Helping your customer take the right pathway is our duty in our businesses. This article explores offering upgrades, and why it’s essential for both you and your customer.
September/October marks planning time for us at All Star Marketing Club, and I’m a big believer that stepping away from the day-to-day grind brings clarity and focus. Just like last year, we headed to Majorca. After a few days of serious planning, we allowed ourselves some downtime at the beach, where something happened that sparked a major business insight.
As I was relaxing on the sand, a lovely massage lady approached, offering two options:
- The €10 massage – back and neck
- The €20 massage – back, neck, and legs
Being a sucker for a good massage, I asked her for a €30 massage, an option that wasn’t even on her list!
We agreed on more ‘back time!’, and I walked away feeling very relaxed and refreshed.
But what really struck me was this: in business, we often forget that some people naturally seek the premium option – even when it’s not explicitly offered.
Key Business Takeaway: Always Cater to “The Upgrader”
In all my years of experience in product/service development, strategy, marketing, and sales, one lesson has stood out: you need to account for “The Upgrader.”
These are customers who are ready and willing to pay for a higher-tier product or service, yet, they probably won’t ask – so make sure you offer! 20% of customers will choose to upgrade when given the option.
“Here’s the thing: if you don’t offer that upgrade, you’re leaving money on the table.”
Victoria Vickery
Why you need to offer upgrade options
Offering a range of product or service tiers can significantly boost your business in several ways:
- Increased Revenue: A premium option allows you to earn more from the same customer base. Even if only a small percentage opt for the upgrade, it can make a substantial difference to your bottom line.
- Higher Perceived Value: When you provide tiered offerings, the higher price points can position your brand as premium, enhancing the perceived value of all your services; even the lower tiers.
- Customer Satisfaction: Offering upgrades gives customers a sense of control over their purchase. It allows them to tailor your offerings to their needs, often resulting in more satisfaction and a feeling of having made a better choice.
- Increased Customer Lifetime Value: By offering upgrades, you’re not just making a one-time increase in revenue; you’re also improving your CLV. Providing premium options deepens the relationship with your clients, ensuring they return for future purchases.
- Maximising Profit Margins with Minimal Additional Cost: Creating a premium option often requires relatively small additional costs (e.g. adding extra features or services) but can significantly boost your profit margins. Offering higher-priced packages or services allows you to leverage your existing infrastructure while gaining more value from each customer interaction.
- Psychological Anchoring Effect: This is key…. having a premium offering helps create price anchoring in the customer’s mind. When they see a high-priced option, they may view your middle-tier option as more reasonable and affordable by comparison. This psychological effect encourages customers to choose mid-range or higher packages, boosting overall revenue.
The questions to help you create YOUR upgrade options
If you haven’t considered it before, now is the perfect time to think about adding premium options to your products or services. Ask yourself these three questions:
- What upgrade options do you currently have, or what could you add?
- Are there opportunities to create a VIP or premium tier for your products? It might be additional features, more personalised services, or a longer-term package.
- What is the ultimate value of that upgrade?
- Make sure to communicate the real-world impact of choosing the upgrade. What will your customers gain that they wouldn’t from the standard offer? Be clear about the value and more importantly, the outcomes.
- When and how can you position that upgrade?
- In your marketing/sales, how will you present these tiers? Are you introducing the idea early enough in the customer journey, and making it attractive enough to be a no-brainer?
- How can you create a sense of urgency or exclusivity around the upgrade?
- Limited-time offers or exclusive access can encourage customers to act on the upgrade sooner rather than later. Are there ways to make the upgrade feel time-sensitive or unique?
- Who is the ideal customer for the upgrade, and how can you tailor it to them?
- Consider who in your customer base would benefit the most from the premium offering. Is it possible to segment your marketing efforts to target this group more effectively?
- What additional support or incentives could make the upgrade irresistible?
- Could you offer perks like extended customer service, a satisfaction guarantee, or special bonuses? These incentives could be the extra nudge someone needs to take the upgrade.
- How will you track the success of your upgrade options?
- Make sure to define KPIs or metrics to track the uptake of your upgrade offers. Are you monitoring conversion rates, feedback, or customer retention to assess the value of your premium options?
A Final Thought
You never know who will be the next “upgrader” in your business. So make sure you have that premium offer ready and waiting. Your clients are always seeking value, and some of them are more than willing to pay for it.
