Industry Update
Opinion Article22 October 2020

Revenue Management - How Upselling Provides Low Cost Revenue and Loyal Customers

Advertorial by Jos Schaap, CEO at ROOMDEX

share this article
1 minComments
Schaap

All kinds of businesses use upselling to enhance the customer experience and maximize revenue on existing sales. From the McDonald's server asking, "Do you want fries with that?", to airlines offering seat upgrades, upselling provides a business the opportunity to maximize the value of every customer. While not all upselling efforts are well-received — particularly efforts driven by the sole desire to make more money — when done right, through revenue management, dynamic pricing and personalization, upselling can bring you closer to your guests, earn more revenue, better retention and lower churn. Especially during and post-COVID-19 when limited guests actually are staying in Hotels. "This is a time when upselling is unbelievably important." Adam Gollance, President & CEO Modus Hotels.

Upselling builds better relationships with your customers

When someone talks about upselling, sadly, the first thing that comes to mind is a greasy salesperson pushing services and products that you do not need or want. The truth is that in most cases, upselling drives happiness. In fact, upselling is closely related to customer satisfaction.

The point of upselling is to give the customer all of their options so they can make better, more informed decisions. If you know an existing customer's expectations and behavior history, you can better guide them to the product or service that would best suit them. By demonstrating that you understand their wants, needs, and preferences you build deeper relationships with customers. It's a win-win. They feel like you delivered special value while you generate more revenue.

Everyone knows that customer acquisition is expensive. The costs are substantial: marketing campaigns, sales teams, commission etc. all have to be paid in order to get customers through the door. An article in Harvard Business Review research conducted by Frederick Reichheld of Bain & Company found that generating a new customer is anywhere from five to a staggering 25 times more expensive than to keep a current customer.

Instead of running elaborate marketing campaigns, awareness ads, throwing good money after bad at OTAs, you can simply upsell to your existing customers, especially now that many hotels have fewer guests - they have already been through the initial "expensive" funnel and therefore are your most profitable customers, as they require far less sales and marketing expense. It is much easier and cheaper to optimize an upsell to a guest who already trusts you and has bought something from you in the past than try and upsell to a guest who is new to your brand.

According to Marketing Metrics by Paul Farris, companies have a 60 - 70% success rate of upselling products and services to existing customers, compared to 5 - 20% chance of selling them to new customers. Moreover, existing customers are also likely to spend 31% more, when compare to new customers.

Upselling increases customer lifetime value (CLV)

Upselling is all about providing the best possible value for your consumers, so that they go on to provide the best possible value for you - which will continue to pay off for many years down the line. Putting it into perspective, Sales guru Jeffrey Gitomer describes it as helping your customers win - Tell them how they win. When they win, you win. Simply show them how an upsell will help them win…and you deliver more value. That cements relationships. Your efforts could lead to around 70-90% of your profits, compared with the mere 5-30% created by an initial or one-time sale.

In addition to increase CLV, upselling is one of the simplest ways to raise your ADR and RevPar. When done right, with dynamic pricing and automated, focusing on upsells to guests who already spend their time and booked a reservation with your hotel is a very effective way to increase your revenue.

Related Product

ROOM UPSELL OPTIMIZER

ROOMDEX intelligently and dynamically calculates the best price, and ensures that only available rooms will be offered for an upgrade. Pre-arrival guests are sent a simple set of emailed offers tailored to their specifics needs and persona.

product details
Related Viewpoint

Visioning a Post-COVID Era in Revenue Management

In this viewpoint, we asked 9 leading solution providers to share their views and thoughts on how revenue management will change in the post-COVID era.
Jos' view

Jos Schaap

    More from Jos Schaap
    Latest News
    Advertisements