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. 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. There’s no reason why upselling and cross-selling shouldn’t work for you. What works between the two is something you can figure out with our powerful A/B testing tool.
In this post, we look at:
- What is upselling and cross-selling?
- Why are upselling and cross-selling important?
- Should you upsell or cross-sell?
- What and how should you upsell/cross-sell?
- How to effectively cross-sell and upsell
What are upselling and cross-selling?
Upselling and cross-selling are cousins of 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 hay bale for 5 bucks: the hay bale 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. It’s also the reason you might have subscriptions which include services you don’t use.
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 socks with a pair of shoes, or batteries for a wall-clock.
Cross-selling is a battle-ready strategy. Here’s how McDonald’s does it: Their apple pie dispensers are kept 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 moving the dispensers to the back kitchen area would probably cut apple pie orders by half.
There is another 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 products are sold for alone.
What is bundling in eCommerce?
By bundling together the camera and two very related (even essential) products, Nikon makes a compelling offer.
Bundling is also quite often used along with a discount to increase the perceived value of the offering.
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.
So should you use upselling, cross-selling, pure bundling, or mixed bundling?
A/B test and find out what works for you!
Specifying a minimum order amount to qualify for free shipping is a great way to use bundling – but it’s important to choose the right minimum order amount that maximizes conversion rates to the bundle.
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.
As a strategy, however, upselling and cross-selling should be used to ‘help customers win’. It’s about making recommendations that might better meet a customer’s current needs, and aiding them to make a choice being fully informed about their options..
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?
Increases customer retention
Leaving aside impulse buys, customers buy products and 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 was 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 they were expecting. It can increase revenues by up to 43%, thereby improving your customer retention.
Increases average order value and life-time value
Cross-selling and upselling increases your average order value, creating revenue and profit at very low incremental cost. You’ve already spent valuable marketing dollars to get the customer to your eCommerce store, so maximizing order value is key to ROI.
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 is a highly cost-efficient way to boost life-time value.
Should you upsell or cross-sell in eCommerce?
There’s no easy answer as to whether upsell or cross-sell is the best strategy. The best way to decide is through A/B testing.
However, PRWD head of usability, Paul Rouke explains why cross-sell works best on checkout pages.
What and how should you upsell?
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.
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.
How to effectively cross-sell and upsell?
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%.
1. 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!
2. Offer bundles 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.
Turns out, not so much.
3. 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.
4. Be helpful and offer value, not pushy or aggressive
A key principle in cross-selling and upselling is to assist the customer, suggesting products which make sense to them and are relevant to their needs. Use data and customer behaviors to offer informed recommendations that are likely to meet their needs or solve a current or potential problem.
Here’s what you shouldn’t do:
- Suggest upsells and cross-sells before a customer picks a product
- Bombard customers with too many cross-sell and upsell products
- Sly tactics like hiding pre-selected add-ons in the hope customers don’t notice it
5. Don’t forget post-purchase cross-selling
Your opportunity to cross-sell doesn’t end once the customer has checked out. In fact, the experience after the purchase is a key moment in the customer journey that too many eCommerce businesses forget about. Don’t just send the receipt and the product – use the opportunity to develop loyalty and make special offers.
Use emails, confirmation pages and other post-purchase communications to offer further products, incentives and value to the customer.
If there’s one thing to take away from this post, it has to be this:
Upsell and cross-sell techniques are powerful strategies that can help customers make better decisions, faster.
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 free trial to assess the tool for yourself or request a personalized demo from one of VWO’s optimization experts.