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.
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.
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.
A technique similar to upselling is cross-selling. While both of these sales tactics are designed to increase the lifetime value of a customer, they differ in their approach. Upselling is all about getting the customer to spend more money on a particular product, whereas cross-selling is about convincing the customer to purchase more than one product. This goal is most often accomplished by presenting the user with items that go well with the one they have decided to purchase.
Both of these techniques are driven largely by the same type of recommendations that made such a profound impact on Amazon's revenue. The key to being successful at both is creating a recommendation system that's tailored to the needs, desires, and goals of your customers. This increases the chances that they'll spend the additional money, and helps to build your relationship with the customer.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.