What Are Upselling and Cross-Selling in E-commerce?
Glory-Anna Oshafi
Upselling and cross-selling are common sales techniques in commerce. There’s every likelihood that you’ve fallen for either of these tactics once in your life, sometimes unaware.
If you’ve ever gone to the movies and the person selling snacks at the concession stand asks sweetly: Do you want extra salted popcorn, instead of regular popcorn, for just $0.99 more? You’ve been upsold too!
But if they ask: Do you want a soda to go with your popcorn? Then they cross-sold to you.
Cross-selling and upselling are not just popular offline; they also prevail in the e-commerce and social commerce world via websites and other e-sales platforms.
One company that has mastered the art of upselling and cross-selling products is Amazon, with near-half of their overall profits coming from leveraging these tactics. The key, they say, is to use personalization strategies and the user’s purchase history to make spot-on recommendations that they can’t resist.
To learn how your business can benefit from these techniques, pay close attention and take key notes from this highly-rated upselling and cross-selling guide.
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Definition of Upselling and Cross-Selling (with Real-Life Examples)
The cinema snacks illustration from earlier should give you a picture of what both techniques work like and how many times you’ve unconsciously fallen “victim” to the brilliant tactics. But to help you gain even more clarity, let’s clearly define each of the strategies below with the aid of everyday examples.
What Is Upselling?
Upselling simply means encouraging your customer to buy a more expensive but noticeably superior alternative to the product or service they’re about to purchase (or already own) to boost your company’s revenue yield.
Remember the extra salted popcorn from earlier? It’s the same cinema popcorn, but with a slightly tastier enhancement offered for a slightly higher price. Any customer who can imagine the sweeter experience they will derive from the saltier popcorn will not hesitate to make the purchase.
Does upselling work in other industries, such as gadget and electronic sales? Sure, brands like Apple do it all the time.
They release an iPhone with certain specs and features. Soon after, they released another smartphone with a few features upgraded, for a slightly higher price, and customers rushed to buy that one as well. Cha-ching!
How about for e-commerce purchases of software products and services?
It works, too.
Imagine signing up to use your company’s CRM product for the first time. Since you’re only a small team, you choose to go for the Basic paid plan. However, at checkout, you see a comparison chart like the above, with the three paid tiers and their features. The Standard paid plan is the most popular, and it offers better features for a little increment in the price of the Basic plan, so you decide to go for it.
With that simple choice, the company upsold its product to you.
The upselling technique thrives on helping the customer see the value in paying a little more to get a better product or service. On the other hand, it also helps the seller make some more money at the point of sale.
Cross-Selling: What Is It?
Cross-selling is a strategy where the seller encourages a buyer to buy related products or services in addition to one they already have or are about to pay for. These can be products that work alongside the purchased item or that the buyer will find useful in the course of use. The goal of this tactic is also to increase the revenue earned per order.
The person at the snack stand offered you a soda (related product) with your popcorn because it’s likely you’d get thirsty while eating the popcorn — the chance to quench your thirst is the related value they’re offering for just a little more money.
Going with the iPhone example used earlier, in a cross-selling scenario, at the checkout point, Apple may suggest that buyers purchase a screen protector and a phone case together with the iPhone at a discounted price.
These extra products for the iPhone are not feature upgrades to the device but simply add-ons the buyer will find value in.
For the CRM software onboarding, the company may suggest that you also add their social scheduling tool to your purchase and then offer you a discounted one-time payment for the tool. They cross-sell the scheduling tool with your CRM subscription because it’s a related product that you will find useful, and it increases your order value for the company.
In all these examples, one thing is common — the goal is to get buyers to pay for more products in addition to the one they have bought or want to purchase to increase the value of the order. Herein lies the difference between upselling and cross-selling.
Cross-selling relies on the customer making add-on purchases to earn additional revenue while upselling upgrades a product to sell it at a more expensive rate to generate increased income.
Importance of Upselling and Cross-Selling in E-commerce
Upselling and cross-selling are strategic and vital for e-commerce for both customers and sellers. It helps marketers provide useful product recommendations which the shopper may find useful for their needs, improving their shopping experience and loyalty to your brand.
It also encourages the customers to make the best buying decision based on their awareness of the recommendations. For instance, an upsell may help a shopper purchase a product that is better suited to their needs instead of settling for an inadequate option.
Cross-selling may encourage a shopper to get all the useful accessories that make their purchase function better, giving them a more enjoyable experience with the main product they bought.
Here are a few more reasons upselling and cross-selling are considered important for e-commerce:
- A Personalized Customer Experience and Improved Customer Retention
Have you ever been shopping online and got a precise recommendation that was what you were looking for? You’ve likely used the platform more times after that because their suggestions were relevant to your shopping needs and gave you a better bargain and more value.
