Your start-up sales strategy must include an up-sell

Up-selling, despite what some people believe, is not a sneaky or dishonest sales strategy.  In fact is is an essential strategy for start-ups.  I do, however, understand, how many people can see it this way.

At the bagel store near my house, a bagel costs $0.49.  Yet, order that bagel with $0.03 worth of butter, and the bagel is suddenly $1.69.  Why does the store do this?  Because its great to advertise bagels that cost only $0.49, but who comes into the store and only orders 1 bagel with nothing on it?  The upsell is the critical method of driving profit into the store.

It’s not a dishonest strategy, but if you sat there and really thought about what is going on, its kind of maddening.  And if you listen to the entire process of people walking in and out of the store (which as a person who looks for sales techniques in anything, I do), you will hear the constant upsell.  “Can I interest you in a coffee too?  Perhaps some cheese with that taylor ham sandwich?  Can I interest you in home fries?”  The entire sales process is hinged on the upsell.

Think about every infomercial you have ever seen.. “but wait… act now and get a second for only $19.95 plus shipping and handling”

So, I can see how people think of the upsell as a technique that lies on the border of sleazy in terms of sales tactics.

However, I think it is an honest and essential tool for start-ups that sell to enterprises.  As I wrote in my post on Easier to buy, easier to sell one of the major keys to seeing breakthrough sales processes in start-ups is to make the decision to buy an easier one.

For most start-ups, especially for those in technology, buying from you takes a major leap of faith.  They have to trust that:

  • You will survive until next year
  • That all of your claims of success to date are repeatable… after all, you are basing your past successes (assuming you have some so far) on a very small and stastically insignificant base
  • Your product even does what you say
  • That you have the ability to scale
  • That you won’t embarrass them to their boss, their investors, wall street, their customers, etc.
  • That you won’t disappear with their money
  • That your visionary new way of doing something will even work
  • and dozens of other dears around working with an unknown entity.

All of their fears will surround ideas like these.  Therefore, the larger the leap that they have to make, the harder it will be for you to get the deal done.

How do you solve this problem?  The intentional and explicit up-sell.  You need to create a snack-size version of your product, and get these people “half-pregnant.”  Once you get them hooked, if your product is as good as you say and provides them value, then they will happily upgrade to the larger package.  Buying anything from you is a massive leap, so you need to figure out the best ways to make the leap smaller.   You should avoid the free trial if at all possible – because you want to establish the relationship of customer-vendor as quickly as possible rather than customer-prospect.  Its too easy for a prospect to say yes to a free trial, when he/she really has no intention of buying.

Lots of companies have embraced the upsell with the freemium models that are so common now in SaaS products, and that’s a great thing!  In fact, its the entire beauty behind the SaaS model.   By allowing someone to buy in smaller chunks, and with an upgrade/upsell path to a larger commitment, you make getting on board significantly easier.

The tricky part here is to make sure that you provide enough value in the lowest version, and enough differentiation and value to get people to move up to the  more expensive options.  I can’t generically speak to what must be included in the minimal package since all products are different, but it should be enough to have the company understand the value that they will get and then also make them feel comfortable with your company enough to write a large check.  There are entire discussions about what and how you should position your packages, and in this post, I don’t intend to dive into that much detail about those issues – just how critical the upsell availability is, and how it affects the sales process for a start-up.

Assuming you’ve embraced my logic behind the up-sell, you need to really think about how it affects the sales process particularly in how your prospects buy.  Do you really understand how the buying happens in their company:  Do you know what the threshold is where the decision maker can buy without major approvals?  Do you know what the budget process is?  Do you know what the fiscal year is?  Do you know how add-ons (up-sells) are treated?  You may offer something at $2,000 / mo with an opportunity to cancel at any time, but the person buying your service may need to budget for the full $24,000 just in case they use it for the full year, so, once again, you need to realize the size of the leap that the prospect needs to make in order to buy.  Is your minimum level, when multiplied out for a year, still too much pain for the prospect? And, while you think you are only asking them for $2,000 – they are making a $24,000 decision – and that is a very different decision.  Can they make a $24,000 decision without needing to bring the decision to a C level person OR can they make a $10,000 decision on their own?  If so, perhaps your initial offering is $10,000 with an up-sell from there.

There is no generic correct answer because every product / offering / value prop / prospect mix is different – but I strongly believe that the start-ups that spend the time to figure out the correct up-sell strategy will have better results with selling to larger enterprises.

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