How to Upsell and Cross-Sell? Strategies to Boost Revenue for eCommerce Businesses
“Buy me those chocolates.”
The kid said sternly, pointing his stubby finger at a big jar of sweets on the shop counter as they waited to check out.
The counter guy grinned. I smiled. The mother winced.
She just got cross-sold.
Amazon has reported that cross-selling and upselling makes up as much as 35% of their revenue.
Product recommendations are responsible for an average of 10-30% of eCommerce site revenues, according to Forrester Research analyst Sucharita Mulpuru.
There’s no reason why upselling and cross-selling shouldn’t work for you. What works between the two and when, is something you can figure out with A/B testing. Request a demo with the VWO team to understand more on this.
In this post, we look at:
- What is upselling and cross-selling?
- Why are they important?
- Should you upsell or cross-sell?
- What and how should you upsell/cross-sell?
- Why does upsell/cross-sell work so well? (personal favorite)
- When’s it too much?
What are upselling and cross-selling?
Upselling and cross-selling are cousins of well, selling.
Buy a cow from me, and I’ll offer you a better one for 50 bucks more: the better cow is an upsell.
Buy a cow from me, and I’ll throw in a haystack for 5 bucks: the haystack is a cross-sell.
Upselling is a strategy to sell a superior, more expensive version of a product that the customer already owns (or is buying). A superior version is:
- a higher, better model of the product or
- same product with value-add features that raises the perceived value of the offering
Upselling is the reason why we have a 54” television instead of the 48” we planned for; the reason why we go for 7 day European Sojourns instead of 5 day simple French Affairs. It’s also the reason why we have unused annual contracts thinning away under silverfish attacks.
Cross-selling is a strategy to sell products related to the one a customer already owns (or is buying). Such products generally belong to different product categories but will be complementary, like the hay-stack for the cow, or batteries for a wall-clock.
Cross-selling is a battle-ready strategy. Here’s how McD does it: McDonald’s keeps their apple pie dispensers right behind the cashier, in full view of customers. The head of the U.S. division for McDonald’s Corp., Jeff Stratton, said in an interview that he felt moving the dispensers to the back kitchen area would probably cut apple pie orders by half.
There is one more popular selling technique known as bundling. Bundling is the offspring of cross-sell and upsell. You bundle together the main product and other auxiliary products for a higher price than what the single product is sold for.
What is bundling in eCommerce?
By bundling together the camera and two very related (even essential) products, Flipkart makes a compelling offer. Notice how there are multiple combos available.
Bundling is also quite often used along with a discount to increase the perceived value of the offering. Here’s more on the benefits of bundling.
Pure bundle or mixed bundle?
Pure Bundling is when products are made available only in bundles and cannot be bought individually. Mixed bundling is when both options (individual buy and bundle buy) are made available.
Vineet Kumar from HBS and Timothy Derdenger at Carnegie Mellon University teamed up together and studied bundling as used by Nintendo in their video game market. Revenues fell almost 20% when Nintendo switched from mixed bundling to pure bundling. In the gaming market, prices fall each day, so customers looking to buy just that one thing will choose to wait until it becomes available, likely at a cheaper price.
Similarly, a study on the effect of bundling in the consumer goods market, revealed that bundling is a great way to entice high-value customers of competitors to switch over. But it does not significantly help category sales, and in some ways even discourages it because different category products are bundled together.
So should you use pure bundling or mixed bundling?
A/B test and find out what works for you!
Here’s a way you can use bundling: Specify a minimum order amount to qualify for free shipping. Customers who are looking to buy only one item are likely to switch to the bundle in order to raise order value and qualify for free shipping.
Amazon does all of this brilliantly.
Why are upsell and cross-sell important for eCommerce?
Upselling and cross-selling are often (and mistakenly) seen as unethical practices to squeeze more out of the customer.
The dilemma of whether upselling/cross-selling is ethical or not has its roots in the means and ends the discussion. The end goal of any business is more profit. It is the means that make all the difference.