Cross-selling and upselling help add a personal touch that is specific to the individual that is shopping. Today’s shoppers love platforms that understand, predict, and take care of their needs. These techniques work best when recommendations are based on the shopper’s buying history, allowing you to recommend targeted products they really need.
The result of both strategies is a much-improved customer experience and higher customer retention rates increasing revenue by up to 43%.
- A Boost in Average Order Value and Lifetime Value
E-commerce brands spend a huge amount of money on adverts and promotions to get shoppers to purchase from their websites. By cross-selling and upselling to customers who have successfully made it to your platform, you’re able to increase your average order value significantly, yielding more profit to gain quick ROI.
Similarly, by upselling and cross-selling to your existing customer, you can increase their lifetime value as a customer with your company. The odds of selling to an existing customer are 60 – 70% more than new buyers. With this, the amount of money you can make from existing customers for the length of time they remain your customer is significantly increased.
- Increased Product Awareness
Using any of the two techniques increases the average customer’s awareness of your available products. Sometimes, it may not be that the customers don’t know that the product they need exists, but they may not be aware that you have it for sale.
The more products you upsell or cross-sell, the more customers find out about them and purchase them, also leading to increased revenue.
- Enhanced Trust
When you consistently make recommendations that align with your customer’s needs, they learn to trust your brand more and even start to look out for your recommendations when they buy things.
They understand that their purchases matter to you, and you go all out to provide them with useful deals they’re interested in. It builds a stronger bond of loyalty between you and the customer, resulting in a longer customer retention time. It’ll be tough for them to leave you!
Examples of Upselling and Cross-Selling Strategies in E-commerce
On e-commerce platforms, you may not always be able to verbally convince your customers to get a better product or service. Sellers upsell their products or services, sometimes using comparison charts by suggesting a higher or more-superior product in the same category.
Cross-selling requires visual product recommendations of related products to the main products. They do not have to be in the same product category.
Let’s see some more examples of how to upsell or cross-sell in the e-commerce business practically.
- Deluxe Beauty Supply’s Bundling Strategy
If you run a beauty product store, you could bundle products that deal with related beauty issues as a cross-selling strategy. Deluxe Beauty has the “Ultimate Moisture Bundle,” for instance, and sells it at a discounted price, making it even more attractive to shoppers seeking multiple products for dry hair problems.
Bundling like this saves money for the customer but also for Deluxe Beauty if their shipping rate is flat. Nevertheless, this strategy drives more product sales and accounts for 10 – 30% of e-commerce revenue.
- Etsy’s Product Recommendations
Product recommendations appear differently on different platforms, but you may find them under categories such as:
- “You may also like”
- “Related Products”
- “Customers also viewed/bought these items”
- “More like this”
- “Recommended for you”
Showing customers more relevant products to their purchase gives them better choices. They may choose to go for a higher-selling product or add more items to their shopping cart. This strategy can work for either upselling or cross-selling.
- Comparison Charts (Hewlett Packard & Spotify)
Comparison is a useful upselling technique for different products or models with similar features. It is commonly used in the consumer electronics industry, where one item may have a variety of models but other specs.
Another way to use comparison charts is in the pricing structure, where you display which features the consumer gets when they go for any of your paid options. See how Spotify does it below.
The price for the Duo plan is only $3 higher than the Individual plan, and the Family plan allows 6 users for $3 more than the Duo plan. It suggests cost-saving options for multiple users who prefer to pay a higher price to access more features.
- Nordstrom’s “Shop the Style” Strategy
“Shop the Look” or “Shop the Style” is a cross-selling strategy that pitches real-life looks or styles centered around the main product to fashion and lifestyle shoppers. Furniture stores may design a beautiful space using a few of their in-store furniture items, then encourage a shopper who wants to buy one of these items to simply shop the entire look for their space.
Nordstrom leverages this approach by suggesting style ideas for shoppers looking for a specific clothing item.
The Zella joggers in the photo above are the primary product the shopper wants to buy; however, they can additionally buy items from any of the suggested looks based on their style and preference.
Best Practices for Upselling and Cross-selling
Upselling and cross-selling are crucial components of any effective sales strategy. When you do it right, they can increase revenue and boost customer retention. With that said, here are some of the best practices for successful upselling and cross-selling:
- Know Your Audience and Tailor Your Offers
Create customer personas using demographics, different analytic tools, and customer input. The aim is to understand their challenges and goals to determine the most beneficial and pertinent products for upselling and cross-selling.
Learning about your customers will help you put yourself in their shoes and better understand the driving force behind their purchases. Consequently, you’ll be able to reach out to them again with engaging messages that speak directly to their unique needs and wants.
