A Beginner’s Guide to Upselling and Cross-Selling
Nowadays markets are huge, due to the effects of globalization. You can reach customers in almost every corner of the world. From Ottawa to London. From London to Istanbul, from Dubai to Tokyo. You just need to name it.
Modern companies are able to reach you anywhere. Why is it so important? Well, it means there is only one important market, which is the global market, where the competition is fierce.
And when the competition is fierce, you have to use anything that could help you increase your chances of selling your product or service.
There are a lot of different marketing and sales strategies that could help you with that.
Today we are going to talk about some of those sales strategies.
We are going to learn what are upselling and cross-selling, why they are important, how you can use them to increase your sales and in the end, we will show you some examples of both.
Without any further due, let’s start the party!
WHAT IS UPSELLING?
Let’s start by defining what upselling is. Upselling is one of the most popular sales strategies out there. So, how to recognize upselling?
It is actually pretty easy. Upselling is a sale strategy where you offer similar products or a product with some extra features.
For instance, if you sell different packages of the same product, like for instance selling anti-virus software.
There is usually a basic version of the product, and there is a premium version, with some additional options, such as real-time protection.
In other words, you “up” your prices by offering the same product with slightly different characteristics. Another good example is a car sale.
You can get the basic version of a car, for a normal price.
On the other hand, you can get a car with additional features, such as air condition and seat heating, for a bit higher price.
So, it is essentially the same product, but with more features.
WHY IS UPSELLING IMPORTANT?
Now that we know what the upselling is, let’s try answering the question why is it so important in internet sales.
A lot of people hate some sales strategies because they can be too pushy, but sometimes they can have a very positive impact on us and persuade us to buy a certain product.
Upselling is generally really important in internet commerce.
So, what are the main reasons online sellers like to use upselling to increase their sales?
1. A deeper relationship with customers.
One thing people hate when it comes to cheesy sales strategies is that they are only meant to get you to buy the product, without worrying about your satisfaction and wishes.
Some even resort to lying and offers a product that is not entirely the same as commercial is describing it.
Upselling, however, takes it to another level. Its goal is not just to sell the product, but to develop a deep relationship with the customer, which could lead to the future increase in sales.
Upselling does that by offering different “packages” of the same product, allowing customers with more money to get additional features that could satisfy their wishes.
That way, the product will have more value, by giving the impression that by buying the more expensive version of the product, you can get a better deal.
That would eventually increase the company’s profits.
2. Upselling is easier with the existing customers.
Nowadays, customers are very picky, everyone would like to get a slightly different product, with different features. However, it is not easy to satisfy everyone’s wishes.
Hence, when you earn the trust of a certain customer group, it makes it much easier to sell another or slightly improved products to that same group, rather than trying to earn the trust of a completely new customer group.
How do we know that? It is supported by the data, which states that the probability to sell to a new customer is only 5 to 20%, while the probability of selling the product to the already established customer is around 60 to 70%.
3. It increases CLV.
CLV or Customer Lifetime Value is a net profit which is contributed by the customers over time.
In that regard, you can divide your customer group into three different categories:
- Not profitable
- Very profitable
So what does having higher CLV even means?
It means that every customer will generate higher profits for you, without you having to invest more money.
That would lead to the company having more means to fight on the market and get new customers.
One of the best ways to increase your CLV is by using upselling.
It could help you to make your buyers to be very profitable, which could lead to them coming back to you when they need to get another product.
4. It makes customers come back to get more.
Because it adds additional value to the product and your sales overall, upselling is the perfect technique that could help you keep the customers and making them come back to get more of your products.
That is especially true if you are offering high-quality products with interesting and useful features.
That way, you will earn more trust from your customers and literally make them come to beg for more, which could lead to an increase in sales.
HOW TO USE UPSELLING?
There are three main steps to use if you want to conduct the successful upselling strategy:
- Pre-purchase – when customers are browsing the store looking for a certain product, you should use this moment to present other possibilities for the same product to them. This is generally done by putting the recommended packages in the sidebar of the store or at the bottom of product or category page.
