Generate tiers and downsells from the quality vectors

1. The eight ways a customer becomes worth more

The starting point is a common claim that there are only two ways to make a customer more valuable: raise the average order, or raise how often they buy. Both are true and both are too broad to act on, so they are split into eight smaller moves that can be run on any business. The habit recommended is to run through all eight almost every time you look at a business, until you are fluent in them. The best-converting upsells rarely come from inspiration; they usually come from working through a process like this one.

#	The way	What it gets the customer to do
1	Raise prices	Pay more for the same thing
2	Lower the cost of delivering it	Nothing new: you keep more of what they pay
3	Increase the number of purchases	Buy the same thing again, later
4	Sell something different alongside	Buy a different thing on top
5	Sell more	Buy more of the same thing now
6	Sell better	Buy a premium version
7	Downsell fewer	Buy fewer things rather than nothing
8	Downsell lower quality	Buy a lower-cost version rather than nothing

The eight are also given in two other orders: price, cost, buy again later, buy more now, buy a premium version, buy fewer, buy a cheaper version, with the different thing last; and price, cost, a different thing, buy again, buy more, buy better, buy fewer, buy worse. No order is said to matter.

The ways are illustrated three times over where it is reasonable: for a local service business, a physical product and a digital product.

2. The first four, briefly

Raise prices. Pricing moves gross profit more than any of the other seven. Take a business making a 10 percent profit, raise prices by 20 percent and keep sales the same, and the business does not grow by a fifth: it grows threefold. The best price is the one where conversion rate times lifetime gross profit is highest, because the aim is the most money rather than the most units. The price that works is usually higher than you think. How to step prices up and how often is SOP 128 — Test price with a step size and a cadence.

Lower the cost of delivery. Prices can rise without limit; costs can only fall to zero. The levers named are more customers per employee, offshore staff, productized delivery for similar customers, moving from doing it for them to helping them do it, capped usage, annual access in place of lifetime access, remote in place of in person, fewer and shorter meetings, and bulk buying or prepaying suppliers. Each lever is worked through on SOP 127, the page on cutting what delivery costs.

Increase the number of purchases. Three routes are given as the only ones known for this, apart from the rest of the eight, and you should pick at least one:

• Add recurring. Offer a version that repeats weekly, monthly, quarterly or yearly. Even with heavy churn, somebody who goes from buying once to buying three times has three times the purchases. A plumber sells a plumbing membership and 20 percent of customers take it; a mug seller runs a mug of the month and 10 percent take it and stay five months; a course adds paid monthly accountability calls.
• Cut churn. If churn falls from 10 percent a month to 5 percent, lifetime value doubles, since lifetime revenue is price divided by churn. A lawn-care business holds an appreciation event and people cancel less often; a meat subscription lets customers change quantity and delivery frequency by text; a course adds a community.
• Follow up. Run a reactivation campaign to the list. The long-term method preferred is one promotion a quarter and useful content the rest of the time. Sometimes it is not the right time for somebody to buy; reminding them you exist, in general, earns more when they are ready.

Sell something different alongside. Sell something that goes with the first purchase: snow blowing to a lawn-care customer, fries and a soda with a burger, a community with a course. Its value adds to lifetime value as conversion rate times gross profit. From a lifetime value of $100, if 20 percent of people buy a $100 add-on that is all profit, you add $20 and the new figure is $120. Pick the add-on you could add most easily with what you already have; do not break the business for change.

3. Quantity, up and down

Selling more at once comes in three forms. A service delivered once a month shows all three — a pest-control service on the way up, a home service on the way down:

Form	Upsell	Multiple given	Downsell
Bulk	Prepay a year	12x	Buy three months up front instead of twelve
Frequency	From monthly to every three weeks	1.33x	One visit every other month rather than none
Size	From one hour each visit to three	3x	From one hour each visit to half an hour (.5x)

For products the same moves are two burgers instead of one, or a bigger burger; and down, one instead of two, or a smaller one. For services a quantity cut might mean fewer sessions or shorter ones, and for products it might mean fewer units: a three-month supply can drop to a one-month supply, and four sessions a month to two. Frequency does not apply to physical products on the upsell side.

The instruction for the upsell is to offer the bigger version first on sales calls and then downsell to the standard one; you may see lifts of 20 percent or more in cash collected overnight.

4. Quality: the vectors

Selling better means a newer version — for a service that might be a new process, for a product it might be a new recipe or an updated model — or a premium one (better ingredients, better materials, better people). Selling worse reverses the same list: the customer gets the same result, but it might take longer, carry more risk or bring more hassle. For products a premium version might mean sirloin against ground chuck, steel against iron, leather seats against vinyl, and older versions, less reliable materials or materials of lower status on the way down.

