The cost of acquiring a new customer is often around four times more expensive than it is to sell to an existing customer. The most successful business practices to achieve this are up-selling and cross-selling.

Both increase the revenue the business generates and help them achieve greater profit margins.

Learn how to up-sell or cross-sell products here.

 

What Is Up-selling and Cross-selling?

Up-selling is the process of having the customer increase the value of their order. This could be through selling more units of the same product, or upgrading their original purchasing decision. Up-selling is very common on service websites where there are different service levels or membership types.

Cross-selling is when you provide complimentary products to an original order. This is very common on ecommerce sites. An example would be “Customers who bought this product also bought…” This is often seen on sites like Amazon, who reported that in 2006 this technique contributed to 35% of their sales.

Cross-selling does not have to be instantaneous. Cross-selling can occur any time after the original purchase and can even include selling to other departments within your client’s organisation or to one of their business partners.

 

What Are the Advantages Of Up-selling and Cross-Selling?

The benefits of up-selling and cross-selling rely on good relationship building and management. Once you have established strong relationships your business can benefit in many ways, including:

  • Decreased customer acquisition costs: because you have already acquired the customer, it costs far less to market and sell the new product to them.
  • Increase Customer Lifetime Value: Selling more products to a customer allows you to increase the lifetime value of your customers.
  • Increase Profit Margins: A lowering of the customer acquisition cost will automatically increase the profit margin on all the products you sell.

These benefits create an increase in working capital. An increase in the working capital allows you to invest greater amounts in other areas of your business. These funds could be allocated for further marketing activities such as paid search marketing (PPC) or investment in your business processes to reduce costs.

 

What Are The Best Tips For Up-selling?

Up-selling is a difficult prospect. It is likely your customer has a set budget or quantity in mind for their purchase. Having them adjust this can be difficult. There are several techniques to implement to help convince them to change their order or to buy extra.

1. Sell the benefits of the up-sell

Customers do not only buy products based on the features of the product. They buy products based on how the product will benefit them. Make sure that you are selling the benefits of the up-sell. The most common benefits are: lower cost per unit, more functionality, better customisation, improved customer service, etc.

The delicate balancing act is to ensure that you aren’t creating negativity about the original product. For example stating better customer service, you still need to imply there is good customer service with the basic product. An option here is to state the higher priced option has 24/7 customer care support whereas the lower cost has e-mail support.

2. Keep The Up-Sell Below 25% Of The Original Order

Studies have shown that there is a larger uptake of an up-sell when changing to the higher priced product incurs a price increase of less than 25%, beyond this the uptake is poor. Therefore when you have an original product of $20, ensure that the up-sell doesn’t exceed $5 more.

3. Highlight Your Up-sell

If you are attempting to up-sell prior to the original order, as is common on many membership sites or service providers, you need to make your up-sell product more prominent.

To do this consider highlighting the higher priced offer, slightly increase the space it takes up on the page, use a different colour for the call to action, place a ‘sticker’ to draw attention to the offer. You might need to do some A/B testing to get this to work as some changes could decrease the uptake of your offers whereas others will increase.

 

Good Tips For Cross-selling

Cross selling can be fairly simple. It is about getting the customer to make an impulse purchasing decision or to buy additional products based on recommendations from peers or experts. Some good tips to support your cross-selling are:

1. Peers Also Bought

This is one of the best marketing techniques available, it works really well because it creates social pressure on the consumer to make the same purchase. It also acts as a recommendation from their peers, which are more trusted than a recommendation from the seller.

2. Incentives

Offer your customers benefits of buying immediately to improve the uptake. Incentives could include “free delivery on orders over…” or “buy now and save 10%”. This will create a sense of urgency with your customers when they think the offer is too good to miss or the offer will be taken away soon. Vouchers with end dates are good examples of this technique.

3. On Product Copy

Another opportunity for cross-selling is placing copy on a product advertising a complimentary product. For example shampoo bottles often have “works best with X product” on the back of the bottle.

4. Discounted Second Buy

Another option is to offer a discounted second buy to the consumer, common examples being “Buy X for half price when you buy Y” or “Save 20% when you buy X and Y together”. These create special offers which research has shown humans are drawn too and find it hard to resist.

5. Build A Relationship And Then Ask

Leverage the power of your customer service and delivery teams and create strong relationships with your customers. When you are performing well and providing quality service and products you have an opportunity to cross-sell by asking if there is anything you can help them with.

 

Conclusion

Up-selling and cross-selling have excellent benefits for your company. With good processes, marketing material designs and excellent customer service you can really increase your revenue and profit margins, and additionally reduce costs.

 

Action Steps:

  • Train your support staff to start cross-selling by asking your customers if they could help with anything else at the end of phone calls.
  • Make higher priced options more prominent on your website when next to lower priced options to encourage up-selling.
  • Implement a “customers who bought this also bought this” area on your website.
  • Check the pricing strategy for your up-sell to check that it is lower than the rule of 25%.
  • Create incentives for your customers to buy more in one transaction.

Jake Burdess

Director at Aflua
This post is by Jake Burdess, the founder of Aflua and HEROIC. Jake is an English designer who lives in New Zealand with his wife and three kids.

Latest posts by Jake Burdess (see all)