Part 5: Upsell Offers | $100M Money Models Audiobook | Ep 942
In this episode of The Game, Alex Hormozi breaks down how businesses can increase profits through strategic upselling techniques. He explains several approaches, including classic upsells that address post-purchase needs, menu-style options that guide customers to higher-margin products, and anchor pricing that uses premium offerings to influence purchasing decisions.
The discussion covers practical methods for implementing these strategies, such as personalizing recommendations through targeted questions and simplifying the purchase process. Hormozi also explores product bundling tactics and the concept of rollover credits, showing how businesses can combine these approaches to create natural, customer-focused upselling opportunities that benefit both the business and its customers.
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1-Page Summary
Different Types Of Upselling Techniques
Alex Hormozi, an expert in upselling techniques, explains that upsells often constitute the majority of a business's profits. He outlines several effective approaches to maximize sales through strategic upselling.
Classic and Menu Upselling
Hormozi describes the classic upsell as offering solutions to problems that emerge after an initial purchase. For example, after buying a bicycle, customers might need helmets or lights. He introduces 'unselling' as a trust-building technique where employees guide customers away from unnecessary items toward higher-margin products they actually need.
The 'prescription upselling' approach involves providing detailed instructions for product use as if the customer already owns it. Additionally, Hormozi explains that offering choices between two products (AB offers) can effectively guide customers toward more profitable options.
Anchor Upselling
Hormozi discusses the anchor upsell tactic, where presenting a premium option first makes the main offer appear more attractive. He shares a personal example where considering a $16,000 suit led him to feel comfortable spending $2,500 on a different suit, demonstrating how premium options can influence spending behavior even when not purchased.
Strategies for Effective Upselling
Hormozi emphasizes personalization in upselling, suggesting that understanding customer preferences through targeted questions can significantly boost conversion rates. He recommends simplifying the purchase process by using stored payment methods and offering choices between options rather than yes/no decisions.
Maximizing Profits Through Upselling
The rollover upsell strategy, as explained by Hormozi, involves applying previous purchase credits to new offers, which can help re-engage past customers and rescue unhappy ones. He advises that the new offer should be at least four times the value of the rollover credit to maintain profitability.
Product bundling emerges as another effective strategy, where complementary items are grouped together under appealing names based on customer types or desired outcomes. Hormozi suggests integrating upsells naturally into the customer experience, making additional purchases feel like logical extensions of the initial service rather than separate sales pitches.
1-Page Summary
Additional Materials
Clarifications
- 'Unselling' is a trust-building technique where salespeople guide customers away from unnecessary items towards higher-margin products they actually need. It focuses on building trust by prioritizing the customer's best interests over making a sale. This approach aims to enhance customer satisfaction and loyalty by ensuring they purchase products that genuinely benefit them. By steering customers towards more suitable and valuable options, 'unselling' can lead to increased customer trust and long-term relationships.
- The 'prescription upselling' approach involves providing detailed instructions for product use as if the customer already owns it. This technique helps customers visualize themselves using the product, making it more appealing. By guiding customers on how to use the product effectively, businesses can increase the perceived value and necessity of the item. It aims to create a sense of ownership and demonstrate the practical benefits of the product.
- The anchor upselling tactic involves presenting a high-priced premium option first to make subsequent, lower-priced offers seem more appealing. By establishing a reference point with the premium option, customers may perceive the main offer as a better value. This strategy leverages the psychological principle of anchoring, where initial information influences decision-making processes. It aims to influence customer behavior by framing choices in a way that encourages them to opt for the main offer after considering the premium option.
- The rollover upsell strategy involves applying previous purchase credits to new offers, aiming to re-engage past customers and retain their loyalty. This technique allows customers to use their existing credits towards new, potentially more valuable purchases. The new offer should ideally be at least four times the value of the rollover credit to ensure profitability. It is a way to encourage repeat business and increase customer lifetime value.
Counterarguments
- Upsells may not always constitute the majority of a business's profits, as this can vary greatly depending on the industry, product, or service.
