Upselling in small businesses takes place when a buyer has already decided to make a purchase and a seller suggests a related product or service in order to enhance the sale. Classic examples include when a seller offers an extended warranty to a customer who is purchasing a new television, or when a customer orders a cheeseburger and the counter person asks, "would you like to add fries to that?"

Upselling works because the buyer has already displayed a willingness to purchase, which is a signal of trust and potential loyalty. Your chances of converting an existing customer into a repeat customer are much higher than turning a prospect into a first-time buyer. As marketing expert Jill Griffin reports in her book, "Customer Loyalty," a study by Marketing Metrics found that "the probability of selling something to a prospect is only about 5–20%, while the probability of selling something to an existing customer is 60–70%." Here are three upselling dos and don'ts.

Three Upselling Dos

1. Be Prepared With Sufficient Brand Knowledge So You Can Suggest Relevant, Related Products

How do you gain this knowledge? First, take note of which post-sale upgrades and add-ons customers generally buy from you. For example, if several customers a month return to your store to buy a protective case for the smartphone you've sold them, then you should be upselling the protective cases (or extended warranties or service agreements) every time a customer buys a smartphone. You might want to make a list of related products that customers sometimes buy as a package or bundle. Then, when a customer buys one of these often-bundled products, you can try to upsell the others.

2. Know When to Upsell

Don't upsell before the initial purchase decision has been made. If you do, you'll likely confuse and turn off buyers, and you may even lose the initial sale. Wait until after the buyer has decided upon the initial purchase, but before he or she has paid.

3. Ask Questions to Qualify the Upsell

For instance, if a customer has just purchased an expensive laptop computer, you can ask: "Would you be interested in protecting your investment?" If the customer says "yes," you could then offer him or her the extended warranty or service agreement, or even a laptop case.

Three Upselling Don'ts

1. Don't Be Aggressive

Be wary of what calls "the rule of 25": Don't seek to upsell products or services that represent more than 25 percent of the initial purchase. This type of large upsell may turn buyers off.

2. Don't Forget to Have a Conversation That's Centered on the Buyer's Needs

Your desire to sell more products should never outweigh your desire to fulfill your customers' needs. When upselling, you should seek to personalize the sale and add convenience for buyers by offering tailored products or services.

3. Don't Forget to Close the Deal

After you've had the upselling discussion, don't forget to close. You might want to walk the customer over to where the upsold product is located and explain its added value. If and when the customer does decide to make the purchase, you should strive to provide affirmation that he or she made the right decision.

Upselling in small businesses can be a great way for you to increase revenue and build customer loyalty.

Tags: Business Strategy customer loyalty Customer Relationships