With margins in manufacturing sitting at just 4-8%, it is more essential than ever to maximize customer lifetime value (CLV). And, according to Marketo, B2B businesses obtain 90% of CLV after the initial sale. So, what’s the best way to boost CLV?
It may not sound as sexy as converting new customers. But time and time again, upselling has proven to be the most efficient and effective way to boost revenue--outpacing cross-selling and costing less than acquiring new business.
Upselling, simply put, is when you encourage a client to upgrade their order at or after the point of sale--for example, maybe they purchase additional units or spring for an installation service. But, how do you decide what to offer as an upsell? And who to offer it to? And when to do it?
Modern selling—for all its positives—is a hassle and can create more questions than answers.
Thankfully, when you look at your data, the answers become straight-forward. Without further ado, here are four ingenious ways you can use data analytics to stop guessing with your manufacturing business and finally get back to selling.
1. Use segmentation to identify prime upsell opportunities.
As much as customers may like to think of themselves as unique flowers . . . well, we know that’s just not true.
Segmentation divides your customers into different groups (“segments”) based on some kind of shared characteristic. The way you define your segments will vary from case to case, but usually are based on the most reliable indicators of projected yield.
For example, if you manufacture plastic injection molds, you may find that the most reliable predictor of revenue is the customer’s industry. If customers in the medical field tend to require more tooling and therefore be more lucrative than those in construction, then you may base your segments on industry.
On the other hand, if you manufacture wearables--consumer goods like smart watches, fitness trackers, sleep monitors, etc.--you may find that you tend to make the most profit when your customer wants something made primarily from carbon fiber. So, you base your segments on the main type of material requested.
This graphic below demonstrates how one protective clothing manufacturer considered segmenting their market.
Source: Allied Market Research
How do you use segmentation to drive sales?
To figure how to segment your own customers, you can either analyze your own data (if you have enough data points collected already) or look at comparables in your specific niche to get you started. Either way, once you determine segments, the real upselling fun begins.
Look at your segments, identify any outliers, and then approach these customers with compelling upgrade offers. For example, if segment A typically buys 50,000 parts, but one customer in that segment is only buying 10,000, then you have a prime upselling opportunity.
When in doubt, try to find a simple quantitative characteristic that influences revenue. How big is the company? How much revenue do they bring in? How long is your typical engagement?
Beyond identifying outliers, you can also upsell to customers who comfortably sit within a segment by looking beyond the RfQ. Experiment with different upsells for particular segments, and see what sticks!
Some opportunities you can look out for are enhanced or additional services to tack on. As noted by Manufacturing Network, it is particularly helpful to important to think up and down the supply chain.
For example, one awesome opportunity is producing engineering drawings. If you can create them in-house (or even subcontract them out), this could relieve a huge burden from your customers’ shoulders. And that will increase customer loyalty and retention.
To figure out possible add-on services for your particular business, think about what the customers would need to find success with the typical . Would they need installation services? Upkeep? If you can anticipate your prospect’s needs, you’ll strongly increase your odds of securing their business.
2. Create data-driven personas to understand customers better than they understand themselves.
If you’ve been in your industry for some time now, you have probably discovered some fairly reliable--and interesting--patterns of business.
For example, maybe you’ve noticed that mid-50s suburban male customers tend to be very concerned with whether a manufacturer can deliver exactly on time, while 20-something crowdfunders are more worried about quality than a schedule.
This is invaluable information!
Using data analytics, you can uncover subtle patterns you may have missed--or even identify additional lurking variables in the patterns you already knew of. These patterns allow you to create detailed data-driven customer personas that will help your sales reps know your customers better than they know themselves.
If this sounds like a lot, it’s because it is. But, there’s good news: you don’t need to make detailed personas for each and every individual customer. In an ideal world, you will create a persona that loosely represents every target customer that comes through your door.
When developing customer personas, segments can be a good place to start. Work with your sales reps (or anybody else who has experience in the field) to build out personas for each segment. You may find some overlap, or even that a couple segments have more than one common persona.
This buyer persona creation tool from Hubspot is an excellent resource for making a nice-looking, effective persona.
How are personas different than segments?
Simply put, personas dive deeper than segments by painting a more qualitative picture of the customer. They include more interpersonal points, like motivations, fears, background, how they obtain information, what social media platforms they’re on, and more.
Another differentiator is that, especially in B2B industries like manufacturing, segments tend to define the company while personas define the person who your rep sells to.
If you have information about your customers in an accessible CRM, then not only will it take less time for your reps to get prepped for a meeting, but they’ll also be better able to pinpoint the
exact problems each type of customer is facing.
Then, when your reps go for an upsell, they will be able to cater their pitch to each customer’s most relevant pain points, desires, preferred method of communication, etc.
As an added bonus, when your reps deliver a hyper-customized pitch and demonstrate that they fully understand a customer’s unique situation, they earn the client’s trust and establish themselves as trusted advisors--not just order-takers.
Then, each transaction becomes a consultation, and in a consultation, there is significantly less resistance to upsells.