- Classic upselling could potentially lead to customer dissatisfaction if perceived as pushing unnecessary products.
- 'Unselling' might backfire if customers feel manipulated into buying more expensive items, even if they are of higher margin.
- Prescription upselling assumes customer interest and could be seen as presumptive or pushy.
- Offering choices between two products may limit customer perception of variety and could lead to decision fatigue if not done carefully.
- Anchor upselling could be seen as manipulative by artificially setting a high price point to make other options seem cheaper.
- Personalization requires access to customer data, which raises privacy concerns and may not be welcomed by all customers.
- Simplifying the purchase process with stored payment methods might raise security concerns among customers wary of data breaches.
- Rollover upsell strategies could be perceived as a ploy to keep customers spending rather than genuinely offering value.
- Product bundling might not appeal to customers who do not need or want all items in the bundle.
- Integrating upsells too seamlessly into the customer experience could be seen as deceptive if customers are not clearly aware they are making additional purchases.
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Different Types Of Upselling Techniques
Upselling is a strategic approach to increase sales and profits, and often, upsells make up the majority of a business's profits. Alex Hormozi, an expert in upselling techniques, sheds light on various methods to maximize sales.
Upsell Solves the Customer's Next Problem After the Initial Purchase
Classic Upsell Hinges On Understanding the Customer's Problem Better, Offering the Solution As Exclusive to the Initial Purchase
The classic upsell is described as offering a solution to the customer's next problem that becomes apparent after they make the initial purchase. It relies on the understanding that the customer's core offer solves one issue but creates another, which the upsell then addresses. For instance, after purchasing a bicycle, customers are offered upsells like helmets, lights, and puncture-resistant tires because these are natural needs following the initial bike purchase.
Alex Hormozi suggests using the classic upsell by addressing immediate problems revealed by a previous offer, which can lead to additional sales opportunities. Examples given include:
- Offering sealant at a local car wash because it complements the clean car.
- Upselling a nutrition course with an exercise course because balanced dieting is integral to fitness.
Hormozi discusses using free bonuses to make the upsell offer more attractive, where the bonus reveals and solves a new problem.
Menu Upsells Encourage High-Margin Choices
Upsells fail when they offer something the customer doesn't want, or is too different, or when the upsell doesn't solve their problem, particularly if it's offered at the wrong time or in the wrong way.
Unselling Reveals Unneeded Items, Eases Upgrades To Higher-Profit Products
Alex Hormozi discusses 'unselling' by crossing out what customers don't need, which builds trust and opens the pathway to upsell what they do need. This process helps highlight the necessary items. Employees who enjoy advising customers on how to “game the system" can aid in unselling lower-margin items and guide customers toward higher-margin products.
Prescriptive Selling Mandates Product/Service Use, Removing the Choice Not to Buy
'Prescription upselling,' Hormozi notes, involves providing detailed and personalized instructions on product use, leading to more upsells than general advice. By telling customers what they do need and how to use it as if they already own it, you remove the option of not buying.
AB Offers Guide Customers To the More Profitable Option
Offering a choice between two products helps guide customers towards the more profitable option. AB upsells are applicable when there are multiple offers solving the same problem, prompting custom ...
Here’s what you’ll find in our full summary
Different Types Of Upselling Techniques
Additional Materials
Clarifications
- Unselling is a sales technique that involves highlighting unnecessary items to build trust and guide customers towards more suitable, higher-margin products. By crossing out what customers don't need, it simplifies the decision-making process and emphasizes essential items. This approach can help customers see the value in upgrading to products that better meet their needs, ultimately leading to increased sales and profits. Hormozi suggests that employees who understand how to effectively "unsell" can play a crucial role in steering customers towards more profitable options.
- Prescriptive selling involves providing detailed and personalized instructions on product use, leading to more upsells than general advice. By guiding customers on how to use a product as if they already own it, the option of not buying is removed. This approach aims to influence customers towards making a purchase by emphasizing the necessity and benefits of the product or service. It focuses on directing customers towards a specific choice rather than leaving the decision entirely up to them.
