How to Instantly Bump Your Income 25-50% With Up-sells
This post is part 3 of 5 in our four-author series on perfect pricing and rates.
As I step up to the counter to place my order for a tall skim-latte at Starbucks, the woman behind the counter immediately responds with, “would you like to make that a grande for only 50 cents more?”
I thought for a moment, then bit on the up-sell and went for the bigger-one.
I then heard the barista repeat the same process with the next five people behind, asking each one if they’d like to bump up one-level from whatever they ordered. Three out of five did.
So, if every person behind the counter in this Starbucks was trained to ask this same question, that simple act would effectively increase the gross-revenue of the location by 60%. If it started with $1 million, then, asking the question would raise revenue to $1.6 million.
Why do you care? Because…
Up-selling also works phenomenally with many types of freelance work.
Many of the big advertising, marketing, design and copy service-providers have been doing this for decades. Take a quick look over at Logoworks.com™, one of the big online logo companies, now owned by HP. (We won’t get into the quality of what is delivered or the way the service works, that is a different conversation. This is just about their sales process.)
If you go to their website in search of a logo, you’ll be quickly presented not with a price for a logo, but with multiple options, each one offering a higher level of service with more options and services.
They effectively try to up-sell you on the opportunity to get more collective creative intelligence faster and have the ability to choose between more concepts. And, while each package is priced incrementally higher…
A great many buyers will actually appreciate having the chance to choose a higher level of service.
This is because they are being exposed to options that they might not have thought of, but once informed, would be happy to have the chance to consider.
And, in the end, many end up signing up for a package that is priced higher and offers more than they had expected to buy before arriving at Logoworks’ website.
The point is, companies like Logoworks do this for a reason, actually two. One, it generates substantially more revenue. And, two, it serves the client better by:
(a) exposing them to not only the needs they’ve thought of, but ones they might have missed,
(b) offering multiple solutions, and
(c) allowing the client to choose the options they are ready to commit to at the time.
Presenting a multi-tier, up-sell proposal actually allows a client the chance to opt into a higher level of service that may yield better results.
So, next time you present an offer or proposal to a client, try something a bit different.
Rather than just presenting a summary only the minimum work requested and a single fee, propose 3 levels of solution and fee that start with the work requested and add two levels of value and fee.
And within the description of each higher value bundle, include a few sentences explaining how the added services would benefit/accelerate/better serve the needs of that prospect than the “basic” solution they requested.
Give them the option to choose more than what they asked for and you both might end up happier…and wealthier!
Stay tuned for my next article on cross-selling…
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Apologies for forgetting to excerpt the post, guys. Fixed now!
Just thought I’d point out a possible error (?) in the equation, not that it makes the point any different. Getting 3 out of 5 people to buy more doesn’t mean an increase of 60% of your money. If a tall drink is $3.00, and a grande is $4.00, then upgrading is a 33% increase of money, and if 3 of 5 people upgrade, than 60% of the time you get a 33% increase.
Meaning, out of 5 people to get tall drinks, that means a minimum of $15.00.
If 3 people get grandes at $4.00, then thats $12.00, and the last 2 at $3 /ea, making a total of $18.00.
Meaning the actual increase is 20%.
Not that that changes what you mean. I personally always provide 3 options in my proposals, one at the bare minimum they need, one in the middle that’s probably their best option, and the highest that has extras that would just be icing on the cake.
This actually is a pretty good tip – thanks!
for a freelancer, upselling is only going to increase your income 50% if you currently spend 50% of your time doing nothing.
Just to take it a step further, take a look at that LogoWorks screen shot and take careful note of the order in which the items are presented and their price points:
$299
$399
$499
$599
> $579
Jonathan i really wish you would have posted this 3 days ago. I signed a client 3 days ago, actually the easiest sign I’ve ever had to be honest. It was a different type of contract than i usually do, and the first time for it actually. It is a huge project that actually intimidated me quite a bit. So i decided the best method to quote the project accurately would be a retainer like deal, a flat monthly fee for my services. I sent the client the price for the retainer ($2,000 per month not to exceed 30 hours) as i also have several other projects that take equal priority.
His response you ask? “I have no problem with $2,000 but i don’t want to be wasting my money to get this thing up and going”. I simply assured him he would not be wasting any funds and like magic i had the full 100% first months payment in my paypal account.
Immediately after i kicked myself and said “what the hell was i thinking why didn’t i charge more” but it was a done deal that i am now stuck with for as many months as this particular project last.
After reading your post, i see so many ways i could have gone for an up-sell and presented more value, and possibly even allotted more time for the project monthly. Unfortunately for me, i was three days early in signing the deal.
Great post, as always. I read your personal blog regularly as well…. but never comment
Great tips anyway… I love reading this one. Thanks for the information..
Thanks for the tip.
I use this in my packages all the time.
Usually I get those just wanting the basics, and others 4/10 times wanting the upgrade.
This is good to read, because I do something very similar when I write proposals for potential clients. I’ll propose 3 different web sites (basic minimum they were inquiring about… middle of the road option with a few additions… and full on suggestions including several new features, etc.)
I’d say about 75% of the time they go the middle road, which is great.
I’ve also just put together a shopping cart on my site – there are a few products that I do something similar with as well, especially in the package section. Like I’ll have a package for a 5 page site, then they have the option to add on hosting and/or a mantenance plan, etc. And on that end, there are several packages for a 5 pg web site, the next for a 10 pg site, etc.
It’s a brand new shopping cart, so I don’t know if it’ll work yet, lol, but I’ve found it works well as far as proposals go.
I’m enjoying this series… can’t wait for the next post!
In your example, a 60% increase in upgrades doesn’t yield a 60% increase in revenue. Great tips either way.
