Nearly every large brand uses product recommendations to increase conversions on their site and in their apps. There's a good reason for this; it works. Reports show that 35% of Amazon's revenue and a whopping 75% of the videos watched on Netflix are the results of product recommendations. Upselling and cross-selling are great ways to use product recommendations in your app to further engage users and spur additional purchases. Of course, product recommendations aren't the only way to do upselling and cross-selling. In this post, we'll tell you what you need to know about how to effectively implement these strategies, starting with simple definitions and examples, and then moving on to some tips on how to best implement the strategy.
What is Upselling?
Upselling is a strategy to increase the purchase price of a product. It can come in various flavors. Offering a customer a higher-priced version of the one they are interested in buying is one way to upsell. Another is to sell additional features or other add-ons that increase the value, and price, of the product.
Upselling doesn't need to be pushy. It's often the result of understanding the customer's needs and offering them a product that better aligns with their goals, either now or in the future. Using upselling in this way allows you to build a stronger relationship with the customer and lets them know that you are invested in helping them achieve their goals.
As we'll see, upselling can happen while the customer is shopping, during the checkout process, or even after the sale. This gives businesses plenty of opportunities to increase the lifetime value of a customer.
Examples of Upselling
To better illustrate what upselling is, let's take a look at some of the common ways the technique is implemented. See how many of the strategies below you've encountered while shopping in your favorite app or on your favorite website.
- Selling a larger or premium version - This is a common tactic in fast food restaurants. You encounter it every time you're asked if you'd like to supersize your order. It also works well with other products. Offering customers a newer model, or one with a better feature set will frequently result in a sale.
- Offering customization options - For an extra fee, you can often add custom engraving, colors, or other customization options to a product. These are services that can't be purchased without first purchasing the original product, and therefore serve as an upsell to that product.
- Offering discounts for certain purchase thresholds - As we'll see, this one can work as both an up-selling and a cross-selling method. If you offer customers a percentage off their order, or free shipping, if their purchase exceeds a certain amount, they'll often purchase extra in order to get the discount. If they upgrade to a higher-priced product to meet that threshold, you've successfully upsold them.
- Offering several tiers of service - Another common strategy, where practical, is to offer several tiers of service. This allows customers who don't need every feature offered to purchase without feeling as though they are overpaying, and provides an opportunity to upsell to them as their needs grow.
What is Cross-Selling?
Cross-selling is a marketing technique where a seller encourages a customer to purchase additional or complementary products or services in addition to their initial purchase. The aim of cross-selling is to increase revenue and customer satisfaction by offering related products or services that the customer may be interested in. For example, a customer who buys a laptop may be cross-sold accessories like a laptop case, a mouse, or additional software. Cross-selling is commonly used in retail, e-commerce, and service industries.
Examples of Cross-Selling
Just like we did for upselling, let's take a look at common strategies used by companies that employ cross-selling in their sales efforts.
- Selling accessories - Many purchases have a long list of accessories that work with them. A printer needs additional ink cartridges, a laptop might have a durable case available for it, etc. Offering these items when the customer adds the initial purchase to their cart can result in a quick additional sale.
- Selling complimentary items - In addition to items made specifically for the product, there is a wide range of complementary items for many products as well. A nice suit jacket paired with a matching set of pants is one example. This is often a good time to show products that were purchased by other people who bought the initial item.
- Offering discounts for certain purchase thresholds - We've seen how this tactic can work for upselling, but it works just as well for cross-selling. A customer who has decided they want to meet a threshold to get the discount is going to be more willing to purchase the extra items that you're pitching them in order to do so.
- Selling protection plans - Often with expensive purchases, the offer to purchase some sort of insurance or protection plan is made. Because people like to safeguard expensive items, this is a cross-sell that can bring in additional income.
Tips for Upselling and Cross-Selling
As with anything in sales, there's a right way and a wrong way to approach upsells and cross-sells. It's easy for someone just starting out to make mistakes that actually decrease their chances of making a sale. While a complete course on the subject is beyond the scope of this post, the tips listed below should help get you started on the right track to successfully increase the average value of your customers.
- Don't Go Overboard
- Use Personalized Data
- Create Product Bundles
- Follow the 25% Rule
- Make the Additional Purchase Easy
Don't Go Overboard
Consumers like a choice. They like to feel as though they are in control and are making informed decisions. However, too much choice creates confusion and decreases the likelihood that the person will make a purchase at all. At least one study has shown this effect in action. Given the choice between a high number of products (24 or more) and a lower choice (6), people were more likely to make a purchase when presented with the lower number of choices. When presenting customers with options for upsells or cross-sells, try not to overload them with choices. The exact ideal number will vary from product to product, but single digits are much better than double digits.
