Should You Downsell In Your Business? [Here’s Why It’s Risky]

Have you been told that downselling is a great marketing strategy to not “lose” a sale?

The argument that generally goes with this advice is that it will increase your conversion rates. 

While it’s true that downselling does increase your conversion rates by having more paying customers – it can actually negatively impact your business’s long-term success.

In this article, we’ll look at what downselling is, how it compares to other strategies (upselling and cross-selling), and why you shouldn’t sell to everyone. 

We’ll also discuss the best practices for implementing downselling to make it worth your while, and share our experience with this strategy to give you insight into how to implement it into your business.

Downselling: Overview

What is Downselling?

“Downselling” is when you’re offering your hesitant customers a lesser and more cost-effective alternate package than your main product or service.

It’s a tried-and-tested method to convert potential customers who are convinced about your value proposition but are not buying for financial reasons.

Downselling Example:

Say that you are an SEO expert and have a $1,000 digital course that helps newbies in the industry learn local SEO. Here’s how downselling would work in your online business:

  • Run a 45-minute live webinar where you demonstrate your SEO skills. Show a case study to your audience where you successfully helped a business get more traffic and share how you were able to do that.
  • After the lesson, you’d offer them to buy your course for $1,000 or on an installment plan of $323 x 4.
  • If they agree to buy on the spot, they’ll get instant access and could start watching your lectures right away.
  • If they refuse to buy your course, they’ll receive another offer: a downsell.
  • For $323, your downsell offer could include a lecture to help them set up an optimized Google Business Profile.

In this case, you are offering your target audience a lower-priced package that would entice them to take immediate action.

You’ve put in a lot of money and effort to bring this audience to the bottom of the sales funnel. With downselling, your goal is to sell them something rather than nothing. Like in the case mentioned above, you’ll be able to get $323 out of your customers who are sold on your proposition but are hesitant just because of the cost.

By downselling, you can make those customers loyal to your brand. Chances are, they’ll buy your main product or service in the future.

Downselling Vs. Upselling

Upselling is when your customer has already purchased from you, and you persuade them to buy something additional. That additional item could be a more expensive product, an add-on, or an upgrade to the chosen item.

You’ll hit them with an upsell before the transaction is complete and give them options to accept or opt-out.

An Example of an Upsell:

In the SEO course scenario, you can offer them an hour of coaching, where you’d have an online meeting to offer them a personalized solution to any problem they face. You could offer this additional service for $300.

Downselling Vs. Cross-Selling

Cross-selling is when a seller tries to persuade customers to buy something different from their main product.

Cross-selling is an effective way to increase your revenue without cannibalizing your primary product. Note that your focus should always remain on your primary product.

An Example of Cross-selling:

Imagine that, in the SEO course example, you also have a course on technical SEO. You offer that course in a bundle with your main local SEO course for a discount.

Note that both of these products are related yet different from each other, which is what cross-selling involves.

The Right Time to Downsell Your Product

All businesses are unique in their model, products, financial situation, industry, etc. That’s why it takes work to know when it’s the right time to downsell for a specific business.

If your conversion rates are significantly worse than the industry standards, here’s what you can do to figure out if downselling is the right strategy for you:

If a customer leaves without purchasing, you could ask them the reason. You can create a survey with options that include why your audience is not converting, with “price” being one of them.

If a significant portion of your audience selects the “price” option, it’s the right time to downsell.

Pros & Cons of Downselling

Here are the common pros and cons of downselling. Go through them to assess if downselling is the right strategy for your business.

Pros of Downselling:

  • A chance to make your buyer loyal to your brand.
  • Cater to a broader audience by offering something for each budget level.
  • Can cover the marketing costs by getting more people to convert.
  • Removing the “high price” obstacle from potential customer’s way who are at the bottom of the sales funnel can increase conversion rates.
  • Easier to sell the main high-end program to your existing customers than to sell it to the new ones.

Cons of Downselling:

  • Getting a lower-end product that doesn’t add much value to the customer’s life could result in a less-then-outstanding customer experience. This neutral customer experience, in turn, could impact your long-term success if they don’t return.
  • Might have to put in the effort to create a product you want to offer as a downsell.
  • It could be annoying to the customer if they want to exit your page and the downsell offer sounds like you’re trying to keep milking something out of them.

Can you see how in these cons of downselling, there are ways to mitigate those risks and actually make it work to your advantage? Learn more below.

Downselling Best Practices

Transparency 

You must sell with integrity and transparency to build a long-term customer relationship with a  high lifetime value.

As the famous author, Douglas Adams, once said, “To give real service, you must add something that cannot be bought or measured with money, and that is sincerity and integrity.”

If you want to maintain the reputation you built with your customer, you need to strive for excellent communication. Be clear about what they will and will not get for the reduced price.

Trial Versions

Offering a free trial version of your product is another great and easy way to downsell. In fact, 25% of the free trial users convert to being paid ones in the software industry. Plus, if you offer an opt-out trial version of your product, the conversion rates can go up to a staggering 60%.