- AB offers, also known as A/B offers, involve presenting customers with a choice between two products or solutions that address the same problem. This technique guides customers towards a specific option by suggesting one as a safer or more profitable choice. By offering a selection between two alternatives, businesses can influence customer decision-making and steer them towards the option that benefits the business the most. This method is a form of suggestive selling that aims to increase sales by directing customers towards a preferred choice.
- Anchor upselling is a technique where a premium or high-priced option is presented first to make subsequent offers seem more appealing in comparison. By showcasing the premium option initially, customers are more inclined to view the following, less expensive options as better value or deals. This strategy leverages the psychological principle of anchoring, where the first piece ...
Counterarguments
- Upselling might not always address the customer's next problem if the sales team misinterprets customer needs or if the customer's needs are non-linear or unpredictable.
- Classic upsell strategies can sometimes be perceived as pushy or manipulative if customers feel pressured to buy something they don't need.
- Free bonuses can devalue the perceived worth of the upsell if customers start expecting more for less, potentially leading to a loss in long-term profitability.
- Menu upsells might narrow customer choices, leading to a less personalized shopping experience and potential customer dissatisfaction.
- Upsells can sometimes be successful even when they offer something the customer didn't initially want, as it can introduce them to products they hadn't considered.
- Unselling could potentially backfire if customers feel that they are being manipulated into buying more expensive items or if they lose trust in the seller's recommendations.
- Prescriptive selling removes customer agency, which can lead to customer resentment or loss of trust if the customer feels their ...
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Strategies for Effective Upselling
Effective upselling tactics can significantly boost a business's sales. Hormozi shares insights into approaches that can lead to more successful upselling, emphasizing personalized recommendations, offering choices, and simplifying the purchase process.
Personalized Upsell Recommendations Boost Conversion Rates
Understanding customer preferences is key to upselling effectively. Hormozi emphasizes the importance of personalization in his upsell strategy, asking questions like "Do you prefer chocolate or vanilla?" to guide the customer into choosing between options. This approach not only increases the likelihood of a sale but also makes the experience seem tailored to the individual customer.
Hormozi further advises on the tactic of unselling, where unnecessary options are crossed out, which can build enough goodwill to upsell the correct products persuasively. By telling customers what they don't need and then recommending what they do need, customers feel understood, which makes them more likely to make a purchase.
Offering Customers a Choice Boosts Sales
The narrative explores the counterintuitive success of providing customers with a choice, which leads to higher sales. Hormozi describes witnessing a fur coat dealer convert 'no' responses into 'yes' by framing the choice in an appealing way. By offering multiple solutions to problems, customers feel empowered to make a decision, which is guided by the "magnetic middle" principle that nudges them toward more profitable choices.
In promoting the 'menu upsell,' Hormozi suggests giving customers the option to choose between A and B, avoiding a yes/no scenario and instead presenting each decision as a choice between different upsell offers. Making buying easy for customers prompts them to move towards what makes sense for them, thus increasing upsell conversions.
Simplifying Purchases With Stored Payment Methods Boosts Upsell Conversions
Concluding the upselling process with an easy ...
Here’s what you’ll find in our full summary
Strategies for Effective Upselling
Additional Materials
Counterarguments
- Personalization requires a delicate balance; too much can feel invasive, leading to discomfort or privacy concerns.
- Unselling might not always build goodwill; some customers might perceive it as a manipulative tactic to steer them towards more expensive options.
- Offering choices can sometimes lead to decision fatigue, where a customer feels overwhelmed by the options and decides not to purchase anything at all.
- The 'magnetic middle' principle might not always work if customers perceive the middle option as a compromise rather than a value proposition.
- The 'menu upsell' strategy assumes customers always appreciate choices, but some might prefer a more straightforward, single recommendation.
- Simplifying purchases with stored payment methods raises security concerns; customers might be wary of having their payment informat ...
