A recent article in Quartz about Tesla's car dealerships pointed out that customers don't like being pushed and prodded into buying a more expensive model than the one they originally intended to buy.

This practice, called "upselling," is common in industries where customers buy a big-ticket item they'll use for a long time. Examples in B2C would be cars, boats and homes; in B2B it's stuff like capital equipment, facilities/infrastructure, and "mission critical" software.

Salespeople upsell because they understandably want a higher commission. What's in the salesperson's best interest, however, isn't necessarily in the best interest of the vendor.

While upselling both increases revenue and reduces cost of sales (since much of the cost lies in new customer acquisition), it also creates ill will, even (especially!) when it works. Customers who've been upsold are more likely to have buyer's remorse.

Worst case, vendors can end up being seen as similare to car dealerships. According to V12, a Florida-based research firm, "87% of Americans dislike something about car shopping at dealerships and 61% feel they're taken advantage of while there." 

As Scooby Doo would say: "Ruh-roh."

This dislike of car dealerships drives an increasing number of buyers online, with a corresponding drop in foot traffic, rendering brick and mortar locations less profitable. It also makes customers less likely to social-share their purchase or recommend a dealership to friends and family.

That even Tesla dealerships try to upsell illustrates the futility of trying to change car dealership culture. Tesla eventually plans move all sales online and will probably only have locations where prospects can test drive. (The only thing buyers like about dealerships!)

In other industries, though, it's possible to get the benefits of upselling without the liabilities by adjusting the compensation scheme.

If salespeople are paid commission based upon the dollar value of the sale, you'll always get upselling.

However, if salespeople are paid a flat commission on each big-ticket item with a commission bump based on customer satisfaction, salespeople will attempt to make the best match between customer and product.

In some cases, this means the customer will end up purchasing something more expensive (an upsell, technically) but just as often will end up purchasing something less expensive (a downsell?).

Either way, the customer will have a positive experience, which means more referral sales. Referrals are the cheapest way to get new customers, with the added bonus that referred customers are by far more likely to buy than walk-ins or online shoppers.

In other words, if you want profitable growth, rather than worrying about leaving money on the table, focus on satisfying the customer's needs. It's really very simple.

Published on: Apr 1, 2019
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