To Upsell or to Cross-Sell? That Is the Question
The first thing you should know is that upselling and cross-selling represent a big opportunity to you, because you are selling to your existing customers who are already trusting you.
From our business experience, you are 14 times more likely to sell to an existing customer than to sell to a new prospect.
In this article, we will review together the following:
- Definitions
- Upselling Strategies
- Examples of Upselling
- Cross-Selling Strategies
- Examples of Cross-Selling
- Do Not Do This
- Important Considerations
- Upselling or Cross-Selling
- Down-Selling
Definitions
Upselling: This is when a seller offers the customer to buy an alternative that is higher in price and quality than the basic product.
For example: when a customer attempts to buy a 32” TV, then the seller offers him a 36” TV, higher in price, but also with higher definition and digital audio, i.e., a higher value.
Cross-selling: is when a seller recommends a complementary product or service to the customer’s original deal.
For example: the same customer buys a 32” TV; this time, the seller invites him to buy a Home Theater System, with a relatively lower price, to supplement the experience along with the 32” TV.
A side note: Who didn’t hear the famous line: Do you want fries with that?
McDonald’s came out with this concept of “do you want …. with that?”
And they were able to add billions of dollars to their revenues every single year!
Tell me: Do you call this upselling or cross-selling?
Keep reading and you will find out the answer.
Keep in mind: In both cases, upsell and cross-sell, the deal must be beneficial for both the seller and the buyer.
Significance of Cross-Selling and Upselling
Why are cross-selling and upselling incredibly important?
In my opinion, the most important reason cross-selling and upselling are absolutely necessary in your business is because it allows you to pay more per customer.
What does that mean?
Let’s say, for just easy numbers, the main core offer costs $100. And that’s what everybody else offers in the marketplace, more or less around $100.
If you don’t have upsells and cross-sells, then that $100 is the absolute maximum amount of money that you will gain from that client. This means that you could only spend $50, $60, or $70 in order to actually acquire that customer.
Let’s not forget, you have to pay, your team’s salaries, or whatever services it costs your business to deliver that offer.
Consequently, you will be left with just a few dollars as profit margin for every single purchase order.
Upselling and cross-selling are used in e-commerce and SaaS fields; they can also be used in any class of service-based business. But the important thing I want you to know is:
Make sure that your upselling or cross-selling shall not take away from the original product that the customer has purchased.
Upselling Strategies
According to Amazon data, 36% of their revenue are made by upselling and cross-selling efforts.
So, what are the techniques applied by giant store owners on their websites that we can take inspiration from?
1. Create Scarcity
Here, I’m not talking about any of this fake scarcity like false timers on a website. But if you do have a limited amount of goods in stock, you should declare that on the sales page.
Because, the feeling of “missing out” may entice people into the buying mode faster. That’s why, when you search an item on Amazon, you can immediately see how many are left in stock, with a very clear “call to action” right next to it.
For example, if you offered someone social media management and, in addition, you are trying to cross-sell them a website design, you could say something like “we’re only able to take two website design clients per month, and we already have one.”
“Are you interested in getting this going? So, we can make sure we really launch our personal brand into the cloud.”
This is a very powerful persuasion, as the product will add value to the customer, and there is a narrow window to make the purchase decision.
The probability the customer adds that particular product to the cart is much higher than any other alternative.
2. Color Psychology
Studies suggest that human eyes are more attracted to blue color. That’s why we click blue colored links more than any other color.
Color is behind 90% of our product assessment. Therefore, choosing the right color will help you persuade visitors to click the Buy button.
If you look at Amazon, every single item link is in blue color, and the price is red. This creates a contrast that stands out, and instead of showing a single price they give the visitor a range of pricing; this makes the visitor curious, and wants to click on that pricing button to see what is available. Eventually, it will increase the visitor’s likelihood to make a purchase order.
3. Increase the Perceived Value
If you want the customer’s senses to receive a higher value of the product(s) he/she desires to buy, choose to bundle items together.
This strategy works well for online retailer to build upon a natural human behavior of “winning” an incredible deal fast.
4. Build Trust
It is socially approved that customers buy from people they trust; and people trust other people more than retailers.
For Example, Amazon uses five-star rating for all their products; Steve Madden also allows customers to add reviews to their products.
Examples of Upselling
The Subscription-Based Model
Spotify offers you 2 options. First, they offer a “Spotify Free” account and “Spotify Premium.”
The free account is for $0, the premium is for approximately $10. As you can see, the free one sets out five or six grayed out features (they do not offer here). Accordingly, the visitor sees only the “Shuffle play” is available, but if the visitor desires to enjoy the other five features, he/she must select the paid version.
This way, they are upselling customers into the paid account by listing the features they will lack if they opt to free account.
The Regular Customer Model
Suppose, you are a retailer but you only sell undergarments, and it happens you have regular customers who buy a pair of undergarments for $20 every 3 months.
You can offer these existing customers a subscription model as the following:
Dear customer, if you sign up in our plan, we will send you a pair of undergarments for only $15.
For your customers, this is a product that they will buy anyway, but now they will buy and save $5 each time they make a purchase.
For your business, you will win a happy customer, and a regular revenue. It is a win-win situation.
A specific example of this, if you have a website design company, you offer a one-time cost in order to build and create a website.
Then, a small $50, or $100 monthly management fee, so that your customers can ask any questions or enable you to quickly make any edits they need to do.
This will both add value to your end consumer, so that they can have exactly what they want, and at the same time allow you to create a powerful subscription-based model, that once again allows you to pay more per client than anybody else.
You can read more about e-commerce subscription-based models if it interests you.
