How pastries turn into pure profit

Jun 27, 2007

She was fully engaged in the conversation. She made eye contact with me, smiled at me as she rang up my purchase, and then said her piece.

Here’s my question: If she says that to 100 people, might 20 or 30 of them decide to have a pastry with their coffee? If she did that every day, what would the outcome be for that tiny kiosk? If every assistant in every kiosk in the chain did the same thing for a year, what would be the results of asking that question and how would that play out across the chain?

The pastry the lady offered me cost £1.29. I asked her how many extra pastries she sells every day by asking that question. More than 200, she replied. I asked her if she and her colleagues were all trained to say that. Yes, she said, they all are.

Selling 200 pastries a day at £1.29 is an extra £258. That’s more than £1,800 a week or £93,900 a year of extra revenue from a single small kiosk… just by asking: “Would you like a pastry?” Let’s say the company has 60 such small kiosks around the UK. That’s more than £5.6 million in extra revenue, of which more than £4 million is pure additional profit.

I’ve just described an example of upselling. It’s an easy and effortless process that you can use in virtually any business to instantly improve the value of every sale.

Essentially, upselling is the process of offering your customers at point of sale a superior, more expensive or more sophisticated product that adds genuine value to their transaction. It’s a vital component in any successful sales career, team or organisation.
If you make a strong enough case for the importance and value of the additional or superior product or service and you only recommend what’s in the customer’s best interests, between 30-80 per cent of your clients will normally take up the offer.

This can dramatically increase both the value and the profitability of each transaction, while also providing a major boost to cash flow. Yet, amazingly, hardly anyone in business systematically uses it or does it.

People who buy your product or service are often content to buy what they thought they wanted. Yet if you establish how they intend to use the product, you may realise that there’s no way they can achieve the performance or outcome they’re seeking from that product.

For example, someone comes to buy an inkjet printer from you. When you question them, you discover that they regularly carry out large volumes of printing. The cost of replacement ink cartridges would make this prohibitively expensive so you advise them instead to buy a colour laser printer. It’s more expensive initially but it will rapidly pay for itself with much lower running costs, and will provide waterproof smudge-free printing and better long-term reliability.
You are recommending a larger, better-quality, more sophisticated alternative that you know will give them a better outcome. They don’t have to buy but, in my view, you are likely to be doing them a disservice if you don’t at least educate them to the difference in the performance and outcome they can expect.

Look at McDonald’s for an everyday consumer example of upselling. If you order a sandwich or a burger, the staff will ask you if you want to upgrade to a meal. If you order a meal, they’ll ask: “Do you want to go large?” For 30p more, you can have a large portion of fries and a large coffee or soft drink. Virtually every penny of that upgrade represents extra profits for McDonald’s… millions of times every day.

I’m told that 47 million people visit 29,000 McDonald’s restaurants a day and 30-40pc go large when asked that question. That’s 18.8 million upgrades at an average of 40p, more than £7.5 million a day, or £2.74 billion a year.

One of my clients is an electronics firm that manufactures specialist instruments in small production runs for well-known industrial customers such as Racal. He had always given them a formal written price quotation but added to each quotation an optional related product or service, like a leather carrying case for the instrument, at, typically, 10-15pc of the overall quoted price.

The optional items weren’t discussed with the buyers yet 30pc of the time they would buy them without any further intervention. It’s an almost effortless process worth tens of thousands of pounds in revenue each year.

BMW are fantastic at persuading customers to shell out thousands of pounds for options such as sports suspension, sports seats, satellite navigation system, ‘M aerodynamic body styling’, cloth/leather trim, larger alloy wheels, cruise control, head airbags, reversing radar, trip control… the list goes on.

They even manage to put sub-divisions within the stratifications. On one model, for example, BMW lists six levels of wheels, four front and two rear-seat specs, eight in-car entertainment packages and five combinations of upholstery and dashboard garnish. Of course, every option is a high-margin profit opportunity.

Upselling systems can be used in almost any business, whether transactions are carried out face to face, over the phone, by mail order or over the internet.

Start by making a list of all the products and services that naturally link together and could be sold as a package. It’s important that whatever you offer should be valuable, timely and needed by your customers, so observe what customers do before they buy your products or services. Could you provide it to them for an additional fee?

Watch what people do with your product or service after they buy it. If it requires assembly or needs installation, you could provide those services for a fee.

If you ask yourself how you can make your customer’s outcome even more complete, you’ll be surprised at how many opportunities are available. Offer your favourite add-ons to your best customers and see which ones they respond to most enthusiastically.

Once you’ve established which offers are best received, develop a compelling, believable reason why you’re offering the additional products or services and create a system for implementing your upselling process. This can be a checklist of affiliated products or services which staff run through before completing the sale or questions they can ask to prompt the upsell.

Upselling is one of the most neglected yet predictably effective techniques you can use to improve the average value of every sales transaction. Experiment – the results will amaze you.

For more information, visit www.dspconnect.com

Robert Clay has been growing businesses since the age of 19. He started his first business with no capital, reaching no.3 in his field in the UK within seven years. His second business reached no.3 in Europe after three years.

After selling both businesses to one of the largest companies in Europe he was persuaded that his self-taught approach to marketing could be used to grow any business successfully.

He subsequently studied and mastered 116 of the world’s most successful business growth techniques, and since June 2000 he and his team at DSP Solutions have transformed the thinking of hundreds of smart successful business leaders by providing them with world-class knowledge of low-risk/high-return marketing strategies that really work in any business.

His new book and set of CDs, “”Learn how to grow your business … in just two hours.”” are available now for just £15 each plus £2.25 for post and packing. Order both together for just £25 plus P&P.

Call DSP now on 01908 357657 to order your copy or to arrange a free consultation.”

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