Cross-sell vs upsell: 8 ways it can boost your revenue
You might have a fantastic website, a loyal customer base, and great marketing strategies, but how can you boost your revenue even further? Instead of starting something entirely new, it might be time to employ two key techniques: cross-selling and upselling.
Both cross-selling and upselling are methods that encourage additional purchases from customers, based on personalised suggestions drawn from what’s already in their shopping cart. When done right, they encourage increased spending, boosting your average order value and conversion rates. But where should you start?
Don’t worry – we’ve got the answers. We’ll look at what these techniques are, their advantages and challenges, as well as how to apply them. Already know the basics? Click the headings below to skip ahead.
What is cross-selling?
When making a purchase, cross-selling suggests additional products or services to customers which complement the original product. For example, when buying a coffee machine, a suitable cross-sell would be the coffee pods to go in it or a three-year warranty for the machine.
You can cross-sell across different product types too – for instance, Amazon often recommends pens when you’re looking at notebooks. With digital products, cross-selling could include additions like related software or access to learning resources.
Cross-selling increases revenue in a very simple way: by increasing the amount of products your customers (hopefully) purchase.
What is upselling?
Alternatively, upselling encourages customers to upgrade their purchase to a premium product or service. With the coffee maker example, your site might promote a coffee maker with additional features (for instance, remote start from your phone). This suggestion replaces the customer’s original interest, instead of adding to it.
The same applies to digital products – you can have a base product, and a premium version. Premium features often include unlimited access or use of additional functions, improving ease of use and personalisation to specific client needs. Testimonials are often used to highlight these areas, recommending the purchase of premium versions.
What are the differences between cross-selling and upselling
Cross-selling and upselling both aim to increase revenue by bringing up the average order value (AOV). Despite this shared goal, they work best in different settings and with different sales tactics.
When it comes to timing, upselling tends to work best at the ‘adding to cart’ stage. This is the point to catch your potential customer’s attention, and show off the premium version in direct comparison to the one they’re looking at. It’s often less effective when they’re at the checkout stage, as by this point they’ve usually weighed up the pros and cons and are ready to press purchase.
In contrast, cross-selling can thrive here. Think of it as equivalent to the products placed at the tills in physical stores – how many times have you grabbed a last minute addition that caught your eye? Impulse purchases are often last minute additions, so you can really push that cross-sell right up to the moment they press ‘buy’.
Of course, there are exceptions – for a digital product, like an app, you can upsell a premium version post-purchase too, suggesting an upgrade for frequency users.
Another key difference is in selling to businesses. Upselling is often easier than cross-selling here, as B2B buyers may require approval processes for necessary purchases and can’t always deviate with impulse buying. Upselling plays to this by recommending the same product, just upgraded.
What are the advantages of cross-selling and upselling?
Along with increasing revenue and the average order value, cross-selling and upselling have additional advantages. Making use of these strategies can help you engage with customers, build customer loyalty, and reduce churn.
Displays a wider range of products
An advantage of cross-selling is it shows customers the range of products you sell. While existing customers may be familiar with some of your range, providing recommendations of additional products can introduce them to other categories of products that your business sells. Even if it doesn’t trigger an immediate sale, it boosts brand awareness in the long-term.
Creates a personalised customer experience
Suggesting products to customers based on their online shopping cart, product search history, and other similar customers’ purchases can create a more personal experience throughout the customer journey. With 52% of customers expecting their offers to be always personalised, cross-selling is a great sales tactic to deliver on personal suggestions to achieve this.
Increase conversion rates
The more purchases made per customer, the better your conversion rate is going to look. The exact rate may vary depending on your definition of conversion – either by purchase or individual product. However, as customers see more recommendations they’re more likely to find other products they need too. This leads to less people leaving without buying, as well as improving your AOV.
Builds customer loyalty
No-one wants to spend hours trawling through websites finding the exact product for their needs. By providing suggestions, you can improve the customer experience, making visitors more likely to return to your business. The customer experience is an important factor for 73% of customers in their purchases, so providing personalisations will influence where they look for these products in future.
When done well, upselling can develop trust in your products by showing customers a range of options. By showing relevant products at a range of price points and functionalities, customers will feel like you’re providing accurate information – not merely pushing one product on them.
Netflix provides transparency by presenting customers with the different package offers at once, highlighting the features specific to the upgraded and premium versions. Many businesses also use testimonials to develop trust based on previous customer experiences.
