InsightIQ Blog

Do you Down Sell?

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Sep 4 2009

Recently, during a company presentation at CSG's Quaero, a senior director talked briefly about down selling. We often hear about cross-selling and up-selling but very seldom do organizations talk about down selling. So, what is it and why is it relevant to marketing professionals?

There are two ways to think about it.  Downselling could mean that you:

  1. Offer your existing customer a cheaper (alternative) solution when you're on the brink of losing them, OR
  2. Acquire new customers with the help of a less expensive product or service than your core offering which could give you the opportunity to build a long lasting relationship with a customer who could become much more valuable in future.

Down selling is probably easier said than done though. On the surface, it seems logical why one would want to do it. But how do you really know when you are at risk of losing an existing customer. Also, the idea might not be very popular in organizations that don't already do it. After all you'll be selling a cheaper alternative proactively and that would usually mean a smaller profit margin to begin with.

Analytics and existing data could be the answer here. Existing data about the customer usage/engagement of products and services can be a great predictor of "at risk" customers, if used efficiently.

Some of the ways to make a case for down selling would be:

  1.  Lowering of attrition rates. If you can reduce churning then that's a great indicator that you are doing the right thing by down selling
  2. Increased conversion rates of prospects into customers would be another great way to demonstrate the effectiveness of down selling.

Down selling is probably even more relevant in tough economic times. So what do you think?  I'd love to hear your thoughts.

 

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