The Power of Downselling

By recommending a less expensive option for your client, you may just gain yourself a long-term customer.
May 10, 2017

We've all heard the expression 'always be closing,' but that kind of hard sell isn't necessarily a sustainable approach to running a business with repeat customers.

Downselling (that is, recommending a less expensive option for a customer), on the other hand, can help you build long-term relationships with your customers. Here's how to help make downselling work for you.

1. Consider your customers' needs first.

Apart from acquiring another company, there are ultimately two ways to grow—sell to new customers (new business) and sell more to current customers (retention and upsells).

It's a lot easier to upsell existing customers than to be constantly on the hunt for new ones. But your existing customers won't stick around if you and your sales team sold them an overpriced solution that doesn't meet their needs.

This requires a choice about your business values—in the short term, do you put your needs or your customers' needs first?

When a prospective client or customer needs help, but is concerned about making a large financial investment, consider recommending they start with a smaller option that will still move the needle for them in achieving their goals—so they can see the ROI in your services or product. This "downsold" alternative means less short-term revenue for you, but builds trust. The risk is lower for them, and can increase the chance they'll make a larger investment down the road. When someone isn't a fit at all, consider referring them elsewhere, rather than a downsold project.

2. Decide how you'll apply this to your business.

Are you selling a transactional product or service, or are you providing something that people tend to buy more of over time? If your business focuses on transactional sales, downselling may not be a great fit—you won't have long-term sales to make up for the short-term revenue hit that comes from downselling.

What kind of a businessperson do you want to be? You become what you practice.

—Karl Sakas, president, Sakas and Company

But if you have a long-term business model, downselling can help you build trust. In the 1950s, my grandparents put an addition on their house. They hired a young plumber to install the radiators. They originally wanted a complex, expensive system, but he and his boss advised them that it would be overkill for their situation. Fifty years later, before he retired, I hired the same guy to do plumbing work on my new house. By downselling, he secured a five-decade revenue stream, plus the referrals that came with having a satisfied customer.

What kind of a businessperson do you want to be? You become what you practice.

3. Plan how you'll relay this message to your sales team.

Want to practice downselling? Implementing this depends on how you compensate and hire your sales team.

What are your sales team's incentives? If their compensation focuses on sales this quarter, you encourage them to sell as much as possible now. This generally isn't a match for long-term relationships.

If you want to encourage long-term customer relationships, try splitting sales compensation between current commissions and trailing (ongoing) commissions. If a salesperson knows they can earn ongoing commissions, they may be more likely to focus on the long term in their current sale.

How do you hire salespeople? If you've hired aggressive 'always be selling' types, don't expect them to embrace downselling; such salespeople may want to maximize their short-term transaction. Downselling fits better when you have a more consultative approach that focuses on finding the right solution for each client.

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