a form, visit a store, or call someone, they won’t bother. This the Action.
Effective methods for implementing this are in-app or in-cart upgrades that can be done there and then. These upgrades can also easily be made relevant because you can base them on prior purchase history, their current purchase, and/or how long they’ve been a customer.
The final part of the formula is to make sure you are offering value. Ideally, the value of the offer must be equal or greater in value to the financial burden the customer is facing by opting into the upsell or cross-sell. Discounts and premium upgrades are good, a free poster is bad.
Build the process into the business
To make this scalable, businesses need to create a flexible pricing formula that empowers customer service agents and automated systems to be able to offer these discounts. It’s no good to have to send permission up the chain, because by the time approval comes back the customer has moved on.
Customer experience platforms should help you find this formula during the on-boarding process. This will allow you to run tests on different segments and offers before rolling it out to the wider business.
Once the basic formula has been applied and the pricing structure has been created, you can scale up the process across the business in creative ways.
For example, if you’re an energy company, one thing you’re always trying to avoid is paying for energy supply from the grid. A way to reduce this cost and offer something to customers is to offer customers a bonus discount for using less electricity over a given period. For example, if you know that the upcoming weekend is likely to be especially hot, and so people will use a lot of AC, you can make them the following offer: Keep your weekend energy use below a certain level and we’ll give you $5 off your next bill. This is a nice surprise for the customer and requires them to do practically nothing.
Win, Win, Win
Research shows that the more you up-sell existing customers, the more their loyalty increases. So farming not only increases revenue, but also customer loyalty, which also then makes further up-selling easier. That’s win, win, win. And it costs an estimated 5 times as much to sell to new customers than existing ones. So that’s now win, win, win, win.