Cross-selling and upselling can be used unethically, in a pushy sort of way, to try and make the customer shell out more. But such tactics don’t last long and are often to the peril of such businesses. More on this under the heading “The Fine Line Between Being Friendly And Being Pushy”
As a strategy, however, upselling and cross-selling should be used to ‘help customers win’ as illustrated beautifully in this video by Jeffrey Gitomer. Look at it this way, upselling and cross-selling become more of friendly suggestions and a helping hand to make the ‘right’ purchase.
Remind Bob to buy some batteries along with his new wall-clock
Jack might be looking for something more powerful than an i5 processor, show him the i7, too.
So how does upselling help you, as a marketer?
#1 Increases customer retention
If you leave aside impulse buys, customers buy products/services to solve a problem. They are aware of the problem, but might not be aware of the best solution to the problem.
Steve Jobs got it right when he said ‘people don’t know what they want until you show it to them.’ Upselling or cross-selling done right helps the customer find more value than he was expecting. You become his best friend.
Best friends return and drive 43% of your revenues, thereby improving your customer retention.
#2 Increases average order value and life-time value
- Cross-sell/upsell increases your average order value (caveat: only if you don’t upsell like this)
- A Marketing Metric study reports that the probability of selling to an existing customer is 60-70%. The probability of selling to a new prospect is 5-20%. Upsell to existing customers to boost LTV.
Should You Upsell or Cross-Sell in eCommerce?
Despite the many ways upsell and cross-sell are similar, there’s a clear winner in terms of numbers.
A little over 4% of all customers who were faced with an upsell bought it while less than 0.5% of customers took the bait when shown a cross-sell.
But when it comes to the checkout page, cross-sell kills it with 3% conversions.
What and how should you upsell?
The data from Predictive Intent’s study shows that a mere 4% of customers convert on average through upselling. It’s not much, you might think.
They aren’t looking for ‘just enough’. They will not shy away from going the extra mile to make sure the product (solution to a problem) is just right.
One of the most common ways to upsell is to suggest the next higher model. But when it’s just 4% that you are targeting, the margin for error is as thin as the edge of a blade.
Here are some suggestions on how to upsell:
- Promote your most reviewed or most sold products
- Give more prominent space for the upsell, display testimonials for the upsell
- If you have customer personas in place, use those to make relevant suggestions
- Make suggestions relevant by giving context: why should I buy that instead of this?
And always, always, make sure you suggest products from the same category. Don’t ask your website visitor to buy a 17-inch laptop when they’re shopping for a MacBook air. The two products don’t satisfy the same needs.
Let’s not forget cross-sell either. Use cross-sell techniques more on the check-out page to tap into impulse buying:
- Cross-sell products should be at least 60% cheaper than the product added to cart so buyers consider adding it to their carts even though they didn’t originally intend to purchase them
- Go for products that are easily missed out: filters for lenses, earphones for mobile phones, lighter for a gas stove, and of course, scrub for cows.. the possibilities are endless
- Try not to bombard them with too many choices that distract them, so they end up abandoning their cart.
If you are manually pushing upsell/cross-sell suggestions, it would be worthwhile to automate the system. Products should be categorized and related products should be tagged so as to enable automation.Now comes the part that is most interesting.
Why does upsell/cross-sell work and how can you ace it?
Upsell and cross-sell works when you are able to ease the decision making process of a customer.
A study by Bain showed that reducing complexity and narrowing choices can boost revenues by 5-40% and cut costs by 10-35%.
Upsell smart by narrowing choices
Too many choices can be paralyzing. Professor Iyengar and her research assistants conducted a study on the effect of choices in the California Gourmet market. They set up booths of Wilkin and Sons Jams — one offered an assortment of 24 jams while the other had on display 6 jam varieties.
60% of the visitors stopped by the larger booth while only 40% flocked to the one with fewer choices.
But 30% of visitors that sampled at the small booth made a buy, while only 3% of the 60% visitors to the larger booth went on to make a purchase.
