Maximizing profits from your online store can be a challenge. Merchants must create a clear marketing strategy to attract and retain customers. While attracting new customers may be the focus of many marketing techniques, there are numerous chances to increase profits from customers who are already making purchases on your online site. This is why, of all the marketing techniques, upselling and cross-selling are two of the most valuable.
Both upselling and cross-selling are focused on selling more products to customers who have already decided to buy from you. These customers already trust your business, and will therefore be open to hearing what other recommended products you sell. In contrast, attracting a new buyer means building a relationship from scratch, persuading them that you are the business they want to buy from, and then making sure they actually buy from you – which is a lot more difficult!
The decision as to whether it’s time to upsell or cross-sell can only be made once you have a clear understanding of what each one entails, and when they are suitable techniques to be used.
So, before you run off to build an upselling or cross-selling strategy, here are the differences between upselling and cross-selling and how you can utilize both to increase your sales:
Upselling is a method by which shoppers are persuaded to buy a product of higher value, an ‘upgrade’, compared to their original product of choice. This will be a product that fulfils the same purpose, but has more features, and therefore, a higher price tag. Merchants can gently push these extra features, by tapping into the emotional and practical needs of the customer.
This way, you can persuade the customer to buy something more advanced than what they were initially planning to buy, and spend more money. Even if every customer only spends a little bit more than they were planning to, which they can be easily persuaded to do if the product really is superior, this will create a significant additional source of profit that adds up once you upsell to many customers.
One instance of upselling can be for example, in an online mobile phone store. Say a customer selects a specific model of mobile phone which is a basic entry-level model with ‘no frills’. When they click on the ‘select’ button, the website takes them to a separate web page where they can choose upgrades for the model. This could be the same model with additional memory or accessories, or a better model with more advanced features. The key is that the product being offered has the same function as the original, but it appears to be clearly superior.
As well as showing customers these products directly after they select a product, you can present relevant upgrades alongside customer search results, under the title of ‘Featured Products’. When a customer searches for a particular product, these featured products will be shown too, and can entice users to select them.
The other prize marketing technique known as cross-selling is similar to upselling, but with one marked difference. Instead of selling a replacement product – you are suggesting an additional product to the customer. The additional product is one that complements the original product chosen, and not an arbitrary one.
Just like upselling, this technique targets a customer who has already decided to buy from your site and offers them something additional for just a little bit more money. Therefore, it can also be a source of extra profit for your business.
Let’s take our online mobile phone store example again. The customer has decided on the mobile phone they wish to purchase, and it’s in their online shopping cart. When they go to check out, they are presented with numerous recommendations. They may be shown a protective case for that particular model of phone – now, that’s clearly very valuable and practical – everyone wants to protect their new mobile phone, especially if they’re paying a large sum of money for it. The extra money spent on a case will be relatively insignificant to the customer compared to the benefit of protecting the phone.
Another way you can tap into this need to ‘protect’ the new purchase is through offering an extended warranty or special insurance plan in case of theft or loss. These additional products will be hard to say “no” to, especially when presented at the stage when the customer is just about to pay for their new item, and because they complement the original offer so well.
One way to encourage cross-selling on your website is by promoting ‘Relevant Products’ alongside your product pages. This way, customers looking at a particular product will see other relevant products as well.
Amazon.com’s CEO, Jeff Bezos, once said that 35% of Amazon sales were a direct result of cross-selling!
Amazon uses cross-selling techniques on every single product page. As you can see below, they show relevant items that other customers bought when buying the product on the page. Under ‘Frequently bought together’, they provide an easy option through which customers can add the current product to their cart, together with other ‘frequently bought together’ products, in a single click.
In this example, looking at the product page for the Galaxy S6 mobile phone shows relevant accessories, including protective cases and glass screen protectors.
Amazon’s cross-selling techniques for the Samsung Galaxy S6 mobile phone (Source: Amazon.com)
Using cross-selling and upselling
The best way to maximize profits from these techniques is to use a combination of both upselling and cross-selling. When using either technique, you must understand the buyer’s needs.
Here are some key points for using upselling and cross-selling effectively:
The product must add value
Make sure the product you are upselling or cross-selling really will add value to your customer’s life – don’t offer something that appears to be an unnecessary or irrelevant extra. And, make sure the advantages of the superior product are real and obvious.
The product must be relevant and suitable
It’s essential that the products being suggested are related to the original product – this applies equally to both cross-selling and upselling.
If you have information about your customer, you can take extra steps to ensure that the products you offer are relevant. For example, if you are selling a mobile phone to a young person, you can offer a good set of headphones for listening to music. On the other hand, if it’s a senior citizen buying the phone, this offer will probably be unsuitable. If you know a customer usually buys items on sale, offering a very expensive product won’t lead to a sale – but showing discounts and offers just might.
Timing is critical
The best time to offer additional products is when the customer has committed to buying a particular item, so they’re planning to spend money with you already. Persuading them to spend just a bit more on something far better, right before they enter the online payment platform, is easiest at this stage.
Offer a range of options
No-one likes to feel forced into buying something they didn’t originally want. Offer a selection of upgrades or additional options, and position one choice as the most attractive. This will make the customer feel more empowered – they will be more likely to choose the upgrade or additional option if they feel like they are really choosing to do so, and are not being pushed into it by the merchant.
If you’re an online merchant, both upselling and cross-selling techniques are a valuable addition to your marketing arsenal. By targeting your loyal customers and showing them relevant products or upgrades, you’ll be able to increase your profits and improve customer satisfaction at the same time.