MBA2703 How To Make More Money With Upsells & Downsells

0:00Today I want to share with you one of the simplest ways to make more money in your business without finding new customers, without running more ads or trying to get more traffic, without changing your product. It's upsells and downsells. Upsells and downsells is a strategy we all experience as consumers, but forget to apply in our own business. We see it every day. It's the same strategy McDonald's uses when they ask you, would you like fries with that? Or would you like to upsize your meal or go large, as they say? Today, I want to show you what upsells and downsells are, how they work, and how to apply them to your own digital business, your own online business without annoying your customers, without making them feel like you're being pushy.

0:39You're actually being helpful with this strategy. I'm going to show you step by step. Let's get into it.

0:52Welcome back to the$100 MBA show. I'm your host, Omar Zinhome, where I deliver practical business lessons three times a week, Monday, Wednesday, and Friday to help you start, grow, and scale your business. Real quick, if these episodes help you in any way, hit the follow button on this podcast app. It helps us to keep bringing you practical business insights three times a week for free. Thanks. Let's start with what they are and why you want to use them. Let's start with upsells. Upsell is offering a higher priced or additional product after a customer commits to buy. So, for example, you order a burger at a fast food restaurant and they ask you, would you like to make it a combo?

1:34Your intention was to buy a burger, right? But then they offered you, hey, you can get fries and a drink for an additional$4. You can obviously refuse the upsell and say, hey, I just want a burger. Or you could say, no, that's actually a pretty good deal. I'd love fries and drink with that for just$4. You're giving the customer optionality in this scenario. They don't have to buy, but by giving them the option, by presenting it, you're actually making yourself more valuable to them. Because now they know that, hey, I could have gotten that if I wanted to. I've made a decision not to, or I've made a decision to go ahead and buy it because it's a good deal or it's exactly what I was looking for.

2:16A downsell. A downsell is offering a lower price alternative when a customer says no to your main offer. This is like Netflix offering you their basic plan, which is their cheaper plan that allows you to use a limited number of devices, or maybe it's not full HD, when you cancel maybe a premium plan. So hey, maybe you don't like this premium plan, but maybe you want to hold on to Netflix and pay a little bit less if you go with the basic plan. Again, you're giving the customer optionality. There is a good chance that they're canceling because they don't want to pay that much money. Maybe they don't see the value in what they're getting.

2:53but maybe they would see the value in the lower plan. Okay, that's much cheaper and I can afford that, or I can see the value in that. Of course, they can cancel and not take the downsell, but by giving your customers options, you're actually serving them better. So why do upsells and downsells work? Well, the hardest part in sales, in business, is getting someone to say yes the first time, to get the actual yes or the buy or the transaction. Once they've decided to buy, they're in the buying mode. They already have decided they're going to go with you, right? They trust you. Psychologically, it feels like a small step to add or to adjust the purchase.

3:33So just even think about your own psychology when you go to a store or a restaurant or McDonald's, for example, and they offer you that upsell. It's not a big decision, right? You're just saying, yes, I want fries. No, I don't want fries. Yes, I want to make it a combo. No, I don't want to make it a combo. It's not the same size of decision of making the decision of going to the actual restaurant and buying the food. What we're going to eat today, that's a bigger decision. Once they've made the decision, okay, we're going to go to McDonald's and they go to McDonald's and they're at that counter, that big decision is already done.

4:07All the other decisions at the time of transaction is a lot smaller. It's less pressure. It's easier for them to make. That's why businesses from Starbucks to Amazon, from your local supermarket to SaaS startups, they use this constantly. It's called average order value, AOV. They're increasing the average amount of money you are making per order without adding in new customers, right? Because they're just spending more with you. This is why your corner store, your supermarket have gum and chocolate and candies and little items. You might want gift cards, right? You see that at the checkout line.

4:46These are called point of sale upsells because, hey, you're there already. You're scanning things. You're putting things on the conveyor belt. So it's an easy upsell and increases the average order value for each customer. So I'm going to give you some rapid fire real world examples of this in action. So we talked about fast food and would you like fries with that? But even fine dining, right? They have like a chef's menu or tasting menu. And then there's the option to have the wine pairing, right? Where you pay X amount of dollars more with your degustation to get the wine pairing. That's an upsell.

