It’s summer time and you intend to spend your vacation at a beautiful resort near the beach in Hawaii. You booked a standard room in a hotel and received interesting offers from the hotel:
- one is to upgrade your room to superior seaview at 30% discount on original price,
- and the other is to add breakfast buffet worth $59.95 into your package with only $19.95 more.
Do you find these offers such easy wins? For me, it would be hard to say no.
That’s a classic example of the cross-sell and upsell strategies – key types of selling to generate more profits for business of all sizes. Back in 2006, Amazon reported that 35% of its revenue was the direct result from upselling and cross selling efforts. The tactics have become more and more popular among online retailers as an inevitable marketing tool kit to multiply revenue for their online business.
Already know it and wanna skip from here? Try upsell & cross-sell tactics on your Shopify/WooCommerce online store with this super awesome tool: Boost Sales – Upsell & Cross-sell in just 1 app
What is upselling and cross-selling?
Both upsell and cross-sell tactics can be applied to sell you other item(s) that complements your purchase, but in different ways and with varying degrees of profitability. Let me make it easier to understand by giving you an imaginary scenario: you are looking for an iPhone 6.
Upsell: The salesperson knows your need and budget at the time you intend to buy a product, so he will try selling a higher-end version of the product you originally came to buy. He will present a variety of more costly versions of the product, each may differ in quality, starting with a base model and progressing through more luxurious models with additional features and of course at higher prices.
In our example, after selecting your chosen iPhone 16Gb version, you will be presented with an offer to upgrade to a larger storage size version, an iPhone 64Gb if you pay $50 more.
Cross-sell: This strategy is applied when the salesman is more concerned with selling additional items he predicts that you may need rather than selling upgrade versions of the main product. Usually, the add-on items complement the main one, whereas less often is the case that non-related items are offered but at such cheap prices that the customers cannot resist.
In our example, you may be persuaded to buy another complementary add-on item that your chosen iPhone 16Gb version may need, here it is a protection case.
Why is upselling and cross-selling so important?
Much as these two strategies are very simple and commonplace, they bring valuable benefits to your business if well-executed. Many online stores have seen incredible increase in revenue by applying upsell and cross-sell tactics in smart ways.
It is much easier to sell more to current customers than to new ones:
There is no surprise that the authors of the book Marketing Metrics state this finding:
“The probability of selling to a new prospect is 5-20%. The probability of selling to an existing customer is 60-70%”.
Upselling and cross-selling both attempt to sell more to the current shoppers who are already interested in and have intention of buying your products. The chance of checkout success will be much higher than trying to sell those items to new customers.
Win customers’ hearts and their money at the same time:
In upselling and cross-selling, both the seller and the buyer are in the win-side of a win-win deal. What it all comes down to is value. For customers, they only have to pay out a little more to get added-value items, saving a sum compared to the original prices. Helping your customer to get more value while pay less without compromise makes them happier in the long run. For sellers, upsell and cross-sell tactics are much more than selling tools. They are keys to customer happiness and surely give both a stronger relationship in business.
How to Upsell and Cross sell Effectively?
Only bundle up the relevant items:
When it comes to upsell and cross sell attempts, the first and foremost rule is to create deals that are relevant, and relevant. I would never buy a pet collar while what I am looking for is a cooker. They are just two unrelated items that I hardly find any situations when I can use them both (except that I was given the pet collar for free. Urgg, not really… I would never need it if I didn’t have any pet, so I would not consider taking it even if it’s for free). If instead I was offered a handy cooker cleaner, I would be happy to consider buying it with my cooker.
Remember your reasoning when applying upsell and cross-sell tactics: you’re trying to sell more to your customers based on what they’ve already chosen, so make the best guess about their need and give them what they exactly want.
Use discount wisely so that total order will not go up by more than 25%:
“Oh gosh, I am going to pay nearly $1,000 for a laptop and you suggest that I spend $600 more on a tablet even at 20% discount? No way, it’s such a big sum and it’s way over my budget”
This would be a normal reaction if customers receive offers that far exceed their initial budget. Unless your customers really need the additional items immediately, an offer that drives up the total payment considerably will much lower the chances that they will accept the offer. Your customers are willing to pay more than planned if they are interested in your items, but they have their budget limit which you should not over-cross.
It is recommended that the when choosing upsell and cross sell products to offer, don’t suggesting items that add up the overall payment by more than 25%.
Make your offers urgent and scarce:
This strategy is indeed very intuitive: unlimited supply surges demand. Applying this psychological strategy into your offers is a great way to increase the chances that your customers will grab the deals before they’re quickly gone.
Just make sure that you don’t overdo it by delivering messages like “This offer is for you only and it’s gone in 3 minutes” or “Grab it or lose it now” (these overdone messages may cause confusion or even annoyance to customers because they feel like being pushed too hard). Instead, make your deals easily elusive if customers procrastinate too long but still give them chances to think before making decision.
It would be a great loss of potential revenue if you don’t apply upsell and cross-sell tools in your online business. However, it’s important to do the tactics wisely and timely to generate the maximum sales from customers. Hope what has been presented in this post will be of much help to you in improving performance of your business.