Cross selling and upselling can make a huge difference to a business. In 2006, Amazon reported that cross-selling and upselling through initiatives such as “people who bought this also bought this” made up 35% of their revenue.
Upselling is telling the customer that there is a better, more expensive version of the product or service they are considering. If you offer this, be careful to listen to the customer and understand their needs, otherwise you will be trying to sell them features they do not want or need and it is likely that you will deter them from buying from you at all.
Upselling only works when the customer believes they are getting more value. McDonalds does this well – you want large fries for X more?
Cross selling is a strategy to sell related products or services to existing or potential customers. It is important that the extra products or services are complementary so the customer can immediately understand why they are being offered. Again, McDonalds do ths well – how about a meal which gives you this and this for only x more?
There is one sales technique which combines cross selling and up selling - bundling. You offer the main product with others as a package at a higher price than the single product costs but for less than buying each item individually costs.
Bundling can work well to increase average spend per customer, and there are 2 main options:
Pure bundling is where products are only available as a package and can’t be bought separately. Sky TV is an example of this. This will generate higher average spend but will also put some customers off buying at all.
Mixed bundling is where products are available as a package and also separately. This is far more effective as the customer can easily see what extra value they get by buying the package. Research has shown that mixed bundling increases sales by 20% over pure bundling.
A very effective way to use mixed bundling is to offer a minimum spend to qualify for free postage and packing. Again, Amazon are experts at this.
If you decide to bundle products and services, your focus should be on making sure customers get extra value through it. There are several key benefits of bundling for a business:
1. Improved customer retention – as customers see that they get more value than they expected, they are much more likely to repeat buy.
2. It increases average spend per customer and therefore profits.
Here are some simple tips to follow:
· Focus on your most popular products or services
· If you are looking to upsell, make sure the more expensive product is displayed more prominently than similar ones.
· Price the most expensive product at no more than 125% of the price of cheaper products
· Be clear about what extra value the more expensive product offers – how do it improve the customer’s life more than a cheaper product would?
· Whilst you should look to upsell as the customer is considering buying, you should only look to cross sell once the customer has made the buying decision. This is because you will give them too much to think about and may come across as a pushy salesperson!
Once they have made the decision to buy, you can use cross selling to show the customer that you are thinking about them and are looking to give them more value.
For example, once they have decided to buy a laptop from you, ask about anti-virus software. Do they already have it, do they want to protect themselves online?
Upselling and cross selling works by reducing complexity and the number of choices a customer has to make. Studies have shown that this can increase sales by up to 40%.
Whilst everyone wants choice, we really only want a limited amount of choice – our ability to make a decision reduces as the number of choices increases.
By using upselling as a technique during the decision process and cross selling after the decision, you reduce the number of choices a customer has to make and therefore increase your chances of a sale. Bundling has the same effect.
Upsell and cross-sell techniques should be used as strategies to help customers make better decisions, faster.