I remember an episode of The Office (US) where Ryan asks Micheal whether it is more cost effective to keep an existing customer, or to get a new one. According to Marketing Metrics: The Definitive Guide to Measuring Marketing Performance;
The probability of selling to a new prospect is 5-20%. The probability of selling to an existing customer is 60-70%.
So, what tools are at our disposal?
Upselling, and cross-selling are important tools that introduce customers to bigger, better and complementary products that you offer.
Offline retailers have been doing this for a very long time – the main drive for a sales team is to sell the customer a more expensive item, or sell them more items.
So, what is the difference between upselling and cross-selling?
When I started researching this post, it became apparent that cross-sell, upsell and related products are all used interchangably by both consumers and by online stores. I surveyed the office (now around 70 people) and found that this caused some confusion. So, let’s define them and find some good examples to show their worth.
I think that Dell is a great example for showing upselling working well online.
Their configuration tool is a constant up-selling model. Dell “starts” you on a base model, and then allows you to customise from there, immediately.
This style of customisation is upselling in practise. Why have this model, when you can have one better, or one we recommend more highly? Dell are trying to essentially get you to spend more money on the item you’re looking to purchase.
As soon as you add an item to your cart, Dell also shows you what you get by default, and then tries to offer you something better.
As you can see from the screenshot, you’re already signed up for 1 year enhanced support. Why not get 2, 3 or 4 years?
Upselling often brings higher gains, and in turn, higher customer retention for certain products.
Once you’ve bought your new shiny computer – and you’ve picked a better processor – what are you going to need to go with it? This is where cross selling comes in.
Do you need a mouse? A monitor? A headset? A printer?
All of these are logical cross sells when purchasing a computer. Things you might need.
Amazon is a great example of this.
However, usually, you’d want to be offering a specific product.
So, is Upselling and Cross-Selling Important?
Upselling and cross selling can boost revenue by selling more to your customer. It’s important to note that this interaction improves your customer’s experience too. If they’re buying a new TV, you can make sure they’re buying the right one for them, and it’s also important to offer them the items that will let them get the most out of their new product.
Which is more effective?
According to a report from PredictiveIntent in 2012, upselling leads to around a 4% increase in conversion, whereas cross selling only raised around 0.2%.
The research however did state that it was aggregated across all their clients, and individual clients had increases in conversion of around 3% when cross selling was displayed in certain key areas – such as the checkout process.
It’s an important balance for an e-commerce store to ensure that a customer ultimately reaches the “checkout” phase as quickly as possible and completes a purchase; weighed against offering the customer – who is in a buying mindset – the ability to purchase more from you.
With the majority of ecommerce platforms, it’s a lot easier to get data based on what sells, rather than looking more indepth into what users visited initially, and what they ended up buying. If categorisation is good, you can probably get a fairly good read on this, but it will require more indepth profiling, and you’ll need to give up product page real estate to promote other products. Whilst this makes sense for the likes of Dell, for non-specialised businesses it makes less sense.
Ultimately, you’d like your customer to spend more money with you, but how you go about this has the potential to be too direct and jarring for the customer experience on your site.
There are a number of factors to increase conversions of you cross sells. A major attribute is value. Try not to offer the customer items that are over 20% the price of the product they’re looking at.
Customers are much more likely to purchase lower-priced add-ons to their purchase than additional big ticket items. This obviously helps if the main item is already expensive. The same goes for upsell items – you don’t want to try and upsell to an item that costs a lot more than the original.
Where to use Upsells and Cross sells
So, you have an ecommerce store, where should you position your upsells and cross sells?
Upsells really need to be on a product page.
Apple show a very good example of this across their iPhone and iMac pages:
You’ll probably see a more regular example from Amazon, or from Interflora.
You’ll often also see cross sells on product pages, but also on pre-basket pages, and on basket pages themselves.
Tesco show cross sells on the basket page, but they could be doing so much more here – like selling me bags for the vacuum cleaner I’ve added.
Finding the balance
Remember, there is a fine line between interupting the checkout journey and empowering a customer to make an additional purchase.
Image Credit: HBM Happy Bench Monday