5:21Airlines, right? They are the king of this, right? They have economy class. And even within the economy class, there's different classes of tickets that allow you to do certain things like refund or change the dates or luggage and all that kind of stuff. Then they have premium economy. Then they have business class and they have first class. So they have all different upsells that you can look at. And of course, you know that when you check out in any kind of like, especially low cost airline, they have add baggage, add travel insurance, add seat selection, add your meal. If you want an exit seat, that's an upsell.

5:53So they have that process in the checkout because they're giving the customers optionality. And now people have just gotten used to this. Now, I'm going to say, first of all, that that experience is not the best experience for the customer. And I'm not a big fan of that, of annoying people with all these upsells. But I do like the idea of having at least one upsell and downsell with your products. So that way your customers at least know what's available and it's frictionless. And you want to make this as pleasant as possible. Unlike some of the checkout in these, you know, low cost airlines where you have to go through five or six or seven pages just to finish your actual reservation.

6:32And there's like this timer. It's a lot of pressure. It's not a fun experience. So there's ways to do this tastefully in your online business. Another example is like when you buy shoes at a shoe store, right? They suggest socks that go with it or shoe cleaner or, you know, the protective spray that allows it to be like water repellent. These are upsells. Gyms, they have a membership. You can also add personal training sessions. You can add nutrition coaching. You can add buying, you know, their protein shakes and their creatine. These are all upsells. There's also downsells, of course, in the gym.

7:07They say, hey, our annual price is XYZ or you can go monthly. That's considered a downsell. Some gyms and some reoccurring like shared spaces, like co-working spaces, they allow you to like have a really cheap membership that only allows you to go to the facility three times a week or two times a week. And that's a downsell. Hey, you don't want the full membership, fine, but we got this option that's less expensive, but limits your membership. Now, the funny thing is, is that often downsells increase the value of the actual flagship offer or your main offer where they say, oh, actually, yeah, I do want to go every day.

7:42I see the value in that now that I'm looking at this other plan. So as you can see, you are experiencing upsells and downsells every single day. But most entrepreneurs don't realize they can use them in their own playbooks in their own digital businesses. So let me give you some examples in the digital product world. And you can do this tastefully without being annoying, with just giving the customers the option to get more value or make the best decision for them when it comes to maybe getting something that's a less expensive offer and exactly what they need. So for example, an online course.

8:17You have a main product, maybe the course is$200, and then you have an upsell to have a one-on-one coaching call for$99. So a lot of people will go for that upsell just because they want one-on-one coaching. They want to speak to you and ask some questions and get some tailored advice. And for$100 for an hour session, say, for example, is pretty reasonable for them. And they can see the value. Now, some people are not going to see the value. And that's because that's not what they need. And they may even see the core product, the main product, which is a$200 course to be out of their price range, and maybe too much of a leap for them at this moment.

8:53You have to remember that your customers are on a spectrum, some people are ready and prime ready to buy and ready to pay whatever you are asking them to pay. and some people not so much. So a downsell is if they say no to the main offer, you can offer, for example, a$49 workbook or template or a mini version of the course or maybe the first module of the course or even the course without lifetime access. So you're like, hey, you're not gonna get lifetime access. You can have access to this course for 30 days if you wanna consume it and take it. It's$49, but after that, it'll be gone. And some people will take that and be like, hey, I will consume it and that's perfect for me.

9:29I'll pay$49 for that. Let's go into membership sites. Your main product might be a monthly membership of$49. An upsell could be an annual for$4.90, which allows them to get two free months. And a downsell might be a live version of your membership for$29 a month with fewer features or benefits. SaaS, software. I ran a software company for 10 years, grew it to over 30 ,000 users. I learned a ton about pricing and packaging through the process before we sold the company exited to ProProfs. So what can you do with software? Well, upsell, you can upsell extra storage, premium features, premium plans, concierge onboarding, white glove service, whatever it might be, premium support.