Use Personalized Data
The use of data that you've collected about a customer allows you greater opportunity to upsell or cross-sell to them. As we've seen above, it's better to limit the number of choices you present to a customer. This is easier if you have an idea of what the customer will like and can draw intelligently from your pool of offerings. Using tools like in-app or web stories from Storyly, you can better gauge what your customers are interested in and create personalized content designed specifically for them. Storyly stories integrate seamlessly into your app or web experience so as not to annoy the customer the way some third-party pop-ups and messages do, all while providing you greater creative freedom.
Create Product Bundles
Creating bundles is one of the best ways to cross-sell your products. To still provide the customer with a choice, you might choose to create multiple bundles to give them some options, however, customers tend to think of a bundle as a single purchase. This is what makes the bundle such a powerful sales tool. The customer is thinking more about the extra stuff they are getting for a single price than they are about the fact that they're purchasing additional items. However, you still want your customers to be happy with their purchase, so be sure to bundle items that will increase the utility of the initial purchase. To create a sense of urgency, you can offer bundles for a limited time only. If you choose to do so, a Storyly countdown timer can help spur the customer into action.
Follow the 25% Rule
It stands to reason that if a customer comes in to buy a coffee mug and you try to sell them a car so they'll have a cupholder to put it in, they are going to look at you like you're crazy. While this is an extreme example, it serves to illustrate an important and often overlooked point. There's a point where your attempt at upselling will exceed the amount of extra money a customer is willing to spend. While every customer is different, a general rule with upsells and cross-sells is to keep the attempt at 25% of the initial purchase or below. This is the amount that most people are comfortable with in terms of extra spending, so staying under it will increase impulse buys.
Make the Additional Purchase Easy
In sales, any extra friction you add to the process is going to have some negative effect on your chances of making the sale. How negative of an effect depends on how much friction you add. For that reason, you should make it as easy as possible for customers to add items that you've recommended to their cart. The same goes for the process of selling upgrades to a product. The more seamlessly a customer can get through the process, the more likely they are to get through to the end of the funnel with those sales upgrades intact.
Upselling and Cross-Selling After the Sale
The tactics of upselling and cross-selling are generally thought of as something that happens during the sales process itself, but there are plenty of chances to make additional sales to the customer after they've already placed their order. Most often, these types of sales attempts come in the form of an email. It may be the order confirmation email or an email that comes later. Either way, if someone has purchased from you, they're a good candidate to pitch another purchase to.
Remind Customers to Reorder
Many products have a finite life. Bottles of cleaning products eventually run out, batteries eventually die, etc. When these products reach the end of their usefulness, they need to be replaced. Ideally, the customer will return to your app to purchase more of the same product. By keeping track of when customers purchase products that they'll need to replace, you can help ensure that this happens. A strategic email timed around the time you expect their product to be running low can prompt them to replace the product through you before they even think about going somewhere else.
Provide Information About Upgrades
This is particularly useful for SaaS and other subscription-based products, though there are certainly other use cases for it. An email reminding customers of the additional features and product upgrades that can enhance their purchase can be sent after their order, or even sometime after. As long as you aren't incessantly asking customers to make additional purchases, these types of communications can also help to build your relationship with the customer and keep your brand on their minds.
Suggest Related Products
It's always a good practice to email a customer thanking them for their order and providing them with the details of their purchase. This is an opportune time to also remind them of related products that might pique their interest. If you're using cross-selling as part of the shopping or checkout experience, it's a good idea to adopt a different strategy for recommendations than you do in those areas. While shopping, for example, you may show them products that complement something they are already buying, whereas in the thank-you email you may show products that customers similar to them have purchased.
Summary
If your shopping app isn't utilizing personalization and the dual strategies of upselling and cross-selling to your customers, then you are likely leaving a lot of money on the table. This strategy has been highly successful for retail giants like Amazon. While you might not get the same results that they did, with their highly advanced algorithms and massive budget, you'll still likely see a significant boost to your revenue when you employ them. Storyly's features can help bring an additional level of interaction to the experience for customers while remaining a seamless and enjoyable part of the shopping experience.
