How to Immediately Add 10 – 30% Profits Using Up-sell, Cross-Sell and Bundling Strategies

To the question which is the most challenging job for the sales and marketing division of a company, my business guru replied without any second thought that it is definitely acquiring a new customer. Indeed, this job is the toughest, the costliest, and most complicated.

Companies spend loads of money to acquire a customer. Firstly, they have to generate a lead, then to entice a prospect to use their products. To do so, they run advertisements in newspapers, magazines, television and radios. They may also showcase their products in tradeshows, organise seminars to educate their prospects or even have a team of sales people calling up corporations to introduce their products.

Once the lead is obtained, next on the agenda is to build rapport by making our prospects like and trust us. We have to find out their needs, both logical and emotional. We have to craft out a value proposition that is uniquely compelling. And we have to convince them that our solutions are far superior than that of our competitors.

But along the way, be prepared to face rejections, objections and play negotiation games. We may have to follow-up with have a dozen of meetings and endless rounds of talks on the coffee table. If it involves a big deal, we may have to work overtime to strengthen our relationship through outings to karaoke, expensive dinners or “wine and dine” in short.

The processes may be daunting but every business has to continually add new customers to their list. We must always find new avenues to reach out to new customers. As the process of acquiring a new customer can be so tedious, we must fully optimise the process to ensure the time spent is worthwhile.

The rule of thumb is to always increase the value of each sale. It simply means getting more dollars from each sale or increasing the average transactional value of each sale. As long as our product or service adds legitimate value to our customer, we must always be continually selling more to our customers. By increasing the value of each sale, we can easily add 10 per cent to 30 per cent in pure profits to our bottom line. Sometimes though, it can even be more.

Ideally, we can increase the value of each sales through up-selling, cross-selling and bundling.

Up-selling is a tactic where we request our customers to purchase items that are more expensive, to upgrade their current subscribed service level or opt for other add-ons where they may not have previously considered.

Next month, my girlfriend and I will be heading to Phuket for a vacation. We are putting up in a four-star boutique resort called Burasari Patong. The beauty of the resort is it has 13 types of rooms – Superior, Deluxe, Premier, Grand Premier, Grand Deluxe, Grand Premier Pool View, Deluxe Pool Access, Premier Pool Access, Grand Premier Pool Access, Classic, Elite, Elite Pool Access and The Mood Collection. An impressive list of 13 different rooms to up-sell, isn’t it?

I know a sales guy who used to work for a five-star hotel at the front desk. His job is to check-in the customers and also to up-sell them. He would causally ask, “Sir, will you be working in your room?” If the reply is “yes”, he will say, “I see that you have booked the superior room, Sir. May I suggest you upgrade to our deluxe room as it offers a very comfortable working table designed especially for executives like you? Many of our executive guests like yourself upgrade to this room for a mere RM50.”

By so doing, the staff would up-sell at least 15% of the resort’s guests every month. Supposedly, the superior room is RM200 a night, he has just increased 25% of the transaction value for that sale. Are you leaving money on the table by not up-selling?

Another value-enhancing method is cross-selling – persuading our customers to buy an additional item that they did not intend to purchase at first. Let me illustrate the strategies low-cost carrier AirAsia uses to cross-sell.

Initially, AirAsia only had air tickets to sell. Now they have even come up with Go Holidays as well as hotel room packages. This is a perfect complement to the air tickets. If we are flying for a vacation, why hassle ourselves by dealing with two vendors when we can purchase our air tickets together with booking our hotel rooms at the same instant?

We head to the airport, and wait to board our plane. Once the announcement is heard, passengers will make a dash to the boarding line. For those who prefer “to beat the queue”, AirAsia offers Xpress Boarding for RM20. For that money, we are given access to the priority lane and earn the privilege to choose our favourite seat by the window.

Inside the aircraft – half way through our destination – if hunger strikes, rest assured our gastronomic needs will be taken care of. Even to quench our thirst, mineral water is available for RM4 a bottle. Everytime I fly AirAsia, I observe that about 20% of the passengers bought something. But wait, there is more …

Next comes the caps, t-shirts and pens for our grandma. These souvenirs – in their red, striking colour – look too good to resist, hence another RM15 spent.

And for the safety-conscious passengers, parting with RM15 for a RM50,000 insurance protection may be a small price to pay. Lastly, if we do not want to trouble our family members to come pick us up at the airport, we probably can take a coach journey to KL Sentral for RM9.

Let us do some math here:
Xpress boarding: RM20
Water and cashew nuts: RM9
T-shirt for grandma: RM15
Travel protection: RM15
Coach ticket: RM9
Air ticket: RM300
Cross-sell: RM68

The cross-sell value of RM68 represents a 22.7% increase in transaction value for one passenger. Multiply that with the number of passengers per flight and multiply that again with the number of flights a day. The sales increase reflects gorgeously on the profit and loss statement. Are we cross-selling effectively?

Bundling or combining several items together and giving a discounted price is another way to get our customers to spend just a little more and get a better value.

Back to the resort I am staying in Phuket. Besides the spa and french restaurant that they can cross-sell, they can also bundle the rooms together this way: stay five nights but just pay for the price of four. Or the massage lover’s package is three nights with 120 minutes of massage for two persons. The lover’s package is three nights with 60 minutes of massage each and also a romantic dinner for two.

Bread Story uses this strategy as well – buy three breads of any type and get one free. G2000 sells its trousers this way – buy any two pairs and get 30 per cent off the second pair. I have a slimming centre client who bundles it this way – sign up for 10 treatments and get two free sessions. McDonalds offers value meals – a burger, fries and soft drink.

One of my training games requires a compass but I could not find any compass at the neighbouring bookstore. The closesest thing the shop has is an “eight-piece math set + two metal compasses” consisting of a divider, ruler, protactor, lettering stencil, pencil, sharpener, eraser and set squares.