Actionable Tip: Don’t bombard your customers with too many choices. If they’ve already said no to an upsell product, do not push for it. Think of upsell as a gentle suggestion, not an aggressive sales tactic. And when in doubt, A/B test! VWO has a full-featured free trial that can help you with important decisions like these.
Bundle to reduce decision complexity
Every action the user has to take makes the decision making more complex. Think of ways to reduce the number of actions in a buying decision. We’ve a limited amount of energy to be spent on decision making.
Bundling brings together related products that are of relevance to a customer. Buying them individually involves more decision making, and more steps. Whereas through bundling, in one a customer is able to buy multiple products together.
It’s also important to understand how we make decisions. Exactly how rational are we at decision making?
Turns out, not so much.
Use price anchoring: The surprising power of dummy choices
A few years back, The Economist ran an ad that looked like this:
You get a web-only subscription for $59, a print-only subscription for $125 or both, again, for $125! Needless to say, the print-only option is a dummy choice. Who would ever choose an inferior option when the price is the same?
Dan Ariely took the ad and took it to 100 MIT students to see what they would choose.
An overwhelming majority chose what seemed the ‘best’ option – both print and web subscription at $125. 16% chose the web-only subscription. Nobody chose the print-only subscription at $125.
Dan then took off the middle choice—the print-only one. And ran the test again on 100 people. This is how the opt-in rates looked now.
Surprisingly, the majority (68%) people chose the cheaper option when the dummy choice was removed. The print and web subscription that saw 84% subscription in the presence of the dummy choice now got a significantly low 32% subscription rate.
An inferior choice makes a similar but superior choice look better even when other options are cheaper.
Actionable Tip: consider a customer looking at a top-tier entry-level DSLR. Show him a mid-level DSLR without add-ons for a marginally higher price and the same mid-level DSLR with add-ons at the same higher price.
Upsell it with the proper communication — how does the mid-level DSLR help the customer win? — and you have a good probability of making the upsell.
The fine line between being friendly and being pushy
In 2009, Graham Charlton at eConsultancy tore apart VistaPrint’s and GoDaddy’s checkout process in this post. GoDaddy’s process at the time contained almost 10 steps from selecting a domain name to finally completing the order – most of which were forced cross-sell attempts.
VistaPrint seems to have taken the critique well, and in a post published 5 years later, eConsultancy looks at how VistaPrint revamped their checkout process, making it much more pleasant and much less in-your-face in the process.
Here’s what you shouldn’t do:
- Suggest upsells and cross-sells before a customer picks a product
- Bombard customers with many cross-sell and upsell products
- Sly tactics like hiding pre-selected add-ons in the hope customers don’t notice it
If there’s one thing that is your takeaway from this post, it has to be this:
Upsell and cross-sell techniques should be used as strategies to help customers make better decisions, faster.
But, to figure out which of these work for your customers, you shouldn’t rely on guesswork. A/B test differing upsell and cross-sell strategies for your multiple visitor segments to determine what works for each of them so you can deploy the one that drives maximum improvement in sales.
VWO Testing allows you to create and run tests on your key pages to experiment with the various upsell and cross-sell tactics discussed above and optimize them for increased revenue. With an easy-to-use visual editor, you can create and run tests independently without having to rely on your IT team. Sign up for a 30 day free trial to assess the tool for yourself or request a personalized demo from one of VWO’s optimization experts.
FAQs on cross-selling and up-selling
Upselling is a strategy to sell a superior, more expensive version of a product that the customer already owns (or is buying).
Cross-selling is a strategy to sell products related to the one a customer already owns (or is buying).
One of the commonest ways to upsell is to suggest the next higher model.
Some other suggestions on how you can upsell are:
Promote your most reviewed or most sold products, give more prominent space for the upsell, display testimonials for the upsell and make sure the upsells are not more than 25% costlier than the original product.
An example of cross-selling can be seen at McDonald’s. Here is how they do it: McDonald’s keep their apple pie dispensers right behind the cashier, in full view of customers. This leads to an increase in the number of apple pies bought along with the original order.