By Kevin Carlson
Vice President, CSO at Optaros
As someone who spends most of every day immersed in e-commerce, I field a number of questions from online retailers about how to best approach some of the challenging aspects of e-commerce.
And I’m starting to notice some trends. One question I seem to hear most is around strategy for up-sells and cross-sells. What’s the difference between the two? How do I get started? What’s the best way to approach this from a strategic perspective?
First, let’s review some basic definitions to make sure we’re all on the same page. “Up-selling” is when a retailer provides an offer that drives a customer to buy a greater quantity of the item they had originally intended. “Cross-selling” is the act of encouraging a customer to add complementary products to their cart. We’ve all seen the cross-sell links on Amazon. They’re presented under the guise of, “Customers who buy this item also buy some other item.”
The challenge facing today’s e-retailers is not whether or not to offer up-sells and cross-sells, but how to build a strategy that best works for their customers. Before getting started, they want to ensure they truly understand their shoppers, and which offers will be most appropriate and effective when it comes time for up-selling and cross-selling.
To be certain, what you offer your online visitors should depend on your customers. What are you trying to sell them? What is the response you want to elicit? When done correctly, cross-selling can be extremely lucrative. Amazon, for instance, reports that as much as 35 percent of their revenue is from cross-selling. And according to the e-tailing group’s recent research, companies that implement up-sell and cross-sell on their site can generate as much as 10 percent of additional revenue. The average increase however is 1 percent and 4 percent – indicating that true success isn’t automatic.
In the e-commerce industry, up-sells and cross-sells have been so effective that 64 percent of companies included in e-tailing group’s research are currently undertaking initiatives in these areas. If you’re not on board, prepare to wear yourself out chasing this bandwagon. However, starting small can bring some real success if you pay close attention to how your offers are prepared, and when they are shown to a shopper.
Up-selling is by far the more straight-forward of the two types of offers. Basically, it is the type of situation where a customer purchasing a 10-pack of something is offered a discounted 25-pack, or an even bigger discount on a 100-pack. For the love of all things precious, though, please make sure it’s a discount! I’ve seen sites offering the equivalent of a deal that seemed right out of the pages of Green Acres’ Mr. Haney: “I’ll sell you 10 for $5 and I’ll sell you 25 of $50, Mr. Douglas.”
It’s important to make sure that all of the products you plan to up-sell are appropriately priced. When you place an item on sale, make sure the up-sell offers still make sense. Otherwise, just don’t offer them. You’ll look ridiculous.
Regarding cross-selling, this can be a bit more complex because it involves offering consumers complementary products. When performed correctly, cross-sell can have a huge impact for sites.
However, implementing cross-sell without giving each offer adequate thought, can often make suggested items seem completely out of place; as if the seller doesn’t really understand why a customer is there in the first place. Careful consideration of cross-selling is a must, and should be carefully planned with guidance from merchandising and marketing functions within the company.
The concept of “symmetrical” products is also critical in understanding when to cross-sell. If two products are symmetrical, they are similar in value and cost in the eyes of the customer. For example, if a consumer is browsing your site and adds rechargeable batteries to the cart, cross-selling a battery charger makes sense.
The opposite would also hold true: the addition of a battery charger initiates the offer of some batteries. Easy enough.
Non-symmetrical products work well when positioning one product against another. The opposite, however, looks ridiculous to the would-be buyer. For example, if a musician visits a musicians supply site and orders a new guitar, cross-selling guitar strings would make perfect sense.
However, for someone purchasing strings, it would be a bit odd to try and sell a guitar to go along with them. Could you eventually hit pay dirt with that strategy? Sure you could. But you’d probably get panned on the pages of Reddit before that happened.
A prudent approach to up-sell and cross-sell is to start small. Test the market and see what works. If you know your product line well – and you should – you will know the obvious places to start. Watch customer behavior and add to what is working while weeding out the offers that don’t produce. It’s an iterative process that one refines over time, and these iterations are necessary for any site hoping to maximize return on up-selling and cross-selling.
Kevin Carlson is a 25-year industry and consulting veteran with a unique combination of technology expertise and business acumen. A two-time CTO and founder of multiple successful startups, Carlson brings his technology leadership and entrepreneurial spirit to his role as vice president, client partner and chief security officer at Optaros. Carlson is an experienced leader of technical and consulting teams and an expert in business development, client relationship, project management and delivery.