How to Upsell: 5 Tactics to Boost Your Customer Lifetime Value

Photo from MakeWebBetter

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The two main ways to increase revenue are: more new clients or selling more to your existing clients. For many companies, the second tactic proves more efficient (and often easier) because it dramatically improves “customer lifetime value.” 

This metric is important because it determines if your customers are creating a profit for your company individually. Boosting your CLV is also healthy from a “top down” perspective, as increasing upsells to your existing customers generates new revenue and improves cost-efficiencies across the board. 

However, upsells can be tricky… Focus on the incorrect value proposition, and you can end up losing trust or spamming customers. They can view your upsell attempts as nothing more than a money grab, so how do you upsell the right way and boost your organization’s customer lifetime value? 

Let’s explore five proven tactics you can use to boost customer lifetime value… But first, let’s discuss what “upselling” really means – and how it’s connected with the CLV metric.

Upselling 

Upselling occurs when you promote add-on items (typically at a higher cost) to an existing customer who is about to purchase. Upselling is all about influencing the customer to upgrade their plan or product, and buy a more expensive and/or improved version.

For example…

Suppose you run an email management platform, and you have a company website where you conduct most of your sales. You can use your website to display three or more subscription plans. Each plan shows what functions and automation are available, teaching the customer how much value they can get from the more expensive plans. 

Upselling works best when it demonstrates how users benefit from paying more. The key to this approach is that the benefits you list outshine the extra costs for the more expensive subscription plans. 

As such, upsells can increase what your customers spend, boosting their customer lifetime value and your profitability. Furthermore, the additional marketing costs of making an upsell are generally zero.

Cross-Selling vs. Upselling

Upsell vs. Cross-sell
Photo from Medium

To achieve successful upselling and see higher conversion rates, you must understand the difference between upselling and cross-selling. As described earlier, upselling happens when you propose a higher cost product (or one with more desirable traits) to your buyer.

Cross-selling is a bit different. Rather than favoring a superior product as a replacement, a cross-sell supports items and services that can be paired or used together with the selected product.

For example, if your online store sells computers and laptops, a cross-sell might offer a wireless keyboard or mouse.

Now that you know what upselling means, and the difference between upsells and cross-sells, let’s move to how you can use upselling tactics to boost CLV.

Upselling Tactics to Increase Your Customer Lifetime Value 

Again, upselling can have a significant impact on conversion rates. However, other metrics and performance indicators can be positively impacted too.

CLV represents the revenue you expect to generate over each customer’s lifetime. If you foresee a client purchasing a lifetime subscription plan at $99, their CLV is $99. However, if you upsell and offer them a better plan with more benefits, they might purchase the premium plan at $179 and improve their CLV.

Working to increase your customers’ order value in the short term improves their long-term value. For this reason, you need to stop leaving money on the table! Your existing customers who are thrilled with your business want more of you… So explore our five favorite tactics for upselling and boosting customer lifetime value. 

Upsell from a Freemium Product or a Free Trial Version 

Many modern-day companies offer a “freemium” version of their product and upsell from there.

Let’s look at Grammarly, for example. This technology company offers digital writing assistance software based on AI and natural language processing. It leverages a freemium service where free users are inspired to switch to a paid subscription. Grammarly makes money by upselling premium plans that begin at $11.66 and go up to $29.95 per month.

Grammarly pricing
Photo from Grammarly

The goal with freemiums is to let prospective customers experience your product and customer service, while seeing some results for free. 

Once they feel comfortable with what they get for free, customers think, “Wow, what if I invested in a premium version of this service? What kind of return would I get?” This is where they pay for your premium plan and become active contributors to your company’s bottom line.

Another option here is offering a free trial period. In every industry, it’s essential to realize that your customers select your service or product to solve a problem or make their life simpler. 

If you have a business that offers a solution to people’s needs, you can run free trials. If customers like what they experience, they’re more likely to purchase your product or service after the free trial period ends.

Both freemium products and free trials are a great way to prove your product’s value and showcase the benefits your customers receive once they purchase a paid plan.

Bundle Relevant Products 

Earlier, we reviewed how cross-selling means suggesting add-on products. Well, bundling is a similar strategy. Instead of recommending supporting items, you group them together and upsell them in a bundle.

Suppose you have an online store that specializes in outdoor gear. In that case, you can offer the “The Ultimate Camping Bundle” deal, which might include a four-person tent, two sleeping bags, floor mat, 60L backpack, travel pillow, earplugs, eye cover, etc. 

The package price should be better than the total of the unit prices for each item, so it’s a win-win for both parties. Bundling relevant products together is a fantastic sales tactic that Nintendo regularly uses to upsell their products.

Nintendo Switch bundle ad
Photo from Nintendo Official UK Store

Pitch the Value vs. Cost of Your Upsell 

When you upsell to your existing customers, they can feel like you’re forcing them to spend more money. For this reason, focus on the upsell value rather than the expense. Explain how this upsell will bring them unique benefits and, if applicable, significant profits.

Since you already have them as a client, don’t waste time assuring them of your capabilities and qualifications. Instead, clarify how their problem is damaging their situation. Then develop a comprehensive strategy for how your offer helps solve the issue.

Hold to a < 25% Upsell Price 

When offering an upsell, always present a moderate price increase. An upsell price should never be higher than 25% of the original product or service being purchased… And again, you must justify price against value.

If your upsell price is significantly higher, the client will likely go through a more comprehensive buying decision process, which can delay the purchase. So, as a general rule, keep your upsell priced under 25% of the original purchase.

Always Combine Your Upsells with Real Proof

When proposing an upsell, always use proof to win over your customers. People need evidence to convince them before making significant purchase decisions. 

For instance, case studies let your clients know that others found your product or service worthwhile, and it resolved their issues. Proof is powerful.  

In Conclusion 

Whatever your type of business, applying these upselling tactics can improve your customer lifetime value significantly.

Just understand that a single standalone task, such as offering an upsell, is rarely the only reason behind a revenue increase. Successful upselling is closely tied to improvements in all customer touchpoints, from marketing to sales, customer experience, and back into sales.

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