- Highlight the Value of Your Recommended Products
Give customers a reason to purchase the recommended products. To ensure you’re on the right path when recommending a product, ensure you understand your customer’s journey. If you highlight the value of a product that’s not needed, you will most likely not get favorable results.
So, map out customer journeys to show how customers will use your products and the value they’ll add to them. Then wait until they’re ready before attempting to upsell or cross-sell. When you tell them about the perks of the new products at this point, your chances of closing the deal are much higher.
- Offer Discounts or Bundles for Related Products
As aforementioned, offering your products in bundles is great for cross-selling and up-selling. Bundling is said to help customers save up to 8% on complementary products. It also enhances cross-selling and upselling by allowing your customers to buy related products together, usually at a lower price than getting them individually.
Furthermore, bundling also lessens the intricacy of decisions. It eliminates the extra thought and effort it takes to purchase the products separately.
- Use Product Recommendations to Enhance the Customer Experience
Using product recommendations directly affects the likelihood of success of your upselling and cross-selling strategy. Using their historical data, you can use the AI-based product recommendations feature on your eCommerce website to recommend relevant products to shoppers. You must present the right product at the right time to the right customer to successfully upsell or cross-sell using the product recommendations feature.
Additionally, you can add cross-sell and upsell product recommendations to your website’s cart feature so that customers who are about to check out can add more products. You can successfully increase the average order value with recommendations from the cart page.
- Avoid Being Pushy or Intrusive with Your Offers
Don’t bombard customers with tons of upsells and cross-sells, especially new customers that are yet to make a purchase. They might leave your website without buying anything if they perceive you are being pushy. This is even more annoying when your upsell or cross-sell suggestions are irrelevant to the particular customer’s needs. Your offers should always be timely and pertinent to customers’ unique needs.
Give customers the option to choose upsells or cross-sells by offering a variety of upgrades or bundles that address different issues they are facing. This way, you don’t appear intrusive.
Lastly, avoid sneaky strategies like concealing pre-selected add-ons in the hopes that customers won’t notice. If your product offers value, customers will be open to any relevant suggestion you make.
- Make the Checkout Process Streamlined and Easy
You need a seamless checkout process to successfully finish your upsells and cross-sells. When your cross-sell or upsell strategy works, you should ensure that there’s no obstacle to closing the deal. If your checkout process is unsatisfactory to customers, they might get a bad impression of your brand and leave your website.
Hence, you need to offer several payment options, especially popular ones, to appeal to a larger number of people. Additionally, you can set up live chat to assist customers during the checkout process. Remember, too, that less is more. Make sure customers can complete their shopping in quick and easy steps.
- Monitor Your Results and Adjust Your Strategy Accordingly
When you monitor your upselling and cross-selling strategy, you can tell what is not working and what is. Thereafter, you can make changes to get the most out of it.
Set up KPIs relevant to your business to measure the success of your strategy over time. You can track results for different offers (discounts, prices, and incentives) and formats to determine what works best.
Then, to optimize your strategy, study your competitors and find out what works for them, and lean towards some of the strategies with the best outcomes from your trials.
Conclusion
Upselling and cross-selling have multi-sided benefits for both the shopper and the seller.
By suggesting better alternatives to your customers, you improve their shopping experience and their confidence in your products and services. A few end goals include improved customer retention, loyalty, and satisfaction.
On the seller’s side, you enjoy an increase in average order value across cross-sold and upsold orders, eventually leading to a significant boost in company revenue.
With the many upselling and cross-selling strategies that you can implement in your e-commerce brand, the sky’s the limit for the marked revenue increase, product awareness, and higher sales you’ll likely achieve.
There’s no time to waste; get to work now with the practical examples we’ve shared above.
FAQ
Upselling is the process of encouraging customers to purchase a more expensive, superior alternative to the product they are about to buy or already own, thus increasing the company’s revenue. Cross-selling, on the other hand, is the strategy of encouraging customers to buy related products or services in addition to the one they already have or are about to purchase, aiming to increase the revenue earned per order.
Upselling and cross-selling are vital in e-commerce as they improve the customer’s shopping experience and brand loyalty by providing useful product recommendations based on their needs. These techniques also help increase the average order value, lifetime customer value, product awareness, and trust between customers and the brand, resulting in higher revenue and customer retention rates.
Key practices for successful upselling and cross-selling include knowing your audience and tailoring your offers, highlighting the value of your recommended products, offering discounts or bundles for related products, using product recommendations to enhance the customer experience, avoiding being pushy or intrusive, streamlining the checkout process, and monitoring your results to adjust your strategy accordingly.
A good example of cross-selling in e-commerce would be when a customer browses your website for a smartphone, and you offer a suitable phone case and other accessories for the phone.
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