Instead of giving your customers a discount or creating a new low-end product, offer your product for a 7–15-day free trial and let your customers decide if it’s worth buying.

Be transparent when offering your customers an opt-out free trial. They need to know if they must cancel the subscription to avoid getting the paid version charged to their credit cards.

Don’t Downgrade The Primary Offer

When operating in a competitive market and offering something that others are not, don’t downgrade it. The last thing you want is a generic product in a competitive market.

Slashing prices would cut your profit margins, which is a big no-no if you ever want to scale up. Scaling a business with thin profit margins is nearly impossible.

Rather than losing the essence of your product because of downgrading, you should create a stand-alone product for downselling.

Installment Plans

A great way to downsell is through installment plans. There’s nothing wrong with charging a premium if you offer something of value. However, that premium price might be out of reach for many potential buyers.

With an installment plan in place, your product will be accessible to more people. However, the payment plan should always have a markup. Otherwise, no one will buy your product on the spot, making you tight on cash.

Pro tip: Never use the word “payment” in your installment plan. People can negatively associated the word “payment” with all the car, loan, and house payments, which is a pain point for many.

Cart Abandonment Emails

Integrate your email marketing with your checkout page and monitor cart abandonment on your website.

Cart abandonment has been a major issue for online businesses since day one. 75.6% of online buyers abandon their carts globally. You can win back these lost buyers who were on the cusp of purchasing by emailing them with a downsell offer.

Offer them a 10-15% discount along with a firm deadline and pictures of the product they carted, which could tip the balance in your favor.

How to Succeed in Downselling

To have positive results from your downselling strategy, you need to keep the following in mind when implementing it:

Cover the Needs of Your Customers

When creating a product for a downsell, the product should be related to the customers’ wants and needs, not what’s convenient for you.

Otherwise, customers might feel ripped off when purchasing your downsell offer.

Scarcity of the Offer

Creating a sense of urgency when downselling might encourage your customers to make impulse purchases. Customers should feel they won’t get a second chance at such a great offer.

Here’s an example where we add some vigor to their step:

“The doors close tonight and won’t open again for the next six months,” or “You have the next 36 hours to save $300, or the prices will go back to normal.”

These deadlines will create a sense of scarcity and help you drive conversions.

Perception of Value

Your job as a business doesn’t end with creating a great product. You must explain to your customers how your product will help them achieve their goals.

Even if your product is life-changing and your customers don’t know a thing about it, it won’t benefit your business.

The value you offer is subjective to your customers. That means, with the right marketing, you can boost the perception of your value.

Use Social Proof

Social proof has always been a marker for building trust among people. Even in social interactions, we actively seek social proof to build trust in relationships. The same is the case with online consumerism. People seek out social evidence in the form of reviews and endorsements.

75% of U.S. consumers look at reviews before purchasing anything online.

When downselling, you must show examples of other customers who have accepted and benefited from the offer. You can also leverage endorsements and case studies to build customer trust.

Reliability

Always be consistent with your brand’s voice. You can’t tell your customers one day that an offer is a one-time deal while you offer them the same deal again next week.

You should really mean whatever you promise. That’s how they’ll know that you are a trustworthy business and you keep your word.

How to Boost Sales with Downselling Online

You can leverage the following three ways to integrate downselling into your business strategy to boost sales.

Exit-intent Pop-ups

Pop-ups are among the most common tactics to stop customers from leaving. Pop-ups usually urge customers to complete their purchases, but you can also use them to downsell.

For example, say that you are selling an online course on guitar lessons. Before completing their purchase on the checkout page, they try to leave your store. A pop-up would show up with a 10% discount coupon as a limited-time offer, which might entice your customer to stay on the website and complete the purchase.

The pop-up, by itself, doesn’t magically help you secure the sale. The message on that pop-up might tempt your customer enough to convert. The goal here is to increase the time on-site, which increases the odds of them buying something from you.

Removing Some Product Features

Another way of downselling is to strip your core offer down to the basics and offer it at a more affordable price than the original one.

Here’s an example:

When you are looking to buy a car, you will find multiple variants of the same car. A $45,000 car could include leather seats, a sunroof, heated seats, etc.

A $40,000 variant of the same car would be called a “base model” with all these features removed. And you’d find both types of these models on the road, meaning there’s a market for both.

This tactic is quite common in subscription services, as they offer various tiers based on price levels.

Option of Quantity-based Buying

If your products come in a bundle, say, a package of 12, you could break it down to a lower quantity and offer it as a downsell. This way, if your customer wants to test the waters first, they’ll be able to do so at a relatively lower risk.

Also, a segment of your potential customers may not need the quantity you are offering and may not want to stock up on your product. Breaking down that bundle could help you cater to that market segment, downsell to them, and boost your sales.

Reasons Why You Should Not Downsell

Downselling is a great way to boost your short-term sales. However, it likely causes more damage than benefits your business in the long run. Here’s what we have experienced:

Not Best for Customers

With downselling, you specifically target the low-income group of your potential customers. And ironically, they are the ones that need your help the most.

