Growth Strategies: Why Up-Selling and Cross-Selling Provides the Path of Least Resistance

As my most loyal readers and customers know, I’m a huge fan of and believer in retaining and growing a business’s current customers. Then again, who isn’t? Yes, new customer acquisition is important to building and scaling a business, but cultivating current customers offers the truest opportunity to drive efficient and sustainable long-term success.

Which is why (and this might surprise you) I think up-selling and cross-selling to those customers is often more important than focusing all of your attention on finding new ones. Let me explain.

Most businesses have an average closing rate of about 25 percent. So, for every four opportunities that come their way, they close just one of them. And that’s not too bad. The problem, however, is that those same businesses tend to lose half of their customers every five years. That kind of churn, if it’s not supported by an incredible influx of new business, can make it exceedingly difficult to grow.

Stronger businesses, on the other hand, close deals at a stronger clip — around 33 percent, or one of every three opportunities that cross their paths. But their customer retention rates are better, too — generally in the neighborhood of 70 percent. As a result, those companies possess stronger leverage and can grow their business more profitably.

See where I’m going with this yet?

Truly breakthrough companies — the top 10 percent, if you will — are even more remarkable, but not because their closing ratios on net new business are any better. In most circumstances, that ratio is still around 33 percent. But here’s where the magic happens: those businesses boast customer retention rates of about 95 percent, and they’re able to efficiently drive profitability by selling more new products and services to those existing customers every year.

That’s really the essence of this discussion. The most efficient way to grow is to sell more to your existing customer base. After all, that is where your highest profit margins likely lie. Yet, many companies get caught up in the uncertain rat race of trying to close more net new business to replace revenue from customers that were lost.  

In the end, that causes an often-stressful culture of chaos. You end up trying to constantly sell new products to new customers, and that can be a very expensive process. To support it, you must invest more capital and human resources into your marketing and sales operations, and the reality is that you’ll never really do much better than a 33 percent closing ratio.

So what should you be doing instead?

Quicker sales, higher profits, and improved leverage happen when you’re able to sell new products and services (or premium add-ons and upgrades of established products and services) to an existing customer base that knows and sees you as a trusted partner. Because they’ve already displayed an affinity for your business, you can go to them first with new products and services, and that’s really where the opportunity for the cross-sell or up-sell occurs. Ultimately, that can yield four distinct benefits:

  • Higher profitability than new sales
  • Stronger customer loyalty
  • Increased referrals
  • Shorter sales cycles

While up-selling and cross-selling can be done at a variety of points throughout the sales and customer lifecycle, I’ve found that two distinct stages are ripest for the picking:

1. During the initial sale

You always have the opportunity to add value during the initial sale. You could add on relevant services, draft proposals with tiered options, add complementary modules or products to supplement a customer’s experience and value, provide support packages, or pitch something like “Platinum level” access.

For instance, let’s say you’re in agricultural sales and a customer places an order for a particular chemical. Can you also recommend that the customer buy a complementary fertilizer or herbicide? Or maybe you’re in software sales and you can offer multiple support packages. In other words, with option A, a customer would get X support. With option B, a customer might get X, Y, and Z support, and around-the-clock access to your customer service team — all, of course, at a premium price.

It’s important to note that you need to focus on adding value, rather than simply adding up-sell or cross-sell options just for the sake of adding them. So, ask yourself what additional or new products and services your customers could benefit from? And how you can go about selling those things to them?

2. After the initial sale

Naturally, this is another great opportunity to up-sell and cross-sell. When you release new products and services, it’s an absolute no-brainer to reach out to your existing customer base first.

So, for instance, maybe your company has always offered existing clients on-site training as part of their package. Next year, however, you’re planning to roll out web-based training, as well. How can you leverage that as an up-sell or cross-sell opportunity? Maybe you continue to offer those clients large classroom-based training for one price, and for a small fee they can also have access to web-based seminars and a library of interactive videos.

There are numerous iterations of that model, too. Take a look at what you’re doing right now and figure out if there’s something you could be doing differently next year to add value.

The key is to never lose sight of sales opportunities with your existing customer base while you engage in new business development.

In sales, that can be admittedly hard to do. We’re a group that tends to get distracted by shiny new objects, after all, and it’s often more fun and exciting to bring a new customer into the fold than simply nurture long-term relationships with existing clients. Yet, as a sales leader or a business owner, nurturing those relationships and sell more to existing clients is the key to sales efficiency and profitability. And it’s exactly what you need to be doing.