Acquiring new customers is more costly than retaining old ones, which is why getting higher-order value out of every single transaction makes sense for businesses. Enter ‘cross-selling’ and ‘upselling’ a time-tested strategy enabling brands to generate high revenues, stay profitable, and drive customer loyalty.
Have doubts? Here is what HubSpot found when they polled 500 salespeople:
A whopping 72% of sales professionals who upsell and 74% who cross-sell reveal that cross-selling and upselling drive 30% of their sales revenue.
In this post, we focus on cross-selling, its importance, best practices, and ways to cross-sell. Bonus, real-life ecommerce brand examples doing it right. However, before we delve further let’s begin by understanding what exactly is cross-selling and upselling and the difference between the two.
Although, upselling and cross-selling are terms often used together or interchangeably there is a subtle difference between the two. As a seller and a business owner, one needs to know the difference to decide which approach you should take to drive your business growth.
Cross-selling is suggesting a complementary product to a customer based on what he/she is considering purchasing. The motive here is to increase the order ticket size, encourage customers to purchase in the future, and build trust and a long-term relationship with customers by recommending something relevant to them and adding value. Let’s understand this with an example.
Here, Casper displays a suggestion to add a bed frame with their “Wave Hybrid Mattress”. Cross-selling is a great strategy to sell related products which in some cases may be complementary or a must-have for the product to function. Like here, someone buying a mattress will need a bed frame to put the mattress.
Upselling is suggesting to the customer a premium or an upgraded version of the same product they are contemplating purchasing. For example, a customer has walked into an Apple store to buy an iPhone 14, but the seller tries to suggest an upgrade to an iPhone 14 Plus.
Cross-sell vs Upsell
Cross-selling is the practice of offering complementary or related products to the customer's original purchase. For example, if a customer is purchasing a camera, a cross-selling suggestion could be a camera case or a memory card.
The goal of cross-selling is to increase the customer's purchase value by suggesting products that complement or enhance their original purchase. Cross-selling helps ecommerce businesses increase their revenue per order and build stronger customer relationships.
Upselling, on the other hand, is offering a higher-end version of the product the customer is considering. For example, if a customer is considering a basic model of a laptop, an upsell suggestion could be a more advanced model with better specifications.
The goal of upselling is to increase the customer's purchase value by encouraging them to upgrade to a more expensive or feature-rich product. Upselling helps ecommerce businesses increase their average order value and improve profit margins.
Continue reading: 12 Tips to Skyrocket your AOV with Upsells and Cross-Sells
Benefits of Cross-selling
Is enhancing customer relations, customer retention, and building long-term relationships with a customer your business objective? If yes, you have all the reasons and a few more as to why you should consider implementing a cross-selling strategy to boost revenue and drive business growth. Let’s find out what these are.
Higher average order value: Persuading someone already browsing your website to purchase to buy more is not all that hard. You already have acquired the customer, by suggesting complementary products at the right time you can get them to spend more, and that too without additional customer acquisition costs. More sales per transaction and a high-value order cart never hurt anybody.
Long-term profit maximization: Each customer acquisition has a cost attached to it. It, therefore, makes sense to sell more per customer. By cross-selling you can get more revenue. The acquisition is a one-time investment, every subsequent sale after that is without incurring this cost. The cumulative individual high-order values result in higher profits in the long run.
Customer satisfaction: By recommending complementary products you enhance the overall customer experience, and you add value to not just their basket but also their purchase translating into better customer satisfaction. To help understand better let’s take an example of McDonald’s. They usually have value meals (burger + fries + drink). The experience of eating a burger with fries is pure satisfaction.
Identifying Cross-Selling Opportunities
In today’s internet age customers interact with brands through various communication channels and have multiple touchpoints with a brand along their journey. Having a holistic view of the customer’s experience at these different touch points can help businesses identify opportunities to cross-sell. Ecommerce businesses can leverage insight reporting tools such as Moda to analyze customer data collected at various touchpoints to identify cross-selling opportunities and personalize their product recommendations.
Identifying cross-selling opportunities is a three-step process:
- Analyze data: Businesses can analyze customer behavior and preference data to identify products that are often purchased together, products that are frequently viewed together, and products that are popular among certain customer segments.
- Segment customers: Basis the analysis they can segment customers based on their buying frequency, products they buy, age group, etc.
- Create buyer persona: They can identify different buyer personas based on past buying behaviors and then recommend a certain set of products that will possibly interest them and convert to a sale.
Now that we know what cross-selling is, let's look at strategies that make for effective cross-selling.
Strategies for effective cross-selling
Effective cross-selling requires a thoughtful approach that is focused on providing value to the customer. The tricky part is how to introduce a cross-sell product to a prospect without being intimidating. Below are a few time-tested strategies that ecommerce businesses can implement to cross-sell effectively:
Today with the help of AI tools understanding the customer's preferences and behavior is a lot easier. Ecommerce businesses can leverage this data to suggest the most relevant products to their prospective customers.