If a rep can demonstrate a deep understanding of a customer’s unique situation, then the customers will trust their information . . . and, most importantly, their advice. A transaction becomes a consultation, and in a consultation, it’s easy for your rep to offer an upsell.
3. Develop new offerings your customers crave by reading the data.
Many times, quality, data-driven upselling will naturally present opportunities for diversification. “Predictive insights,” or predictive data, can help you determine what new products, service offerings, customization options, or upgrades may generate the most revenue.
As mentioned before, the most natural upsells are up or down the supply chain. Often, though, your current business will represent only a small portion of the supply chain--meaning you may not have the ability to fill other needs in-house right now . . .
. . . But that certainly doesn’t mean you can’t take care of it for your customers anyway.
For example, say you run a car manufacturing company out of Omaha. When you check out your data, you notice that the customers who are more than 100 miles away from your plant purchase significantly less than closer customers.
This presents a natural opportunity for those far-away customers. To encourage the upsell, you want to offer free delivery on large orders. You’re not sure how profitable this will be, though, and you’re not ready to commit to hiring drivers full-time.
The quickest, most cost-effective way to test the viability of a new service or feature is to subcontract out the work. This way, you can get a sense of how in-demand and hot an offering will be before you invest in new capabilities--especially expensive new machinery.
As another example, a common (and often profitable) upsell for manufacturers is customization and personalization. If you want to experiment with these upgrades, it is likely cheaper to rent the necessary equipment or pay another company to complete the work, and then analyze the data instead of committing to thousands of dollars worth of machinery up front.
In the example above, your company is the Original Equipment Manufacturer, and your subcontractor is the Manufacturing Partner. (If subcontracting is particularly interesting to you, consider whether it would be best for your company to use buy/sell or chargeable subcontracting.)
As time goes on, you’ll collect enough data to discover if the particular upsell is profitable and, if so, who tends to buy it.
Data analytics is a constant feedback loop--once you fill out the persona of who tends to spring for a particular upsell, you can figure out what tends to tip a customer from a segment that doesn’t buy to a segment that does. The trick is identifying these patterns and acting on them.
And then, if you find that many customers are taking you up on the work you subcontract out, you can eventually acquire resources needed to do it on your own.
What’s the best way to introduce new offerings to the market?
Instead of making decisions in boardrooms over monthly--or even quarterly--sales reports, emerging technologies make it possible to track point-of-sale data in nearly real-time. Now more than ever, you can practice data-driven agile manufacturing.
What might this look like?
When kicking off new or risky changes, you can forgo the large production runs, minimize risk, and launch with “minimal viable batch quantities.” You’ll see the data roll in and can almost instantly decide whether this is a good avenue for company to pursue long-term.
4. Discover the perfect times to offer the upsell.
It’s the quandary that has plagued us for centuries: When to pop the question?
The point-of-sale is a natural time to offer an upgrade. At the POS, upselling can be as simple as making sure your customer knows that a premium version of whatever they are purchasing exists.
For example, in their proposal, your sales rep can ask customers check a box indicating whether they want a small or large package, or if they’d like fewer or more capabilities, features, etc., allowing them to present other options without being pushy.
But, the POS it’s certainly not the only time to upsell--and data analytics can help you find the perfect opportunity to go for the close for your unique situation.
For example, if you have the means to monitor your customers’ inventory, you can offer them the chance to upgrade to a larger package once they start running low. Another good time to go for the upsell is when a client has an achievement or hits an important milestone: They’ve been a customer for a year? Upsell. Their company go public? Upsell.
It can be easy to get intimidated and think that you don’t want to bother a customer with an upsell during their positive moment. But it is important to celebrate your customers’ achievements with them. Plus, you can make the moment even more special by offering incredible value.
How can I increase my reps’ likelihood for success in upsells?
When choosing a time to pitch your customers an upsell, it is also vitally important to go for gold when your customer is their most happy.
It seems simple, but it’s enormously important: a sure-fire way to make sure your upsell will be well-received is making sure your customer is happy with your products or services.
If you have happy, satisfied customers, upsells are like asking if they’d like whipped cream on their dessert. The answer is a clear “duh.” But if you were just served a god-awful meal that was cold, wrong, and late, you would probably lose your mind if they waiter tried to push you into ordering dessert as well.
Data analytics can help you make sure each and every customer is satisfied--and ripe for the upselling. But how?
Data that can help you determine customer satisfaction (beyond the obvious, like complaints) are things like: how often they use customer service, if they make frequent returns or exchanges, or if they only purchase discounted offers.
Wrapping It All Up
The trick to putting data to work for your business is making sure that the analyses are available to your entire team through company-wide easy-to-use digital tools, like sales and CRM software. With everyone’s heads together, you can track more data points, uncover more profit-maximizing patterns, and discover more opportunities for upsells.
Now, it’s normal to be hesitant to go for the upsell. Upsells have a negative association with slimy sales tactics--it’s just the truth. But in reality, well-positioned and well-timed upsells are like mindreading, and your customers will thank you for it.
Upselling is offering more value to your customers. And when you’re empowered with data analytics to know ahead of time who is most likely to need what when, you and your customers will both win.