Estimated read time: 5 minutes, 21 seconds
Cross-selling and upselling is all about giving your customer the right solution for their unique needs. Whether you sell them a higher-quality/more comprehensive version of the product or an add-on to complement their purchase, both your customers and your bottom line come out ahead of the game.
Now, you just need to decide on the right sales strategy.
While the main goal behind cross-selling and upselling is essentially the same—add value to purchases and boost the average order value—there are also some very significant differences between the two approaches.
To help you navigate the ins and outs of each sales strategy and decide which one is right for your business, we’ve put together a little guide. And remember, you can implement both strategies into your marketing campaigns as long as you use them at the right time and place.
What is Cross-Selling?
Cross-selling (aka an add-on in ecommerce terms) is when you offer a different or complementary product or service in addition to the original sale item. This can happen at any point during the purchase process—on the product page, interstitial pages, checkout page, etc.
The easiest way to think about a cross-sale is with the iconic question, “Would you like fries with that?” The fries aren’t replacing your burger; they’re the perfect addition to your meal.
Some common ecommerce add-ons are support subscriptions, product training, bundled protection plans, etc. The purpose of the cross-sale item is to make the original product or service easier to use or more efficient.
The Rules of Cross-Selling
When determining your cross-selling strategy, remember that your cross-sale product should be:
1. Complementary – Make sure it actually goes with the original sale item
2. Less expensive than the original product – A cross-sale should only add 25% onto the total purchase amount
3. A no-brainer – You shouldn’t have to explain the product
Pros of Cross-Selling
- Increased Conversions – Predictive Intent found that cross-sells on the checkout page can actually increase conversions by 3%.
- Increased Efficiency – With one transaction, you sell more items and increase the order amount.
- Increased Customer Satisfaction – Shoppers are happier when they’re offered add-ons that enhance their product experience, which leads to long-term brand loyalty.
- Increased Revenue – A 2012 study by Exastax discovered that the worldwide average of website revenue generated through product recommendations is 12%.
Cons of Cross-Selling
- Adds Distractions – Depending on what cross-sale products you promote, shoppers may get distracted or confused.
- Challenging to Effectively Personalize – In order to be effective, your cross-sales have to be super personalized, which requires lots of market research and smart tools. If you offer the wrong add-on, you run the risk of losing that customer altogether.
What is Upselling?
Upselling is when you offer a customer an upgraded version of their current purchase. It can be in the form of a superior, higher-priced model or the same product bundled with additional features.
To go along with our cross-sale example, you can think of an up-sale as “Do you want that in a combo meal?” You’re still getting the same burger you ordered, it’s just been upgraded with a few more delicious items.
Besides promoting more comprehensive products at full-price to your customers, you can take a different approach. Another method of upselling involves offering a higher-priced option at a slight discount in exchange for a longer contract. For example, a customer can purchase a software license on a three-year contract at 15% off, while the one-year contract is at its usual rate. So, instead of making customers feel like they’re paying more than they expected, this approach makes them feel like they’re actually saving money.
The Rules of Upselling
In order to upsell, you need to have multiple tiers in place; you can’t sell up without a better/more comprehensive product or service available.
Pros of Upselling
- Enhanced Customer Experience – Customers feel like they’re being listened to and getting a product or service that is the right fit for them.
- Increased Customer Lifetime Value – As you find the best product for all their needs, customer satisfaction increases, which boosts brand loyalty, which increases CLV.
Cons of Upselling
- Increased Opportunity for Confusion – It’s easy for customers to get confused when bombarded with lists of features and benefits that don’t apply to their current purchase. You have to be careful to communicate the differences between packages clearly and simply.
- Potential to Appear Pushy – When it comes to upselling, there’s a fine line between being helpful and being too aggressive. You have to find that sweet spot before you start turning customers off.
When to Cross-Sell Vs. Upsell
While there are endless opportunities to cross-sell and upsell, here are just a few common examples of scenarios that work best for each strategy.
You should upsell if you …
- Have multiple tiered packages. Whether you offer bundled packages or similar products at varying quality levels, a tiered model is perfect when trying to encourage customers to upgrade their purchase.
- Offer subscription services. By offering extended contracts at discounted rates (e.g. 3-year contract at a 15% discount), you increase both the purchase amount and customer loyalty.
- Target audiences in the “Education” stage. The education stage of the customer journey is the perfect time to show the differences and benefits of your various product packages and help customers find the best solution for them.
You should cross-sell if you …
- Offer a variety of complementary products. “You might also need …” is a magical phrase to include on product pages, shopping cart pages, and post-purchase emails to get your customers to click “add to cart” a second time.
- Run post-purchase email campaigns. After they’ve completed their purchase, you can continue to promote different add-ons to enhance their experience.
- Have additional products that you can promote on the checkout page. Predictive Intent found that cross-sells on the checkout page can actually increase conversions by 3%.
- Remarket to abandoned carts. Use remarketing tools to turn abandoned carts into opportunities to entice customers back to complete or augment their purchases.
Are you ready to increase your average order value? Perfect! Now you just need to look at your product offering and your current marketing strategy and decide where you can cross-sell and where you can upsell. Your customers and bottom line will thank you. Interested in learning how full-service commerce can help you sell more with upsells and cross-sells? Schedule a demo with an Ecommerce Specialist today!