Upselling is by definition the sale of a product or service at a higher level and price than that originally purchased by a customer, i.e. a form of upgrade in the product or service purchased. Thus, it is a sales strategy aimed at inducing the customer to purchase the higher-end version of a product or service at a higher value because it is newer, improved or premium at a higher price in exchange for an increase in the customer’s benefit.
Upselling is always a profitable strategy for the company offering it because it is risk-free. This is because the offer takes place at a time when the consumer is already predisposed to purchase; therefore, the idea of adding a plus to the product or service for which the purchase is to be finalised can easily be accepted or in the worst case rejected, without compromising the initial purchase.
In addition to the benefit in terms of incremental profits, this strategy can lead to other benefits such as long-term customer loyalty. This happens when the added value brought by a higher category product is recognised by the customer and is therefore considered real. In that case, the customer will tend to appreciate the suggestion received and the attention shown through that advice. Moreover, when the customer perceives this added value, he will be induced to continue buying the product of a higher level and price, increasing the average value of the purchase.
Generally, this effect results from the combination of two elements:
- the first is called anchoring and consists in the fact that the mind of the potential buyer binds itself to the price of a product or service and uses it as a basis for calculation. Consequently, the option proposed through upselling will not be evaluated in absolute terms but always in relation to the price of the product still.
- The second element, on the other hand, is that of customisation, whereby being given the opportunity to customise the product or service one was choosing, so as to make it more in line with one’s own needs or aspirations, determines the attribution of incremental value to the product or service itself on the part of the customer.
The two main effects linked to such a sales strategy are thus related to increased revenues and customer loyalty.
Upselling in Hospitality. Timing and examples
These discourses apply to most sectors, but one of those in which practices of this kind have been adopted for a long time and to a large extent is certainly tourism and hospitality.
In the hotel industry, the first moment is the one before the stay, in which, using all the touch points (email, app notification, sms, call…), in addition to information on the chosen stay, it is possible to make an upselling proposal, for example in terms of a room with higher standards and services. Subsequently, a second useful moment is when the customer checks in, where it is possible to offer an upgrade on what has already been purchased. Finally, at the end of the stay, this strategy can be put into practice, e.g. by offering the customer a discount or a voucher on the next purchase, in order to incentivize a new purchase.
Finally, it should be emphasized that the choice of when to carry out an upselling action and how to do it is important to be data-driven. By analysing the information on customer behaviour available, it is possible to make more profitable and tendentially also more effective decisions. This stems from the identification of similar patterns of behaviour, the clustering of the same and the possibility of using this wealth of information with current and potential customers to increase customer satisfaction and the structure’s profits.