A lesson in how to upsell your customers
Category: Blog & News
Booking airport parking something usually approached with a clear cost/benefit mind-set. How much are you willing to pay for the benefit of being close to the terminal?
Well here’s how one parking provider made me feel like I’d won even though I paid more than I had intended; a lesson in how to upsell your customers.
By the time I first looked at my parking options I had two in mind. The convenience of the under cover Multi-Level parking or the cheaper - and much further way - Long Term parking. Confronted by $99 for the closer park I instead opted for the $29 deal and braced myself for the irritation of getting from and to my car.
Figure 1 Initial options
Decision made, I clicked Book Now.
But then, dangling before me as I reviewed my order was this tantalising offer.
Treat myself to an upgrade to the Multi-Level parking for only $6.67 more a day!
Figure 2 The upsell offer
I leapt on it. They upsold me from $29 to $49 in the blink of an eye, and what business wouldn’t want to be able to do that?
So let’s review how this was structured.
First they ‘anchored’ the value of the Multi-Level as $99. While less price sensitive consumers probably went for that, others like me we were left with the cheaper $29 deal (which itself had been marked down from $69).
Next, after I had expressed my willingness to pay for $29 parking they presented me with an upgrade path that was within easy reach. Remembering (thanks to the concept of Mental Accounting) I had effectively “saved” $70 by choosing $29 over $99, $6.67 a day became a pretty easy amount to justify.
Looking at the numbers - who won?
If the true value of this car space was $99 then you could argue they have lost $50 on the sale, discounting it down to $49. But there was no way I was going to pay $99 and if I was their average customer then they could have easily ended up with a lot of empty, high priced spaces, earning exactly $0 instead of $49.
In real terms this business made $20 more by upgrading someone for whom $99 was out of reach and was only going to spend $29. They won and I felt like I did too.
A few lessons from this example;
- Anchoring the value again comes up as a vital consideration in how you communicate your prices. For more about Anchoring read here or here.
- Create a reason for your customers to upgrade - what tension are you resolving if they move to the next rung?
- Minimise the perceived magnitude of the upgrade. As we’ve seen here, use the differential ($20) to calculate a daily cost ($6.67) which will seem less expensive than paying $49 in total.
This article also appeared in Smartcompany.
"Upsell" image taken from thestartupfoundry.com.