Actionables
- You can create a personalized gift guide for friends and family by observing their preferences throughout the year and suggesting gifts they're likely to enjoy. Keep a note on your phone or a dedicated notebook where you jot down any interests, brands, or products your loved ones mention. When a special occasion arises, use this curated list to select gifts, which can lead to more meaningful and appreciated presents.
- Start a habit of decluttering your online shopping cart before checkout to avoid impulse buys and save money. Before you finalize any online purchase, take a moment to review each item in your cart and ask yourself if it's truly necessary or if it was an impulsive add-on. Removing items that don't serve a clear purpose can help you manage your budget better and make more intentional buying decisions.
- Implement a 'choose your own adventure' approach to planning ...
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Maximizing Profits Through Upselling
Maximizing profits through strategic upselling is a critical part of enhancing a business's revenue. Alex Hormozi and experts discuss several upselling techniques that can engage past, rescue unhappy, and upscale current customers, ultimately leading to increased profitability.
Rollover Upsells Apply Previous Purchase Credit To New Offer
Rollover Upsells Re-engage Past, Rescue Unhappy, and Upsell Current Customers
Rollover upsells are a powerful tool for re-engagement, customer satisfaction, and incremental sales. Hormozi provides examples of how businesses can employ this strategy in various scenarios, such as:
- For unhappy customers: If a customer is dissatisfied with a teeth cleaning, a business can upsell a more expensive teeth whitening package, crediting the initial payment towards this new offering.
- For competitors' unhappy customers: By crediting remaining payments of customers dissatisfied with a competitor's service towards a new purchase with your own business.
- For current customers' first purchase: Offering to apply the amount spent on an initial service or membership toward a longer-term plan, encouraging loyalty and reducing churn.
It's not only about customer retention but also about acquisition, as shown in Hormozi's winback campaigns that re-engaged previous customers by offering them credit to return.
Structuring Rollover Credit and Pricing to Ensure Profitability
The smart structuring of rollover credits ensures that businesses don't erode their margins. Hormozi emphasizes that the offer should be at least four times the value of the rollover credit to maintain profitability. It's also essential to create urgency with these offers, making them one-time and requiring immediate customer decisions.
Product Bundling Increases Order Value
Creating bundles of products or services and giving them appealing names based on customer types or outcomes (like "fastest results bundle") can significantly enhance upsell rates. While upselling, it's sometimes advantageous to downsell some products or features from a package.
An example provided includes bundling free earmuffs with a coat storage service and then offering an additional storage option for the earmuffs at a fee. This indicates that bundling a free product with an exclusive service can increase the overall order value. Product bundling joins multiple ...
Here’s what you’ll find in our full summary
Maximizing Profits Through Upselling
Additional Materials
Clarifications
- When structuring rollover credits for profitability, it's crucial to ensure that the value of the upsell offer is at least four times the amount of the credit being rolled over. This helps maintain healthy profit margins for the business. Additionally, creating a sense of urgency around these offers by making them one-time and requiring immediate customer decisions can help drive conversions. By carefully balancing the value of the upsell with the rollover credit and creating a compelling offer, businesses can maximize profitability while providing added value to customers.
- Downselling involves offering a lower-priced or less comprehensive product or service to a customer who may not be interested in or able to afford the initial upsell offer. It is a strategic approach to cater to a wider range of customers and increase the likelihood of making a sale by providing alternative options that bette ...
Counterarguments
- Rollover upsells may not always re-engage past customers if the reason for their initial disengagement is not addressed.
- Crediting unhappy customers with a more expensive package assumes they are willing to give the business another chance, which may not always be the case.
- Structuring rollover credits to ensure profitability might lead to offers that are perceived as less valuable by customers, potentially reducing the effectiveness of the upsell.
- Product bundling can increase order value but may also overwhelm or confuse customers with too many options, leading to decision fatigue and potentially lower sales.
- Offering free products with exclusive services could inadvertently devalue the perceived worth of the free product.
- While integrating upsell ...
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