For services the levers are what this page calls the quality vectors. Each has a premium end — what a premium version might give them — and a downsell end, and every one you can turn down you can also turn up:

Vector	Premium end	Downsell end
Response time	Five minutes	Overnight
Time availability	Whenever you want	Set office hours
Days of the week	All days	Monday, Wednesday, Friday
Times of day	24 hours	9 to 5
Amount of time	60-minute calls	15-minute calls
Location	All locations	One location
Cancellations	Free rescheduling	Rescheduling fees
Speed of response	Minutes	Hours or days
Speed of delivery	Priority, same day or next day	Next week, or wait in line
Service ratio	Many of your team on one customer	One-on-one, or one of you to many customers
Communication	Video support	Text or chat support
Provider	The owner	A long-time employee, or a new, junior one
Live or recorded	Live	Recorded
In person or remote	In person	Remote
Who does the work	Done for you	Done with you, then do it yourself
Expiration	Works forever	Works for a set time, or at set times
Personalization	Made just for you	Built for three to five types of customer, or generic
Guarantee length	For life	One year
Guarantee coverage	Any bad thing	One named bad thing
Guarantee terms	Unconditional	Conditional: only if they do what you set

The instruction that matters is to quantify these for your own service before you need them. You probably have not put numbers on half of them. The customer does not need to hear any of it until you start peeling things back; then you tell them what the level is and what you are removing. Quality upsells are said to lift cash collected up front, and lifetime value, by 20 percent or more routinely.

5. Cutting a whole feature, or the whole service

Rather than turning a vector down, you can take a feature out altogether. Somebody offered priority chat support, email support and calls is offered chat and email without the calls, for less: they still get their answers, it saves you time, and the saving is passed on.

The last cut is to a different product that solves the same problem. If you can't sell the service in any form, sell the do-it-yourself version:

• A chiropractor sells home massage tools, foam rollers and mats instead of adjustments.
• A painter who is refused sells the paint and leases a spray machine by the day.
• A firm that would otherwise buy into a company and grow it sells a two-day workshop instead.
• A business whose prospect will not buy the service offers a nutrition consult, then sells the at-home version.

This cut probably comes up for a lot of service businesses. The do-it-yourself version opens new problems the customer can then pay you to solve. The view given is that for businesses already selling one-to-many training, looking for yet another product to downsell to is most of the time not worth it; if you insist, this is how.

6. Turning combinations into tiers

Once the vectors are quantified, a tier is a named combination of settings at a price. You can name the combinations as you remove features and change prices — first class, business class, economy. The preference stated is to call the cheapest combination the minimum: the name says the customer needs at least that much, and a prospect who has refused every other package can be offered nothing more than the minimum. It does not always work; it is described as very effective.

The same list builds the top tier. The premium version gets more of each vector; the standard offer is what they fall back to.

7. Who may buy the cheaper version

A downsell adds money when it is sold to people who would otherwise have bought nothing. The case given imagines four people walking in and shows what you might make per visitor before and after a cheaper option is added: revenue per visitor rises by 50 percent. The same case warns that you lose money when somebody who would have bought the $5 item takes the $2.50 one instead.

Flag: the four-visitor comparison. The figures behind 50 percent more per visitor are given only in a picture. This page gives no figure for the sales or prices in either scenario beyond the $5 and $2.50 price points.

So the rule is: offer the quantity and quality downsells only to prospects who do not qualify for the main offer. One practice here is to forbid the sales team to sell a qualified prospect the downsell. That protects the main offer from being eaten by the cheaper one and still collects the extra cash. These downsells tend to add little operational drag, because you already make or do the thing.

Flag: whether to downsell the unqualified at all.

• This section: sell the cheaper versions only to prospects who fail to qualify, and collect the extra cash. The cost: where people do the selling, SOP 228 counts added complexity, rep time and a distracted team against a small rise in revenue.
• SOP 228, section 9: where people do the selling, a downsell to the unqualified is not worth it; screen them out and sell a bigger offer instead. The cost: the cash from buyers who would otherwise have taken nothing is left on the table.

This page does not settle which reading is right.

Flag: a cheaper version for a qualified prospect who says no.

• This section: a qualified prospect is never sold the cheaper version. The cost: one who turns down the main offer leaves with nothing.
• SOP 70, section 8: rules for every downsell, a cut-down product included; a downsell is what you do when somebody says no, changing how they pay or what they get. The cost: some buyers who would have paid for the main offer take the cheaper one, the $5-to-$2.50 loss above.

This page does not settle which reading is right.

8. What this page does not decide for you

• Which vector to turn first. The order is learned from your own customers; running the removals in that order is SOP 73.
• How far apart to price the tiers. This page gives no figure for the gap between tiers.
• What counts as qualified. The rule depends on it; the test is yours to set.

9. The checklist

Question	The answer
The eight ways	Price, cost, repeat purchases, something different, more, better, fewer, lower quality
Repeat purchases	Add recurring, cut churn, follow up; pick at least one
Quantity forms	Bulk, frequency, size
Quality forms	Newer or premium; the reverse to downsell
Before you need them	Put a number on every vector you deliver
Removing a feature	Take it out whole and pass the saving on
Last resort	A do-it-yourself product for the same problem
Naming	Named combinations; call the cheapest the minimum
Who may buy the downsell	Only prospects who do not qualify for the main offer

10. What this page does not cover

Running the cuts in a live conversation, in order, and doing it for current customers before they leave, is SOP 73 — Feature-downsell customers before they cancel; changing how somebody pays instead of what they get is SOP 70 — Work the payment-plan downsell ladder. Computing lifetime value is SOP 55 — Compute lifetime gross profit and the ratio that gates spending. Where these tiers fit in a sequence of offers is SOP 59 — Assemble a money model from four prongs, and the anchor that offers the top tier first is SOP 68 — Run the anchor upsell. Pricing a higher tier from the share of buyers who take it is SOP 224 — Set fractal price tiers and read price off the close rate.

Product liability and consumer-protection rules on downgraded goods are not covered on this page.