10:10Some people offered that. We didn't do that because we felt like we wanted to give premium support to everybody. But these are options. A downsell could be a lower tier plan for those who don't want to pay full price or just want to try you out. What about e-commerce? What if you sell like physical products on an online store? Let's say you sell cameras, right? You could buy a camera and the upsell is a lens bundle or a downsell is a cheaper tripod than the one that you're recommending in the bundle. And Amazon does this a lot with, you see it, frequently bought together, right? They know that people want to accessorize, want to have options to improve their experience with this new product.

10:49But quick pro tip, Digital products have the best margins for upsells because the cost of delivery is basically zero. So how do you add these upsells and downsells to your funnel right now? Step one, map your customer journey. What's the natural next step after the main offer? Whatever your main offer is, what's the next thing that your customer wants to solve, wants to do? Create that offer and create a one-click upsell. Don't make them re-enter their payment information. Again, use a checkout tool that supports one-click add-ons. So that way, when they're in the checkout process, it makes sense to add on the template or add on the coaching call.

11:32Step three, decide on your downsell. Ask yourself, if they say no to my main offer, what's a smaller version or a starter option of my main offer? Again, this could be the offer itself or the product itself, but with limitations. Maybe a limitation of time or content or support. Step four is to test the placement of these offers. If you want to do a pre-checkout with the upsell or post-checkout after they say thanks for your order and you want to add this to your cart. So you want to test these out in your own system or follow-up or cart abandonment emails for downsells where you email them and say, hey, I saw you checked out this offer but didn't buy.

12:14We have another option that's a little less expensive but have these limitations. it might be up your alley. And lastly, step five, you want to track the impact. As Peter Drucker says, what gets measured gets managed, right? So you want to watch what your average order value is and the conversion rates. So even 10 to 20 % take rate of an upsell can transform your revenue incredibly. So when you're getting started, look at what your average order value is right now so that you have a benchmark to measure against. Before we wrap up this episode, I want to give you some parting advice, some last tips to help you out.

12:49When you're thinking about building your upsells and downsells, think about building like a menu, like you have a restaurant and you're building out your menu. The burger is your main product, right? The fries, the drinks, the desserts, that's your upsell menu. And a smaller burger, instead of the Big Mac, just a cheeseburger, is your downsell. So how do you make money with upsells and downsells? Stop thinking only about the sale and think about the total order and how I can solve more problems for my customers and give them more value. Because if I give them more value, they'll be willing to pay for it.

13:23This is the thing a lot of people don't comprehend when they're starting out in business, is that people are willing to pay for more value. And we just think, who's going to pay more? Lots of people. There's a lot of people that have enough money to spend to get more out of what you offer, meaning that they want you to help them with other things. Do this right and you'll boost your revenue without spending more on ads or chasing new customers. Now, before you go, I want to leave you with this. If you ever have the feeling like, I don't want to know my customers, the customers are going to get angry.

13:54Ask yourself how you feel as a customer. The airline example of checking out and buying an airline ticket is the worst example and the other side of the spectrum. But on this other side of the spectrum where upsells and downsells are great, for example, of the company, Apple, right? Apple has a ton of products in its product line, right? It has the AirPods, which is kind of their starting line product. And they have, you know, the watch, the Apple watch, and then they have iPhones and they have iMacs and they have iPads and they have AirPod Maxes, you know, like I can go on and on and on. And the reason why they do this is because they know that once you consume one product, you're going to be like, Hey, actually, I love their products.

14:31They're high quality. They work perfectly. I might want to consider buying my next tablet from Apple. I need a new laptop. Maybe I should look at Apple since I love their other products. So we're not so inconvenienced by it. We actually love the fact that we can get more value from a company that gives us value in the first place. If you found today's episode helpful and you want more practical business lessons to help you start, grow and scale your business, the best thing you could do is subscribe to this podcast. Hit subscribe or follow on your favorite podcast app, the one that you're using right now, whether it's Apple or Spotify or wherever you listen to podcasts.

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