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Upselling and Cross-Selling: A Guide to New Age E-commerce

In the e-commerce race, cross-selling and upselling products have become niche strategies and campaigns of their own. They have become important strategies for e-commerce businesses to acquire new customers and retain older ones. Here we look at these strategies in detail and break them down to understand the key distinctions between them.

June 17, 2022
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Upselling and Cross-Selling: A Guide to New Age E-commerce

Sucharita Kodali, a Forrester Principal Analyst, highlighted that eCommerce stores generate about 10% to 30% of their revenues from upselling and cross-selling.

This statement is a serious one in terms of numbers, considering that personalization reigns supreme today. Consumers like being served advertisements and recommendations that are highly relevant to what they prefer and like.

Research shows that 91% of consumers prefer purchasing from brands that pay attention to personalization, according to an Accenture Pulse Survey.

In the eCommerce race, cross-selling marketing and upselling products have thus become niche strategies and campaigns of their own. According to the data published on The Funnel Strategist, 2021 saw about 60% of sales representatives leveraging upselling and cross-selling strategies.

Needless to say, upselling and cross-selling have become important strategies for eCommerce businesses in order to acquire new customers and retain the older ones.

Let’s look at these strategies in detail and understand the key distinctions between them.

What is Cross-Selling Marketing?

Cross-selling is a marketing strategy employed by businesses to get their customers to spend more money purchasing products related to the ones they have just bought. eCommerce businesses use this strategy to get a boost in their sales.

For example, for a customer who just carted a pair of shoes, cross-selling algorithms of the e-retailer then recommend a pair of socks or shoelaces as the next additions to the cart.

The more polished and intelligent a cross-selling algorithm is, the better it will understand a consumer’s purchasing intentions. For a consumer purchasing sunscreens labeled for use on oily skin, the cross-selling algorithms then recommend de-tanning formulas with oil-control features.

The basic idea of cross-selling a product is to get a consumer to buy more things at the end of the day instead of stopping at just one product. Advertising related products helps achieve this goal.

What is Upselling Marketing?

Upselling is a more complex marketing strategy. The main objective is to get the consumer to spend more on the same product by purchasing an updated or upgraded version instead of the basic one.

For example, for a person purchasing 50ml of sunscreen, an upsell strategy would promptly recommend a 100ml pack instead with an add-on freebie (like zero shipping charges) or a discount coupon for the next purchase.

By recommending a costlier product laced with incentives, upselling aims to entice a customer to spend more with the idea that they are getting better value from the money they spend. Furthermore, by including a discount coupon for the next purchase, the upsell attempts to secure a repeat customer.

The Funnel Strategist reports that 90% of consumers admit to shopping more when they have access to free shipping – this is the reason why a lot of upsell strategies make use of this feature.

Cross-Selling vs. Upselling: The Distinctions

At their core, both cross-selling and upselling are marketing strategies designed to increase merchant profit. The only difference lies in the way they recommend products and the kind of products they recommend.

Let’s look at both these marketing strategies in comparison to understand the differences better.

Customer Intention

The foundational difference between a cross-selling marketing strategy and upselling is the way consumer intention is manipulated.

A cross-sell strategy recommends new products to consumers based on what they intend to purchase originally. This method banks heavily on consumer consideration to buy more things related to the one they have already shown intention for.

For example, while buying sunscreen, the consumer may not have intended to purchase a de-tanning formula. However, when a cross-sell recommendation shows up with this product, they may just buy it.

On the other hand, upselling bets its dollar on the already established consumer intent. In showing the brand that a consumer wishes to purchase a 50ml sunscreen, upselling would attempt to get them to buy more of the same product by including an incentive.

Incentive

The incentives included with an upsell and a cross-sell are different because of the nature of these marketing campaigns.

An upsell would attempt to get a repeat customer by giving discounts on higher order values, free shipping, deals, and coupons for the next purchase or upgraded products for a lesser price and a complimentary gift. Any combination is possible.