Say you have two programs: your core program, priced at $5,000, and another one, priced at $1,000, created specifically for downselling. You call your prospects before you close them. Ideally, you should follow consultative selling.

Consultative selling is a sales technique where the rep behaves more like an honest adviser than a salesperson. You listen to your prospect and try to be more empathic by understanding where they are coming from and their primary pain points. Then, based on that, you can recommend a product only if it makes sense and solves their problems.

Consultative selling is what you should be doing with your core offer. After listening to your prospect, you’d recommend your main offer if you think your $5,000 offer is a good fit for them and will help them reach their objectives.

Some of your prospects will say that they understand that it’s a good fit but that it’s too expensive for them. Now, if you are more focused on the conversion rate and the profits than on actually helping your customers, you’d be dishonest with them.

You’ve just told them that this $5,000 package is the best way to reach your objectives. In the same breath, you’d tell them, “Here is a $1,000 version of our offer that is more affordable for you, and you should be purchasing that.”

As an entrepreneur, you should look at the bigger picture instead of going for instant money. Your customers’ needs and objectives should be your priority. That’s what makes your customers loyal to you and will increase the customer’s lifetime value, which can be much more than what you’ll make on a short-term sale.

Don’t Sell to Everybody

You must understand that your core offer isn’t the right fit for everyone and should control your urge to sell to anyone who knocks on your door.

Instead of worrying about “wasting a lead,” you should focus on finding the right clients that match your product in the true sense. Otherwise, you’ll be unable to build a loyal customer base, which is essential to any business’s success.

For example, at Scaling With Systems, we don’t continue with 70–75% of people who book appointments with us because they are not a good fit. We prefer to sell our services only to customers who we can help achieve their goals instead of going for instant conversions.

Downsell as a Crutch

The third reason why downselling is not a great idea is that if you have a sales team, they will use it as a crutch. Salespeople work on a commission basis. That means if you have a downsell offer, it makes sense for them to push it over the core one because of its lower price, making it easier to sell.

By creating a downsell offer, you’ve incentivized them to do so to increase their return on the time they are investing in.

Under pressure from your prospect, they’ll crumble like a house of cards and immediately start pushing your downsell offer.

What Worked For Us

We experienced all three downsides of this strategy when we tried it at our marketing agency, “Prospect Social.”

Instead of focusing on selling our core service, which was priced at $2,500, our sales team started to push a $697 digital course we created for downselling. And guess whose idea was it to do so? That’s right, the salespeople.

  • They wanted a crutch to fall back on, and we made the mistake of creating one for them. So as an entrepreneur, be aware of when someone pitches you the idea of downselling.
  • It wasn’t the best fit for our prospects, as they needed the most help and were getting the least because it was just a digital course.
  • We were trying to sell to everybody, even those who didn’t have the know-how of the industry they were working in, so that we could achieve more short-term goals.

When all three of these issues were combined, the result was total chaos. We had a lot of refunds for the $697 downsell offer, while our primary $2,500 service was operating seamlessly. The downselling venture was more of a burden on our business model than a relief.

As a solution, we canceled our $697 digital course and included it in our $2,500 package. This inclusion helped us retain our clients for much longer as they were able to perform better in their industry.

We did say no to many of our prospects who weren’t a good match. However, our clients in our primary program stayed with us longer because of the extra value they received from that course.

Downsell: Frequently Asked Questions

Why create a downselling option?

With downselling, you can cater to a larger portion of your audience, as you can now target the low-income segment and achieve a higher conversion rate and, as a result, extra revenue. You are doing so with almost the same marketing budget. Plus, once they become your customers, the odds of them buying your main product or service in the future will increase.

Is it better to Upsell or Downsell?

Upselling is a better strategy than downselling. With upselling, you don’t have to compromise on the compatibility of the prospect with your offer. You know that they are a right fit as they already have bought your primary program.

What are the disadvantages of upselling?

While upselling, if you are too aggressive with your pitch, your buyer will perceive you as too pushy, which might deteriorate the trust you’ve built over your customer’s lifetime. Plus, if what you pitch is out of your customer’s financial reach, the whole experience can get frustrating.

Wrapping Up: Downselling Guide

While downselling is a great strategy, upselling is far superior. With downselling, you run the risk of thin margins, which will be a massive hurdle to scaling your business. Upselling provides you with higher margins and a higher return on investment (ROI) because you sell to existing customers, which is cheaper than acquiring new ones.

Find the right prospects that perfectly fit with what you are offering, and you could earn more while managing fewer clients, making scaling more convenient.

Speaking of scaling, most entrepreneurs get into business to achieve freedom. That’s what we offer at Scaling With Systems. With our client acquisition channel, you’ll be able to convert strangers into long-term clients.

Once we’ve helped you create a flawless client acquisition strategy, you can start hiring team members and building systems that will scale your business for you while you sit in the backseat without any worries.

Want to know more? Book a free consultation call, and one of our advisors will contact you.

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