When customers buy more expensive products, your business sees an increase in revenue. By presenting a more expensive version of the product with added features and functionality, customers see that what they get is worth the additional spending. This helps your business to sell more premium editions, increasing the value of the products most often purchased.
Improves customer satisfaction
Delivering premium products to your customers gives them accessibility to useful features which may not be included within the standard edition. These functions and add-ons within premium products are able to go above and beyond what customers expect, leading to increased levels of customer satisfaction with the more expensive product. Just make sure you’re not taking anything away from the standard version – instead, you’re simply adding to the premium one.
Presents your business as high-quality
By promoting a range of products with a variety of features and applications, your business shows that it values matching customers to products that will meet their needs completely. Rather than letting customers purchase products that give limited solutions, upselling based on customer needs ensures the full functionality of the features they rely on.
Challenges of cross-selling and upselling
Relevance of recommended products
With suggested products, you may miss the mark of what the customer was looking for. When customers buy products as a one-off or for someone else, this can affect algorithms for suggestions and create unhelpful product recommendations, undermining your personalisation strategy.
To avoid this, base your suggestions on customer personas as well as individual search history. A persona outlines the demographic and preferences of your typical customers. These help distinguish regular purchases from the one-offs. Using this, you can provide product recommendations of complementary items that customers want.
Slows customer checkout experience
Too many suggestions of items can slow down the checkout process, adding additional steps to the checkout process and making the total cost less clear. Complicated checkout processes lead 18% of shoppers to abandon their cart, including their original purchase, often feeling misled.
To ensure customers complete their purchases, limit the suggestions, displaying their pricing clearly, and make sure buttons to add the item to the basket or move on are clear. List out the checkout process steps so customers can gauge how long it will take and what is left for them to do before completing their purchase.
Relies on impulse spending
Unlike the original purchase, cross-selling items are not products that the customer has already decided on buying. Often, customers won’t have the resources or inclination for impulse spending.
That doesn’t mean it’s not worth it – after all, no sales technique will work with every customer! However, you can still optimise cross-selling opportunities when they arise. When customers can enable free shipping or a discount by reaching a certain shopping cart total, they are more open to related products that can help attain that. This gives customers a reason to impulse spend.
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You can oversell your products, especially when your upsell constantly pops up within the customer journey and on every page of your online store. Rather than increasing the appeal of your premium version, it’s more likely to decrease the appeal of your standard one.
In this case, less is more. Identify areas of your online shop and software products where upselling is most effective and stick to them, creating a user experience where customers don’t feel accosted. Upselling techniques shouldn’t force customers to buy premium products, instead only provide recommendations for them.
Unnecessary additional features
A more expensive version of your product or service should have additional features and capabilities that add to its value. However, where these features and capabilities are irrelevant, they aren’t benefiting your customers or your products and maybe better to get rid of.
Premium products don’t need every possible add-on, so instead focus on features or that enhance the customer experience and product usage. Base your product decisions on customer needs, adding elements with which users will interact. A high-quality product with purposeful functions is worth more than thousands of unused features.
Limits future sales opportunities
Offering premium versions of your products can make it seem to customers that the cheaper option isn’t as good as the more expensive option. This can make customers wary of your upselling and less likely to return to your business to make additional purchases.
Don’t sacrifice the long-term relationships for a quick revenue boost. Instead, use other techniques alongside upselling, like discounts or referral programs. These incentives draw existing and new customers to your business, and ensure you’re not putting all your eggs in one basket.
How to apply cross-selling and upselling to your business
Like many sales techniques, cross-selling and upselling can both be applied in a variety of ways. Whether using them within your checkout process, or on product pages, you need a strategy behind where you use them and why. Applying them everywhere is likely to turn customers away, whilst using them in spaces where they aren’t seen is equally ineffective.
2 factors to consider for cross-selling vs upselling
Using customer personas ensures you use upselling and cross-selling opportunities to reach the most appropriate audience. Step one needs to be using insights and analytic data to create personas of average customers and key customer groups, so that you can anticipate the effect of your cross-selling and upselling strategies. Within this, there are two important factors to recognise.
One aim of cross-selling and upselling is to increase the average order value (AOV), building larger ecommerce shopping carts or filling carts with more expensive items. AOV is a metric often used by businesses to determine the success of their marketing and sales alongside tracking customer behaviours.
When encouraging additional products or upgrading purchases, it’s important to keep the overall value of the purchase not too far off what the customer had anticipated. A handy guideline is to keep upselling and cross-selling no more than 25% of the original order pricing. This reduces customer churn based on a huge hike in price whilst helping to gradually raise your bottom line.