On the other hand, cross-selling creates a bag full of products that make complete sense for the product a consumer came to buy.

For example, cross-selling a sunscreen would include recommendations of de-tanning formulas, skin-soothing lotions, sunhats, and umbrellas – along with a discount on the bag value that the e-retailer has curated.

Similarly, cross-selling for a pair of formal trousers would entail recommendations of a tie, formal socks, and belts, perhaps with a provision of one-day delivery for an extra charge.

Different though these techniques may be, the fact is that cross-selling and upselling can happen at the same time.

For example, if a customer carts one book of the Harry Potter series, a cross-selling algorithm would automatically recommend the next part as well.

On the other hand, an upsell-cross-sell algorithm would recommend an entire boxed set for a discount, in addition to a brand-merchandise bookmark for a fraction of the cost, express shipping, or gift-wrapping free of charge.

In the end, it all works for the benefit of the merchant.

Best Examples of Cross-Selling

You may not be aware of it, but you come across some stellar cross-selling tactics every single day, and not just on eCommerce stores. Let’s look at one online and one offline example of cross-selling.

Food and Beverage Industry

Cross-selling couldn’t be more in-your-face than with Starbucks or McDonald’s.

While ordering a burger, the McD sales representative will ask you whether you would like fries or a soda with your order or if you would like to upgrade your order to a meal to get a bigger pack of fries or an add-on dessert.

The same concept applies to Starbucks – while ordering coffee, you would be asked if you want any syrups, toppings, or flavors added to your coffee or if you would like a cookie or a slice of cake to go along with it.

E-commerce Industry

While shopping on Amazon, you may have noticed a section on the product page that lists a combination of products under “Buy it With” or “You May Also Like.”

Say you wish to purchase an activity tracker. These sections (which are actually the cross-sell sections) would then show you sports drinks, running shoes, and gym apparel along with your tracker at a competitive deal price.

You may end up buying the entire package depending on your needs or impulse – this is cross-selling marketing working at its best.

Best Examples of Upselling

You would be surprised to know that some of the household brands – the big names – employ upselling in an incredibly subtle manner to achieve their sales targets. Let’s take a look at how these brands get customers to spend more on the same product.

Apple

Apple is one of the most popular premium consumer electronics brands today; everybody wants the latest iPhone. This is where the brand leverages upselling to get its latest products flying off the shelf.

Apple accepts older iPhones in exchange for a discount on the latest models – this is essentially an upselling tactic. The consumers view it as an upgrade while saving on the new purchase; for the merchant, however, it is a sale, nonetheless.

Trade-ins are practiced by many industries that deal in consumer goods that have reuse or recycling value (electronics, mostly).

Tesla

The name says it all. This upmarket car tech company leverages the beauty of subtlety in upselling like no other. It allows consumers to make a car purchase online, and throughout the entire journey, it strategically places upselling modules where consumers end up buying more.

For example, Tesla allows consumers to custom upgrade their cars on the website itself. They can choose their own add-on features (like longer range or better off-road performance) while they are looking at car features. This enables Tesla to maximize each order value as much as possible.

How to Cross-Sell and Upsell

Cross-selling and upselling aren’t rocket science. Keeping the following pointers in mind can help you devise a great cross- and upsell marketing campaign:

  • Make it simple by avoiding recommending too many products or services at once. This works to confuse the customer
  • Customize the offerings based on the customer journey to make the cross and upselling options more relevant
  • Time the marketing right. Cross-selling and upselling shouldn’t be done when a user begins their journey; rather, when their intention to purchase is solidified
  • Offer an incentive for loyalty. For example, start a point-based system wherein new incentives can be unlocked as a customer accumulates certain points while shopping
  • Follow up!

Wrapping Up

Marketing is all about understanding what a consumer wants and offering them better options that are profitable for the brand as well.

Upselling and cross-selling are great ways to achieve this objective. If you wish to know more about these wonderful marketing tactics, visit Glood.AI.

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