- Purchase process – then, when a person selects the product, make sure to present those options to them again, by using a pop-up or options to select different packages. This is usually done while the customer is in the shopping cart, in the abandoned cart emails or while browsing a checkout page.
- Post-purchase – after the customers have made their purchases, make sure to send them emails, that are personalized, which are used to bring customers back and encourage them to buy more of your products.
Now, this may sound easy, but it really requires you to know your customers and understand their needs, in order to make their shopping process and experience better and enjoyable.
The result you want to reach is that the customers should feel like they are the winners here.
So how does it work and what should you do in order to reach that result? Let’s find out.
- First of all, show some incentive and try to persuade your customers to spend more money on your products. You can do that by giving certain rewards for paying for the more expensive packages. For instance, with bookselling, you can award people for buying 3 books, by giving 4th one for free. Or if it is a trilogy, you can sell all three books in a bundle, where each book individually would be cheaper than if they bought it one by one. That way, you instigate your customers to spend more money at once.
- When browsing in online stores, people often like to compare similar products, to see which one is better at the current price. One good way of using the upselling strategy is to have a table of comparisons for similar products, or the same product with additional features. For example, you can see this on Amazon a lot.
- Price range is important. When choosing a bundle or a premium product to upsell, you should think about the price difference between different bundles. Customers are usually not inclined to pay more than 15-30% more than the amount they intended to spend on a product.
- It is ok to use pop-ups and premium bundle information, but do not try to push too hard. Make sure to minimize pop-ups, and let customers decide whether they want to get something or not. Too many pop-ups might enrage some impatient buyers and they might even give up on the purchase in some cases. So, don’t be pushy, just informative on a reasonable level.
- Another very common thing you can see on Amazon is some real-time updates when it comes to the number of items available. This is done to create a sense of urgency, which could persuade people to buy something, so they wouldn’t miss a chance to do it in the future.
- A good way to meet your customers and learn about their preferences is to analyze some customer data, which could show you what people like and don’t like. That could help you to personalize some special offers you might have for them and suggest products which could lead to an increase in purchasing value.
- Another “emergency” situation you can create is by offering certain items to be on the sale for a limited amount of time. So, for example, when your customer purchases a base version of a software, you can offer the premium version at a lower price for a limited amount of time. That is one way to make people to get the upgraded versions of your software and to show them the risks of not doing it at that moment. Because after the clock stops, they won’t be able to get it for the lower price and would have to pay the full price in case they decide to move to premium.
- When you decide to show some additional options or products that are similar, make sure not to overwhelm your customers by giving them a lot of different choices. They might get indecisive and give up on the purchase if they are not sure whether they need one or another, or perhaps some third product. In Amazon, it is a practice to show either 3 different packages of the same product or maximum 3-5 similar products.
WHAT IS CROSS-SELLING?
Similar to the upselling, cross-selling is a sales strategy that is used to increase the sales, by suggesting and offering products, that are tightly related to the product the customer is buying.
Those could be some complementary products that your customers could use to improve their user experience with the product they intend to buy.
You probably know about we’re talking about.
There are lots of examples in supermarkets or almost every general store.
For example, there are packages with razor blades, shaving foams, and shower gels.
Those are all different products, but you can use them together at any time since they complement each other.
INTERNET COMMERCE AND CROSS-SELLING
Internet commerce is a very important part of nowadays markets, so it is not a surprise there are a lot of different strategies related to it.
One of the most important of those strategies is cross-selling. It focuses on presenting similar products to people who are already buying a certain product, for instance, by showing those options while the customer is in the shopping cart.
You can find a lot of examples on Amazon.
For instance, if you want to buy a phone over Amazon, you will often be presented with the option to get items such as headphones, chargers for that phone, masks for phone or some additional gadgets that could be used with that phone model.
That way, you can help the customers by offering them the products they didn’t even think they would need and that they could use them to improve their user experience.
On the other hand, that could help you as a company, if you have a wide range of complementary products, meaning that by using cross-selling you could offer your other products.
By doing that, your sales would increase, meaning that in the long term, your profits would increase as well. So, do not hesitate to use this method, since it can be very beneficial to both customers and the company.
HOW TO USE CROSS-SELLING
Same as with upselling, there are different stages of how and when you can use cross-selling.