Hah, Sean beat me to it.
Personally, I hate it when I’m in a store and the clerk tries to upsell me. I’ve even considered having a T-shirt printed saying, “If I’d wanted a muffin with that, I would have asked!” (And I still might.) I find upselling is emphasized in corporate-type places, less so in locally owned.
The overall point of the article is well taken, that when someone is buying your freelance services, you should sell them a little more if appropriate. I just think freelancers should be careful that they don’t alienate their clients by coming across as too pushy. We’re professionals, not fast food restaurants.
those are pretty cheap logos
and for unlimited revisions i would charge by the hour.
I sort of disagree with “package offers” anyways because each graphic design project is unique.
It’s not uncommon for folks to price their base and upsell models such that they just cover their expenses on the sale of the base, but make substantial profit on the upsell. Excellent article.
i hate ‘design packages’ with all my being.
designers should offer ‘custom-made’ design solutions as clients’ design challenges differ, that encourages the designer to be impersonal with the poor client’s poor project!
We might both have a headache but that doesn’t mean the doctor’s prescription will be suitable for the both of us, it might work for you and suck for me!
i really hate ‘design packages’.
i really do!
Love it! Now, since I’m a Personal Finance Blogger, I say SAVE 50% of that additional income (put it into your Passive Investing Strategy) and one day you just may become RICH. Pretty simple really …
I think this article makes some good points, but I personally feel that I would have a hard time creating packages to offer to clients. I don’t even have a set pricing structure for logos, business cards, etc. because, as Niki Brown said above, each project is unique, and I estimate each job individually.
Thanks for the informative article. I’ve been reviewing my own pricing structure recently and I can see how offering add ons could be very lucrative. I usually give quotes based on a Client’s requirements, but why not offer them some options that they might not have thought of…
This would also work well for extras such as hosting, monthly maintenance, etc.
It’s not so much about making standard design packages. I quote each job differently as well. I ask what they feel they need, what they think would be cool, and learn what they want to accomplish.
Then I make 3 “packages”, one with all they would need to survive, middle ground where I point out extra pieces that would greatly help them, and the highest one where I add in any “cool” things they mentioned, etc.
That way, if they don’t have much to throw around, they can get what the NEED. Or they can take the bigger packages that will benefit them, and me, cause I can always do with more work
This seems very, very bargain basement. And though I could see it working on the occasional local business owner, my national and international clients would just be offended. This isn’t McDonalds, it’s a graphic design studio that examines each client’s needs and crafts custom solutions to meet that need. There is no “middle ground” and I think even acknowledging one could exist threatens my credibility as a designer.
Maybe this is a better solution for web development people that don’t claim to “design.” Because in design there are often many answers to the problem, but the right answer is never anything but the most thoughtful, considered one.
I liked the article a lot, it offers a very interesting approach to increase your revenue. However, I can only imagine myself applying this advice to those clients that request very basic services.
Let me try to explain. I’m a graphic designer here in Brazil, and very often I’m asked to price the development of a very simple website, with maximum of 5 pages. Even though not knowing, this clients often want something else, but can’t verbalize it. Maybe he needs an easy way to update the content of website, or hire someone to update it for him, among other things.
With that in mind, I would offer the following packages:
Basic: 5 pages design + CSS&HTML coding
Pro: Basic + CMS implementation
Advanced: Pro + copywriting contract
But when the client knows what he wants, it is though to offer different packages.
yes man, I’ll apply it on next sale.
This isn’t exactly new … up selling a customer has been a foundation formula in quick service restaurants for decades. The increases actually realized is much less than 60% or even the recalculated 20% (correct) by another poster since a single menu item is typically only one of several menu items in a transaction. If my $3 drink is part of a $7 transaction and is upgraded to $4, the increase is around 14%. But it is an effective tool, one of many for increasing revenues. Providing stellar customer service, and quality product and taking care of repeat customers is the best way to insure future business.
Just because 3 out of 5 people accepted the bigger drink doesn’t mean that over the long run, the company’s revenue will increase by 60%. I realize that’s not the point of the article but it certainly paints a rosier picture than reality dictates.
Certainly the author isn’t that naive. I could flip a coin a billion times and over the course of those flips, at some point, the outcome could be ‘heads’ a thousand times in a row. Looking at that small sample doesn’t mean that heads comes up 100% of the time. It also doesn’t mean that Starbucks will make a gazillion trillion.6 dollars.
Great article. It is easier to sell additional services to a client once they have committed themselves. I usually try to sell SEO and Email Marketing services to those who want Web Design and 3 out of 5 go for it.
Whilst it makes sense to offer a client further options, often with an eye on the future and possibly saving them money (using a CMS solution, for example) and creating a long-term relationship, Sean’s calculations are crucial to this.
Not only is the increase of an upsell in the Starbucks example 20% as he calculated, but so is the profit margin. For Starbucks, not for a designer. It costs almost nothing in terms of time or even coffee for a barista to make a larger cup of coffee. The only real cost is a fraction more water and the energy required to heat it, all of which is negligible in the enormous mark-up that Starbucks coffee already enjoys.
A freelance designer, on the other hand, has to do a significant amount of extra work for the upsold piece of work. Granted, that’s better than less work if you are getting paid for it and it might turn into a longer, more trusting relationship, which is where the real profit is. In terms of money paid for work done, it can end up being less lucrative because you’re basically rewarding the client for the extra business by doing more for what is probably a lower rate, so actually the “profits” can be negative.
The best aspect of providing alternative solutions (let’s not call them packages) isn’t the extra money is demonstrating both the value of what they’re getting in the initial/reduced package and your knowledge as a designer that you can offer.