By aiming to provide personalised recommendations to customers, both methods of selling also help businesses to focus on the needs of their customers. This provides a sense of understanding and makes customers feel unique, recognising your business as actively trying to anticipate and resolve customer challenges. These ecommerce personalisation features can also contribute to AOV.
Likewise, during your cross-sell or upsell, ensure the products and services you’re recommending are already recognisable and familiar to customers. These may be add-on products they have previously seen advertised or products that easily link to and work with products they regularly use. Familiarity means customers are more comfortable and likely to make the additional purchase.
How to generate more revenue with cross-selling and upselling
We’ve seen how the sales techniques used in cross-selling and upselling can increase AOV and the advantages it holds for your ecommerce business. Using data based on customer interactions along with real-time insights on customer shopping behaviour can help suggest the right products at the right moment in their customer journey, leading to successful cross or up-selling.
If this seems like a huge undertaking, don’t worry: that’s what AI-driven product recommendations are for. PureClarity’s AI product recommendation engine matches suggestions to your business’s ecommerce products based on what will be useful and wanted by customers. This reduces churn from any irrelevant example of cross-selling and increases engagement with your upselling techniques.
What is down selling?
Now you have some knowledge of upselling and cross-selling, you may be able to guess what down selling is. The idea behind it is again to promote purchases, encourage spending in your customers, and maintain customer retention, therefore increasing your overall ecommerce revenue. However, it takes a different approach and focuses on a specific group of buyers.
Definition of down selling
Occasionally, a customer will go to buy a product and realise it’s more expensive than they anticipated and no longer can afford what they initially intended to purchase. Down-selling prevents this creating churn by suggesting a less expensive version of the product. This continues the customer journey, rather than them simply leaving in disappointment.
Often down selling techniques are used once a customer declines a service or product – perhaps abandoning or deleting it from their online shopping cart. This helps reengage the customer in your products, showing there is a range of pricing options available. By securing customer loyalty to your business in this way, you improve your longer term conversion rates.
How it differs from upselling and cross-selling
The primary difference between down selling and other sales techniques is the purpose behind the strategy. Whereas upselling and cross-selling aim to increase customer spending and AOV, leading them to finish the checkout process with more than they started with, down selling is almost the opposite. Instead, it focuses on customer retention, building up customer loyalty, and your long term customer lifetime value.
Down selling also differs in practice and how it is employed on ecommerce sites. Where upselling and cross-selling recommendations may be viewable across product pages, down-selling tends to be reserved until the customer rejects a more expensive version of a product. It isn’t usually the sales technique to lead customer interactions. Instead, treat it as a safety net to ensure all customers leave ecommerce pages with a purchase.
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What’s the best to use? Down selling or upselling?
Both upselling and down selling have their perks and can be harnessed within your sales strategies. However, in certain circumstances, one may be more appropriate than the other. By monitoring user habits and referring to customer personas, you can use customer segmentation. This helps to identify which strategy would be more successful for your business and the customer.
Upselling is ideal to use when selling to businesses, or with products clients are likely to want long-term (think furniture, technology, and other big-ticket items). Customers will have high expectations of what functionality they are looking for in a product, leading them to look towards more expensive versions with upgraded features and more available add-ons.
Alternatively, down-selling is best to use with individual customers who have shown an interest in a product, before then rejecting it. Using their customer data, you may notice trends in looking at less expensive versions of your product, suggesting the downsell would be more successful and prevent customer churn.
Using the right sales techniques throughout the customer journey can increase your ecommerce success and improve key performance indicators, including your AOV and conversion rates Noticing the key differences between upselling strategies, cross-selling techniques like product bundling, and down-selling mean you can utilise each to benefit your business and optimise your sales strategy.
Together, these build a loyal customer base who value your business, consistently returning for repeat purchases and to engage with the rest of your product range. This creates long term benefits for your business, boosting your revenue in a sustainable and continuous way.
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Frequently Asked Questions (FAQs)
- What is the difference between cross-selling and upsell?
Upselling helps increase profit by convincing consumers to buy more products that would make their primary purchase better. Cross-selling on the other hand encourages customers to buy more products by presenting them a variety of products that may complement their needs.
- What are the strategies for cross-selling and upselling?
One of the noteworthy strategies for cross-selling and upselling are to suggest premium products, send offers via email, enhance user-generated content, suggest complementary products, and many more.
- Why is cross-selling and upselling important?
Cross-selling and upselling are important as it gets you on top of your competitors by expanding and giving your customers more value. Experience this using PureClarity!