So, let’s get into it.
- The very first thing you need to do is to analyze the market and see what complementary products you can use together in order to actually begin with the cross-selling strategy. After you know what products you want to use, you should create some offers.
- Another very important aspect when it comes to cross-selling is picking the right moment and location to showcase different products. The usual places to do it is on the product page, on the cash register page, or check out and by using the follow-up emails.
When it comes to the different tactics of cross-selling, we could say that there are two of them. Let’s see what they are.
- Packaging – as we had already mentioned some examples, a good way to cross-sell is to create packages that contain several complementary products. For example, people might want to buy a mouse for their computer. But what you could do is create a bundle where you will offer a mouse and a keyboard at a reasonable price. Same as with upselling, the price of both products should be smaller than the joint price of each individual product. So, you could reduce the bundle price by 15-20%.
- Photographs of all offered items – this tactic is very important for fashion products. For example, if you are selling a belt, jeans and a T-Shirt in a package, you should display how all three items look together, by posting some pictures. Even though you can get each product individually, it is a good thing to show them together in one picture.
How can you conduct a successful cross-selling campaign? What are the actions you can conduct in order to do it?
Persuade people to spend more money to buy bundles with complementary products by having them earn a reward for doing it, like offering some discounts or free shipping.
Have a reasonable price range for your products. As said above, do not try to increase the price of joint items too much. It would be a good idea to count what would be the joint price of all complimentary items, then reducing it by a certain percentage, from 10-25%, for example.
Try not to be so pushy when it comes to showcasing complementary products. A pop-up here and there is nice, but don’t use it on every page customers browse. It might make them less happy about purchasing the product they had intended.
Same as with upselling, try to create a sense of urgency, by letting them know how much items you have left in your stock. That way you might make people buy something, even if they haven’t intended on doing that.
Another similar thing would be to offer an additional complementary product at a lower price when you buy one product. For example, when someone makes a purchase and checkout, let’s say it’s a mouse, you can create a pop-up saying how some specific keyboard is on a sale for a limited amount of time because they bought this mouse. That could make them buy the keyboard as well, earning you higher revenue.
While it is a good way to show several complementary products, try not to show too many. You might overwhelm your customers that way, in which case they could give up on their initial purchase. It’s a common practice to put like 4-5 additional products, just to inform people. So, for instance, if you are buying a phone on Amazon, you can see the products such as headphones, chargers, masks and simple gadgets. Adding more, would just confuse people and make it hard for them to choose what to buy.
THE DIFFERENCE BETWEEN UPSELLING AND CROSS-SELLING
These two sales strategies are very similar to one another.
They are both used to increase the value of a purchase and to improve the experience customers have during and after the purchase itself, by adding more value to the products they buy.
When it comes to internet commerce, they are both very important sales strategies, but there are some differences between them.
Upselling is focused on advertising the upgraded version of the same product or some similar products in order to make people spend more money, thus increasing the company’s sales.
On the other hand, cross-selling is used to advertise different products that could be used together, or in other words, it is used to advertise complementary products.
The goal is to make people get additional products, in order to maximize sales.
Let’s take a look at some examples in order to completely clarify the meaning of both.
Let’ imagine that you are buying a shaving machine. You get on the Amazon, find what you are looking for and then see there are 3 different packages of the same product.
First, that offers the only basic machine with all necessary equipment.
The second one, that offers all that plus the additional equipment, for cleaner shavings, such as different size razor and such.
And the third one that offers all the previous 2 has plus a shaving foam.
First, two examples are the result of the upselling strategy because you are essentially offered the same product, just with some additional features.
The third package is the result of a cross-selling strategy since it offers a completely different product, but which is complementary to the one you are buying.
Alright, folks, that would be all for today. We learned what are upselling and cross-selling strategies, why they are important, how to use each of them and what the differences between them are.
What remains now, is for you to go out there and apply what you learned here.
Conduct your own upselling and cross-selling tactics, make your customers spend that money in order to improve their user-experience and eventually increase your sales and profit.
As always, if you have any questions or you just liked the article, feel free to use the comment section down below to let us know what you think about it. Cheers!
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