How To Effectively Upsell And Cross-Sell For Revenue Maximization
Amazon’s recommendation algorithm drive 35% of its sales.
How’s that for some eCommerce trivia?
We all know that most eCommerce stores do a fine job of recommending products related to the products we are browsing or have browsed in the past.
These product recommendations do not happen by chance. They are carefully curated and presented with the help of the intelligent platform.
There is a business terminology used to describe this — upselling and cross-selling.
Let’s understand each of them one at a time.
You’re considering buying a 32GB iPhone. The store seller convinces you that it is insufficient for your needs and nudges you to buy a 64GB iPhone which costs a bit more than the 32GB version. That’s upselling.
Upselling is persuading the customer to buy something more expensive than what has already been decided.
Cross-selling is slightly different. Now you have your 64GB iPhone. Even without your asking the store seller brings to the table a collection of hard cases for your iPhone. Of course, you were planning to buy one sometime, but not immediately.
The store seller says that there is an ongoing offer that gives hard cases at a 10% discount along with new purchases. The discount impresses you and you buy the hard case. That’s cross-selling.
Selling a different product or service to an existing customer along with another product is referred to as cross-selling.
Now that we have seen how upselling and cross-selling works, let’s take a closer look at their individual traits. The traits that make them different from each other and how each tactic becomes best suitable for each sales scenario.
Upselling and cross-selling: What, when, and why?
In eCommerce or in any other business format, the purpose of both upselling and cross-selling is to maximize revenue. However, there are differences between both the selling techniques that make them suitable for specific scenarios.
|What is it used for?||Making the customer buy an expensive product, higher plan, or upgraded service.||Used to make the customer buy an additional product along with the original product. |
|When is it used?||When there is a product or service that is priced higher and can offer more value to the customer while earning more revenue for the business.||When there are complementary products that can go well with the original product that can help the customer use the original product in a better way.|
|Why is it offered?||When the higher price or plan is still affordable for the customer and offers the same, if not better features||The user will be able to extract maximum value out of the original product by using the secondary product along with the original product or with other related products.|
|What is its nature?||Perfect substitutes of higher capabilities.||Complementary products with entirely different product features and characteristics.|
How to effectively upsell and cross-sell
Amazon might make upselling and cross-selling look easy. Your neighborhood store seller who has been in the game for a decade might do it without breaking a sweat. However, for those of us who have joined the eCommerce bandwagon recently, upselling and cross-selling might appear to be a difficult puzzle to crack.
If upselling and cross-selling are not planned and executed properly, you might end up losing money in the process rather than earning additional revenue. It could also provide a bad shopping experience for customers forcing them to abandon carts, discontinue their relationship with your brand, or result in upset and angry customers.
Here are some measures that will help you upsell and cross-sell effectively.
- Narrow down choices
The store seller was able to sell you the 34 GB version instead of 32 GB because he did not give you several options and confused you. Confusion often leads to inaction, especially during online shopping.
Let’s take a real-world scenario. A convenience store has two sections for jams. In one section there are 24 flavors of jam. The other has 6 flavors.
Guess which section will have the maximum sales? The second one. Six flavors are easy to choose from while 24 can be mind-boggling. The same with any product sold online. Hence the need to narrow down the choices offered for upselling or cross-selling. This HBR article titled “More isn’t always better” also stresses why too many flavors can actually backfire.
When you narrow down choices for your customers and make it easy for them to make a decision, the chances of upselling increase drastically. It is easier to pick one or two flavors from 6 flavors than from 24 flavors. The same with any commodity or service.
Actionable tip: Offer as few choices as possible. Make decision-making easy for customers. Avoid confusion paralysis.
- Make decision-making easy
Have you seen how the product recommendations that accompany any product are related products? They may not be competing with each other, but you definitely need both to use them properly. For example, a product recommendation of a mitten while purchasing an oven. A white sneaker while purchasing a pair of blue jeans, and so on.