The 1+1, 2+1, and Variant Models
Definitely, we all encountered this luring banner “Buy one and get 50% sale on the second” while shopping, or this “Buy 2 and get 1 for free.”
These attractive invitations can be proposed in other many variants. Such as, buy N of this product and get 1 (or more) for free.
The Free Shipping Model
Nowadays, nobody wants to pay or think of shipping headache.
This is a well-known technique whereby a seller, like Zara, offers the customer a free shipping if the same customer upgrades the order or buys another item to complement the existing deal. As a result, the customer wins a free-shipping deal, and you win an additional revenue.
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Cross-selling
As we discussed above, cross-selling is an offer to buy an additional product or service to complement the customer’s original intended product.
You should know that cross-selling is proved to be much more profitable when presented on “also check” pages versus the “products” pages.
Thus, sellers offer cross-selling after displaying recommended products or services that were purchased by another customer who bought the same item.
Basically, they introduce the customers to complementary products. So, what are the benefits of cross-selling?
Cross-selling is a great way not only to increase conversion rate, but also to build customer loyalty.
It helps differentiate your brand from other competitors and improve your market position.
Cross-sell Strategies
Bundling Model
One of the most famous and effective tactics of cross-selling is offering bundling and saving packs. This can be applied by offering multiple complementary products for lower bargain rate.
“Customers Also Bought” Model
Another way to cross-sell is by recommending to your customers, on the product page, what other purchases were made by shoppers.
A simple message like “customers who bought this also bought that” can help you increase your conversion rate and revenues.
McDonald’s meals fall under this category. Actually, they represent the best example of cross-selling, by just asking the customer if they want to spend about a dollar and a fraction more to get some fries with their hamburger.
Personalized Bundles
You can take the above cross-selling methods to a step further, and convince customers to personalize their bundles, by selecting the exact products they desire, instead of buying anything that they do not need/want.
Examples of Cross-selling
Think of buying a PlayStation, the console alone may cost you $400, but if you add to it, for example, 2 games, you can buy the whole set for $600, that would otherwise cost you about $800.
Another example is Zara. When a visitor lands on a product page, while scrolling down, they will find a “wear with” message. It is a great way to suggest other items that will complement that look for a particular customer.
If you have a brick-and-mortar store that uses mannequins to sell complementary products, it will work wonderfully, as some customers would love to appear in that exact look they see.
Keep in mind, you can actually upsell the customers, instead of cross-sell. So, they buy one quantity of this nice T-shirt; then they go to the next page and we say:
Dear customer, you purchased one quantity for $20. But now if you buy two more shirts, we’ll give them to you at $15 each, and save $10.
Do Not Do This
let’s say you are running an online store, and you’re selling T-shirts. You, offer one T-shirt on the front page. It’s worth $30 and it’s pretty cool.
Then, the customers go to the next page and you’re trying to cross-sell them another T-shirt worth another $15, $20, or $25. But it’s a different T-shirt.
Here, if they liked the second T-shirt more than the first T-shirt, then you might actually cause them to have buyer’s remorse by even buying the first T-shirt and they might say, I wish I just bought that second T-shirt.
buyer’s remorse: a feeling of regret or guilt after you have bought something you no longer want.
That’s why most of the largest clothing and e-commerce brands in the world like Zara, Zappos, or any other big company, will say in inviting tone, “customers that bought this also bought these.”
Important Considerations
Ensure that the customer is satisfied with the first sale, with the basic product. As a seller, you should find the customer needs and to satisfy through either cross-selling or upselling.
Focus on customer needs first, then on yours. This is called “Sell with integrity.”
Upselling or Cross-selling?
What should you apply? Upsell, cross-sell, or both?
In my business experience, you can apply both of them. But, if you insist, it depends on what business and customer you have.
Let’s say you own a fashion store; it feels much logical to perform cross-selling than upselling.
Because, cross-selling allows you to assemble together a complete look and sell complementary products.
If somebody added a dress or a shirt on your site, you can offer them pants or a jacket that completes the look.
Here, the customer is much more likely to add those in their cart, than offering them a shirt or dress that is similar to the one they just bought.
If you have a subscription website, it makes more sense if you apply upselling.
For this type of e-commerce, I suggest that you should implement Tier 1, Tier 2, Tier 3 model, of which a customer can pick.
Attract the visitor for the basic (free) model; later, you can upsell them the 2nd or 3rd tier, which looks more expensive but will add more value than the service they already have.
You can apply the A/B test or Mix & Match assessment method to find out which one generates more revenue, and more click-through rate (CTR) for your business, and choose accordingly.
Click-Through Rate (CTR): is the percentage of individuals who view and then click on a specific advertisement.
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Down-selling
Although not a major part of this article, it is worth mentioning as it is also part of the selling process.
It is the exact opposite of upselling, as the name implies; it applies when the seller offers the customer the option to buy the cheaper variation of the original product.
This might seem illogical, but think about the cases where the customer simply doesn’t have the money to pay for the more expensive product, or they just don’t think the more expensive product is worth the cost.
These are some cases you will go with down-selling in order not to lose this customer.
To Recap
Here you are, that’s exactly what upselling and cross-selling are, with some specific strategies behind, and some specific examples that are in use by giant stores and companies out in the general market.
Definitely, upselling and cross-selling can help increase your revenue. Find what type of business you are running, and which strategy you can well adapt to your business.
In my opinion, implement all of the above on your online store. You are not obliged to choose either one or nothing. Each one fits a different scenario for a different customer and a different product.
You should use each one as a selling technique in different cases and in different places in your store.
Finally, I hope the above paragraphs were useful to you.
