Melbourne Herald Sun, 6th March 2010
If you run a business I don't have to tell you how hard it is. You advertise and proselytise, urge and cajole, promise and plead to get a customer through the door. You drag that business in and take great pride in the feat.
But once you have them, do you get all you should out of them? Or do you think your job's done now they are through the door?
There is an art to good business, which is maximising your sale, getting the most out of each customer.
The deli owner knows it, and asks, "Something else?" after wrapping each product. The fast food retailer knows it, when the customer orders a hamburger and is asked "You want fries with that?"
This up selling strategy was made famous by McDonalds restaurants. In the past it added some 35% to the value of each transaction. However by the early 90s fast foods started to dip in popularity under claims of poor nutrition and obesity.
It was Melbourne that gave the world the answer - opening the first McCafe selling coffee and Danish pastries. Now the question is "Do you want a cappuccino with that?" And the per-sale profitability has gone up to some 60%.
The great lessons in up-selling come from the USA. They developed the pattern where some 35% of fast food and snack sales include a soft drink with them. When you consider the billions of dollars turned over by these companies, you get an inkling of the amount of money involved. No wonder the world's biggest McDonalds is in the Coca Cola building in Manhattan.
Another variation of this is up sizing. So when you go to the movies and get persuaded to buy an overpriced coke and popcorn, you are then told: "For an extra $3 you get the jumbo popcorn and the mega coke". Well, what's another $3? But then - when are you ever going to eat so much popcorn?
Up-selling works in every business, not just restaurants. I recall a client with a carpet-cleaning franchise. Their operators were extremely good at their jobs. But at the end they would leave with just the $100 or so cleaning fee - not a great deal to pay two salaries, a van and the driving time. They needed to add to this turnover.
So we designed them a catalogue on how to look after carpets - featuring a range of products that should be in the closet.
As they cleaned, the customer would read the book - and usually buy some cleaning fluids or even a high-efficiency vacuum cleaner. In the end these add-ons could increase the price of the visit by an average of $30. And the customer was happy that she had not been pressured.
When you buy a car you're used to being sold up. ("And would you like a roo bar with that?") Especially profitable for dealerships are the extended guarantees which deliver the commissions immediately - while the later costs are covered by insurance.
Computers are an unlimited field for the technique. I bet none of us has bought one without being persuaded that an extra $100 would double the hard disc and double the ram.
The greatest problem with upselling, in any industry I've known, has always been the staff. They need training, bribing, cajoling, to put in that extra effort and sell a little more. Within hours of reading this piece you'll be in a shop where the assistant will cheerfully take your money without giving a thought to selling you one of the extras or treats hanging round the counter.
And somewhere will be a boss tearing their hair out because of all the missed opportunities from the customers they worked so hard at to pull into the shop.
Ray@ebeatty.com