The key to making upselling and cross-selling work for you is to make decision-making easy for customers. Reduce cognitive overload as much as possible.
It is here that product bundling comes into play. Product bundling is perhaps the best example of cross-selling as well. Product bundling offers two products that complement each other at a discounted price. It increases the chances of purchase more than the chances of the product being purchased individually.
Let’s take the example of a customer who is buying a DSLR camera. Sometime in the future or even right now they would probably need a tripod for camera stability and an SD card for media storage. When these products are sold as a bundle and not as individual products, the chances of sales are higher. It also brings in more revenue for the business.
- Use price anchoring
As the name hints, price anchoring is the use of specific pricing as a reference point to help customers make quick decisions. Usually, the pricing point at which the business wants to sell is surrounded by lower and higher plans. The lower plan will be stripped off with most features making it less favorable. This is a typical pricing strategy used by SaaS companies to drive subscriptions for plans with higher and mid-tier plans.
The higher plan would be priced way higher than the middle plan so most users who don’t want the lower plan would go for the middle plan. Of course, customers with low budgets will gravitate towards lower plans and those with higher feature expectations will gravitate towards the highest plan. However, the middle pricing gives the impression of a middle ground that is both affordable and feature-rich.
If you notice SaaS products where sales are made through the subscription model, it is pure price anchoring at play. By showing three choices, and placing highlights on the middle plan, SaaS companies are able to drive more revenue. As for big enterprises, higher plans with customized pricing plans are offered, which again makes it easy to price the product according to each individual customer. As a result, the company would earn more revenue than it would with a basic plan.
Nonetheless, if you do have more than 3 pricing tiers, think of presenting them in a way that won’t intimidate users. The WordPress website building platform Elementor, for example, leads things off with 2 options.
Only then does it present its 4 subscription packages:
Mind you, since SaaS is a subscription-based business model, there will be different SaaS Sales metrics to keep an eye on, as opposed to traditional business. Thus cross-selling and upselling will be highly dependent on the level of customer satisfaction driven by your sales and customer success team.
- Sell subtly and not aggressively
One of the basic rules of selling is to persuade a sale and not force it on the customer. Even with upselling and cross-selling you can try selling, but don’t push it on your customer. Offer the choices as helpful suggestions that will add more value to the user.
Going back to the iPhone example. A hard case is something that will definitely protect your device from damage. But, if the store seller had tried selling an earphone, it may not have been so useful. You probably wouldn’t have purchased it and the cross-selling may not have happened. The thumb rule for upselling and cross-selling to work is that it offers value to the user. Sell subtly and not aggressively.
For example, request the customer to consider an upgrade from a Standard Room to a Premium room that comes with perfect sleep in the luxurious bed and free breakfast. Don’t force the upgrade to the premium room just because it is available.
Actionable tip: offer upselling or cross-selling only if it is going to provide value for the user or if they are going to be impressed by the better choice.
- Follow-up post-sales
From the examples seen so far, you could have formed the impression that upselling or cross-selling happens only at the point of sales. However, upselling and cross-selling can be made possible at any juncture following the actual sales.
Online stores use email marketing to actively retarget existing customers with related products. You might recollect receiving emails that mention “customer who bought this also bought these” emails. The purpose of these follow-up emails is to persuade the customer to make an additional purchase in tandem with the original purchase.
Why is post-sales follow-up so important?
It is common knowledge that the chances of selling to an existing customer are 60-70% higher than selling to a new customer. The already existing relationship and the previous buying experience give the customer the confidence to make another purchase without much afterthought.
The fact that Amazon makes more than one-third of its income through upselling and cross-selling is proof enough that these selling tactics are worthwhile. The good news is upselling and cross-selling can be used by anybody. It is not restricted only to bigwigs or those with deep pockets.
All it requires is some proper planning, bundling of products, and an attitude for customer service. The success of customer service lies in how it is executed. The tactics we listed above should help you take advantage of upselling and cross-selling and maximize your sales.