One Way to Increase Revenue: Upsell!
There are two ways to grow a business (other than acquisitions):
1. Increase share of market.
2. Increase share of wallet—get your customers to spend more with you than at the other guy's emporium.
During the Internet boom, I belittled the start-ups that offered dog and cat food over the Web and shipped via UPS. I could get the stuff at my supermarket and the idea of paying extra for shipping the dead weight of canned pet food seemed preposterous.
Fast-forward 12 years. I have an elderly gentleman dog—a 15-year-old cocker named Auggie—with a delicate interior. He requires Iams low-residue kibble, available only by prescription at the veterinarian. However, our wonderful dog doctors are 20 miles away. So I started ordering Auggie's food from PetFoodDirect.com
Every time I order a bag, I get a pitch for the auto-ship plan:
Repeat delivery with Auto Ship Makes you Life Easier!
- SAVE 15% on EVERY ORDER! (Our Lowest Price Guaranteed!)
- Never Run Out of Pet Food, Meds, or Litter Again
- Enjoy Repeat Delivery ... on YOUR Schedule
This upsell is a terrific deal all around: PetFoodsDirect.com is guaranteed of charging the customer's credit card at specified intervals and the customer gets the lowest price. What's more, PetFoodsDirect has created a comfort zone for its busy customers who won't go price shopping every time pet food is needed.
Alas, with a 15-year old dog, I operate under George Burns' dictum: "At my age I don't even buy green bananas."
An Organic Supplement Client
Recently, I did work for a cataloger in the field of natural and organic supplements, nutrients and remedies. Good stuff. Doctor approved and marketed through catalogs and individual mailings—both to prospects and existing customers.
On the order forms was a little box to check for the automatic refill program (auto ship). When I suggested this was a complex idea that needed more selling copy, I was cut off at the knees. "When customers call in their orders, our telephone sales reps offer this. Twenty percent of our customers are on the auto-ship plan."
Unlike 50 pounds of dog kibble, pills and tablets are sold in one- or two-month quantities. Auto ship in this business is exact and profitable. The lion's share of the firm's customers are senior citizens and forgetful. The copy points are obvious:
- FEAR: Don't take a chance on inadvertently losing the benefits of these nutrients and getting sick as a result.
- GREED: Save 30% (or 40% or 50%) and at the same time be sure of enjoying continued good health.
- GUILT: Don't deprive your system of these valuable, doctor-approved nutrients and remedies.
- SALVATION: Testimonials here from happy old customers that credit these pills for making them feel 40 years younger.
An old business rule: 20 percent of your customers will account for 80 percent of your profits. My bet is that the 20 percent of customers on the auto ship plan are the most profitable.
I offered to work like the dickens on tests to convert all his customers to the automatic refill system. The client said that some tests were in the works.
Package Inserts and Package Insert Programs
One of the times a customer is in the mood to order something is when a package arrives filled with goodies from a store or cataloger and the family happily opens it.
Smart marketers always include another catalog and/or some special offers in a shipment of merchandise, and chances are they more than pay for themselves.
A number of catalogers offer package insert programs, whereby outside mailers (presumably not competitors) can include direct response offers in merchandise shipments from catalogers and retail stores. These are often worth testing.
Renewal at Birth
Another upsell technique is used in the magazine and newsletter subscription business.
A sample offer: Take 4 issues—FREE! Cancel any time, no risk, no obligation. If you decide to subscribe, a full year—48 additional issues—will be just $19, a 60% saving under the regular subscription rate and 80% less than what others pay at the newsstand.
The Billing Effort
If the subscriber does not cancel during the free trial, a welcome letter and bill for $19 is sent. On the bill are two boxes to check:
- Yes, send me 48 additional issues for just $19. Here's my check or credit card number.
- I want to save more. Please send two years for a total of $39.
In the parlance of the subscription world, this upsell is known as "renewal at birth." It brings in extra cash and increases the advertising base from one year to two years.
In the 1980s when I was publisher and owner of WHO'S MAILING WHAT!—a newsletter about junk mail for junk mailers—I would attend the Newsletter Publishers Association conference at the Mayflower Hotel in Washington every June. One year an icon of the business—financial publisher Howard Ruff—gave a speech on the arithmetic of running a newsletter. His opening line:
"If you need money, never, never, never ever borrow it. Instead, always go to the Advance Renewal National Bank!"
Publishers short of cash can send out a fabulous discount renewal offer far in advance of the subscription running out. Most folks don't have a clue when their subscription is up for renewal, so they send money for another two or three years. This "advance renewal" scheme always brings in needed cash.
FLEDGELING PUBLISHERS NOTE: Under publishing rules, if you take cash for a magazine or newsletter that you intend to deliver in the future, you must deliver the publication as promised or you're in trouble with the FTC. Some eager circulation directors have been known to send advance renewal efforts every year which means they can owe 20-years or more worth of issues. When it comes time to sell the publication, this unfulfilled subscription liability can cause a serious diminution of the actual value of the magazine.
Takeaways to Consider
- Old rule: It's five times more profitable to sell an existing customer than acquire a new one.
- "The most important order you ever get from a customer is the second order."
—Maxwell Sackheim (1890-1982), copywriter, co-founder (with Harry Scherman) of Book-of-the-Month
- Presumably your existing customers like you and will welcome a good offer from you.
- The term "upsell" has acquired a negative meaning in some circles. For example, a shyster advertises merchandise at an obscenely low price and then takes the shopper into his confidence and reveals that the thing being offered in junk, but he happens to have something real good for more money. This is known as bait-'n'-switch, "drip pricing" or "shrouded pricing" and can raise red flags at the FTC.
- However, if done on the up-and-up, upselling can be a good deal for both buyer and seller.
- Always spend time coming up with tests that will pry more cash out of your existing customers. As Willie Sutton said about robbing banks, "That's where the money is"
- Direct marketing is like fishing. You charter a boat and go deep-sea fishing in the vast ocean. When you land a fish, you capture it alive, bring it back to your private inland salt-water pond and coddle it. When you go fishing in your private pond, you'll get a lot more bites than when out on the broad ocean.