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In the 1950s, my grandparents built an addition on their home, and they wanted a high-end, complicated system to heat it. The young plumber they hired to do the work thought their vision was overkill. “Go with radiators,” he said, and they did. By turning down an easy sale on lucrative work his clients didn’t really need, that plumber secured a revenue stream that lasted for more than four decades. He became my grandparents’ go-to plumber, and they sang his praises to their friends, neighbors and family, including me. That plumber’s instinct to sell his customers what they needed — even if it was cheaper than what they asked for — is called “downselling.” It’s one of the great sales tools for any company taking the long view on business growth, but few, unfortunately, use it.
A plan for customer loyalty that lasts
Whether you’re selling products or services to businesses or to consumers, downselling can be a one-step path to creating loyal, long-term relationships. When counseling digital marketing agencies about how to maximize profits, my clients often ask for tips on upselling and cross-selling. Both are important efforts for increasing revenue, and they’re easier than constantly generating new business leads, but neither is as effective at creating customer loyalty as downselling.
You’ve likely experienced the reason why. The owner of your local hardware store suggests you rent a tool for that one-time job instead of buying a contractor-grade tool. He loses revenue today, but he gains a loyal customer who comes back when he needs a bigger ticket item, like a snow-blower or a deluxe gas grill. In fact, 86 percent of consumers say loyalty is primarily driven by likeability and 83 percent of consumers say trust.
In a service industry like digital marketing, a business owner might choose downselling for a client that can’t pay a steep monthly retainer, but can afford a one-time workshop or some one-on-one coaching. These clients might not fit into the agency’s preferred buyer personas, but they have the potential to one day. When such clients have the funding to expand their marketing spend, they’ll return to the agency that was honest enough to offer them worthwhile options they could afford.
Serve the customer, serve your bottom line
Lots of business owners talk about putting their customers’ needs first; downselling proves they do. It also has the added benefit of ultimately being quite profitable. Take a commercial builder I met at an event recently. She is in the business of building million-dollar projects, but she wasn’t rigid about that model. When she spots a prospect with potential, she bends her own rules to create relationships, and she finds this often ends up being the right financial choice. A loading dock renovation she agreed to do for $150,000, for example, later led to a $7-million project for the same client.
To make this downsell-now-and-upsell-later plan work, business owners must pre-qualify customers to determine their future sales potential. When your customer looks like a prospect worth developing over time, have lower-end options ready. For some organizations, this might even be a strategically “free” piece of work that demonstrates the value of your paid service and helps close the first deal to spur repeat sales.
Just keep in mind that the lower price point for the customer does not mean that the work you do should be unprofitable. If you need to include fewer revisions or slow down your delivery to keep costs in check and retain a profit, do it. Let these clients know that when they opt for upsells later, they’ll see additional perks.
Sales incentives for downselling
A sales team that runs on quarterly commissions is not likely to support the long-term vision for downselling. If you want to get your sales reps on board, you need to incentivize them to see downselling as the beginning of long-term profitability — for the company and for themselves. Some options to achieve that goal include splitting the sales compensation between the deals they close today and the ones that create ongoing work. Also, consider whether you need a sales culture change to support downselling efforts. If your company mantra is the classic Alec Baldwin “always be closing,” the consultative approach of downselling is not likely to sit well with your sales team.
The secret to downselling is not so secret. Solidifying customer loyalty early in the relationship sets the foundation for profitable upselling and cross-selling later. To make it work, ensure your offers are profitable for you and your team, and valuable to your customers.