If you were to go into any restaurant in North America and order a sandwich, the waiter or waitress will almost always ask the same question: “Would you like fries with that?” That one question has added literally billions of dollars of additional revenue to restaurants around the world.
It’s a simple, straightforward question that makes total sense to the person being asked, and yet it is one of the most powerful tools any person can use to add additional revenue to the bottom line of every business that exists.
As a dealer, you understand that margins on wholegoods continue to tighten year after year. The tightening is coming from both the manufacturer of the products as well as the increased competition each dealership is experiencing in the field.
With tightening comes the need to add additional revenue to the sales in order to offset the loss of profits. By focusing on opportunities to up-sell in wholegoods, parts and service, you can drive additional profits into your business and tie your customers more closely to you.
Add value to the customer experience
The nice side of up-selling is that you can easily train your people to up-sell without coming across as pushy. That makes most of your staff more open to asking customers the up-selling questions.
The other upside is that in most cases, up-selling will also add to your customer’s satisfaction with the equipment you sell them because of the value that additional products or services bring to the customer experience.
Let’s say for an example that you have a customer that has just purchased a mower. You ask them if they would like to purchase the first service for the equipment and receive free pickup and delivery. The value of the pickup and delivery might be $75 to you if you had to do it as a one-off deal, but you know that you will do it as a part of your regular winter service program so the cost will go down substantially.
From the customer’s perspective, they get $75 off a service they are going to want anyway. The customer saves dollars and you get the equipment in for the first service. That first service is important because it sets them up for each year’s service after that.
The service on the mower is probably going to be around $150, so you’ve added a nice piece of profit to the sale and have a customer that is going to be a happy owner for years to come.
You could just as easily do the same thing with a customer who buys a chainsaw. Right before the sale is complete, ask them if they would like to add a pair of safety chaps or face guard to the sale and receive 10% off the price of either one or both. The customer is already in the buying mood, so it’s a fairly simple process to have your people just ask, “Would you like chaps with that?”
Training and incentives
To make up-selling work, you have to take the time to prepare the employees who will be working with your customers. If you have inside salespeople, they need to understand each of the products you sell, along with the add-on options for each product.
With a mower it could be a grass catcher, a cart or a first service like mentioned earlier. You might consider offering an extended service agreement as well. Several manufacturers are making extended service agreements available through third-party vendors. I would encourage you to look at them carefully, and talk with other dealers who are selling them. Selling a good customer an extended service agreement and then having the warranty company deny all the claims you send in doesn’t help you or your customer in the long run. The great thing about offering extended warranties or service agreements is that roughly 30% of the people who walk into your dealership will buy one if it is offered and you will end up pocketing about 50% of the sale.
In up-selling, the incentive to make the offer and to take the offer has an impact on the final results. I would encourage you to give some careful thought to what you would want to offer the customer as an incentive to “buy more”, and what you would want to bonus the employee for making the offer to the customer.
From a customer’s perspective, the offer has to be attractive enough to make them want to part with additional money. From your position, it has to be beneficial enough to make giving up the additional revenue worth the cost.
I like to encourage my dealers to put together service and parts packages to use for the up-sell. First, you have good margins in both, so if you discount you still make new dollars. Secondly, if you can get them to buy their first service in advance, you can be guaranteed that they will bring the equipment back in to have that service completed in your service department. This begins the process of conditioning them each year to return for preseason service.
You should offer employee incentives, so they are motivated to up-sell whenever possible. It could be a small cash bonus, say something like $5 for every service package they up-sell, or maybe 10% of the profit on an extended service or warranty agreement. In either case, you are still making good money and your people are more likely to ask the customer to make the additional purchase.
As with all things, practice is an important part of the up-selling process, and will help your employees do a better job asking the questions to get the customer to spend more money. Take the time to give thought to the packages you might offer and to the training you might give your employees—so that every sale you make gives you the potential to add dollars to your bottom line.