Rather than mass segmenting and sending the same recommendation to all customers, personalizing the recommendations makes a lot more sense. Personalized product recommendations can be given based on the customer's browsing history, purchase history, buying behavior, and analyzing multiple data points. The more personalized the suggestion, the more likely the customer will make an additional purchase.
We like how Lancome uses a personalization strategy by showing products that "You may like" with the item the customer is adding to the cart.
2) Product Placement
The placement of cross-selling offers can have a big impact on their effectiveness. Cross-selling suggestions can be displayed on the product page, in the shopping cart, or through email marketing. The offer should be presented at the right time in the customer's journey, and in a way that doesn't interrupt their shopping experience.
Best Buy uses product placement and personalization to encourage cross-selling. When a customer is browsing for a new TV, Best Buy may suggest complementary products such as a soundbar or a streaming device.
Bundling is a powerful cross-selling strategy where businesses bundle complementary or related products at a discounted price. This can incentivize customers to make additional purchases, as they feel they are getting a better deal.
Amazon is a master of bundling complementary products to encourage cross-selling. For example, when a customer purchases a new camera, Amazon may suggest a bundle that includes a camera case, memory card, and additional lenses. By bundling these products at a discounted price, Amazon incentivizes customers to make additional purchases.
4) Discounts and Offers
Discounts and offers can also be used to incentivize customers to make additional purchases. For example, businesses can offer a discount on a second purchase or provide a free gift with a certain order value. However, it's important to avoid spamming customers with irrelevant offers, as this can harm the customer's trust.
Sephora is known for its effective use of discounts and offers to encourage cross-selling. For example, the company may offer a free gift with a purchase or a discount on a second item. These incentives help to increase the customer's purchase value and encourage them to try new products.
5) Follow-up Emails
One way to cross-sell products more subtly is to include recommendations for related products in standard messages sent after purchase. This includes the automated email that confirms the original order and any other emails that give updates on shipping.
Dollar Shave Club nails it when it comes to cross-selling with a follow-up email on the shipping details of a subscription box. When sending dispatch and content details of the next subscription box, Dollar Shave also recommends a few complementary products suggesting the customer add those before they ship the order.
Best practices for cross-selling
It takes a few tips, tricks, and certain best practices to make any marketing strategy a success, and cross-selling is no different. Here’s a roundup of what we at Moda think are certain best practices to make your cross-selling efforts a success.
Keep it relevant: Cross-selling suggestions should be relevant to the customer's needs and preferences. Suggesting irrelevant or unrelated products can snub them the wrong way and a brand may end up losing the customer's trust. The outcome, customers are less likely to make additional purchases in the future. Using customer data and personalization techniques to suggest the most relevant products is the key.
Matalan is a clothing brand. They have nailed it in keeping the suggestions relevant. Based on what the customer purchased in the past they have only recommended other uniform basics essentials for boys. What we like in particular is the placement of the CTA and the text in the email.
Don’t be pushy: Customers don't like feeling pressured or manipulated into making additional purchases. Cross-selling should be done in a way that is respectful and non-intrusive. Avoid bombarding customers with too many offers or displaying them at inappropriate times in the customer journey.
Provide Value: In this digital era, we are constantly bombarded with information that can be overwhelming and intimidating, to say the least. When cross-selling, pay special attention to providing value to the customer, not just increasing revenue. Suggest products that genuinely complement or enhance the customer's original purchase. Discounts and offers can be used to incentivize customers, but make sure they are relevant and not just a ploy to increase sales.
Optimize for Mobile: With more and more customers shopping on mobile devices, it's important to optimize cross-selling offers for mobile screens. Make sure cross-selling suggestions are easily visible and don't interfere with the customer's browsing experience.
Test and Measure: To determine what works best for your business, test different cross-selling strategies and measure their effectiveness. Use data analytics to track the impact of cross-selling on revenue, conversion rates, and customer satisfaction. This will help you refine your cross-selling approach over time.
The DTC ecommerce space is crowded and one needs to apply all tricks of the trade to cut through the noise to be heard. Another aspect that can’t be overlooked is to deliver customer experiences that make an impact. If as an ecommerce business owner deploying an effective cross-selling strategy is something you have been struggling with, look no further beyond MODA. Our analytics and automated marketing workflows can help you understand the customer's preferences and behavior and enable you to identify cross-selling opportunities and suggest the most relevant products.
Cross-selling is a powerful strategy for ecommerce businesses looking to increase revenue and build stronger relationships with their customers. An effective cross-selling strategy has the potential to significantly impact your bottom line for the good.
Frequently Asked Questions (FAQs)
1) What is the best way to effectively cross-sell products in an ecommerce store?
The best way to cross-sell products on an ecommerce store is to analyze customer data (touchpoints) during a customer journey using an intelligent analytics tool such as MODA, segment customers, and send the most relevant product recommendations incorporating the best practices discussed here.
2) How can I ensure that my cross-selling efforts are successful?
Track important metrics such as email open rate, CTR, conversions, and test from time to time what subject line, content, and promotional strategy to see what is working and what is not working. Assessing, making amendments, and reinventing the strategy basis of the data is the best way to ensure your cross-selling efforts make an impact.