The declining state of the economy has left many online retailers scrambling to find more effective ways to increase their sales volume and their average order size without having to increase their marketing budgets. With revenues declining and consumers tightening their spending, how could you possibly increase your sales revenue and average order size without spending more money on advertising? Many experts agree that cross-selling and up-selling are a great place to start as these concepts represent one of the most significant unrealized opportunities for so many online retailers, from the biggest to the very smallest.
Cross-selling refers to the practice of promoting complimentary items related to the item being sold while up-selling is the practice of offering customers an upgraded or premium version of a product. These techniques are pretty simple concepts to understand and can provide lots of value to your customers, enhancing their shopping experience while increasing your site’s sales volume. It’s a win, win. If used incorrectly, however, they can damage your credibility and sabotage your marketing efforts.
Many of the most recognizable websites, such as Amazon.com and Expedia.com, have pioneered the use of cross-selling and up-selling. Amazon.com was an early pioneer of cross-selling complementary products – “if you bought product A, you might also like products B and C.” Expedia.com, a leader in the online travel category, has led the industry in “bundling” travel packages, which has led to substantial revenue and profit gains since they first implemented the concept.
McDonald’s is a perfect offline example. Asking you if you’d like the “Meal Deal” with your Quarter Pounder is a cross-sell; asking if you’d like to “SuperSize” the meal is an up-sell.
When thinking about enhancing the shopping experience for your own customers, a website that suggests complimentary or related purchase items is both logical and intuitive. Just think about the shopping that you do online:
- If you were buying a pair of shoes would you be open to a suggestion to buy socks at the same time?
- While purchasing a new cell phone, would you appreciate being shown recommendations for related accessories like a hands-free kit and extended charge battery?
- How often do you buy related products in this manner?
The evidence is clear that cross selling and upselling really works (see the McDonald’s example above and then ask Jenny Craig). Most small websites, however, employ weak or totally unproductive cross-selling tactics, if they do at all. If used properly, cross-selling represents an enormous, cost-effective opportunity for all online retailers.
Keys to Effective Cross-Selling and Up-Selling
The key to effective cross-selling and up-selling is putting your customers’ needs first by adding value to the customer experience with your related-item suggestions. Cross-selling helps to educate your customers on the depth and variety of what your business has to offer but, above all, don’t use cross-selling carelessly as a forum to simply push more products or services.
One of the most common up-selling techniques is either discounted or free shipping on a specified purchase amount. Encouraging customers to purchase additional items with free shipping or discounts on orders over a specific sales threshold – free shipping for a minimum of $100 in purchases, for example – is a pretty easy way to improve your sales volume incrementally.
If a customer’s order totals $90 and shipping is free on orders over $100, they’ll have much more incentive to find an additional item to purchase to take advantage of your free shipping offer.
Be sure, however, that you’re not shooting yourself in the foot with this strategy. A free shipping promotion should help to improve your sales volume, but more importantly, it should add to your bottom line – increasing your total profit per order. So, be sure to calculate these promotional offers very carefully.
How Should I Implement Cross-Selling?
The most ideal solution is to employ suggestions or recommendations for related products dynamically utilizing a shopping cart platform, if at all possible. Using a shopping cart is, hands down, the easiest way to effectively automate the cross-selling and upselling process. For those site owners who don’t have enough products to justify a shopping cart solution or who simply can’t afford one, cross-selling can be as simple as having links to similar products on your products pages with some copy such as “Customers who bought X also purchased Y.” While this alternative might sound decidedly low-tech, it’s better than not cross-selling at all.
We’ve provided a list of shopping carts below that offer cross-selling as a feature of their respective platforms:
- Prostores.com – our recommendation for first time website owners looking to cross sell.
For first time website owners, we highly recommend the Prostores shopping cart platform. It’s a perfect fit for most website owners, very affordable, and one of the best shopping cart options available anywhere.
Their most popular “Professional eCommerce” package allows up to 5,000 products, offers cross-selling and up-selling as a feature and even offers a free one month trial.
We highly recommend Prostores for those who are:
- Just starting out, first-time website owners
- Want to cross sell without too much fuss
- Having a hard time deciding among shopping carts
Alternatively, OSCommerce is a free, open-source shopping cart platform that has a cross-selling feature built in. Keep in mind though, with OSCommerce you’ll need to have some programming experience to use it. We don’t recommend the use of OSCommerce for beginners or site owners just starting out.
Types of Product Relation
Online shoppers, like offline shoppers, will buy “impulse” items at the point of purchase when presented. Showcasing related products help remind people of other things they were not actively looking for but still might need or want. How can you relate products effectively to generate additional sales? The most common type of product relation is referred to as natural relation, or ontological relation. It essentially means that products being marketed together naturally go together. For instance, a new camera has a natural relation to batteries or camera bags.
Another type of product relation is known as collective behavior. This means that some products may not have an obvious natural relation but according to research on sales data, the products are linked together based on what consumers actually purchased together.
All things considered, website owners should first take a logical approach to cross selling. Start by looking at your inventory and come up with natural matches for related items that make sense. Depending on the nature of your business, you may find that nearly all of your products easily relate to each other, making natural matches a more difficult prospect for certain retailers. If you’re unsure, just try to start with a logical approach using your own knowledge about your products, how they interact and how clients use them.
Product Recommendation Labels and Copy
There is always a bit of debate among retailers about how to effectively label your recommendations. For starters, you should label your related item recommendations clearly and distinctly, but you should also try to add some contextual relevance to your labels and copy as well. For example, if you were selling eco-friendly fashion accessories, instead of using traditional label recommendations like “Recommended” or “Suggested Items”, you might instead try something like “These Items Look Great with Your Selection.” Try to make your labels and copy unique and relevant to your business and avoid generic, vague or generalized descriptions.
Here are some general guidelines for using recommendation copy effectively:
- Personalize: Use personalized offer copy such as “you” rather than “we” – “You Might Also Like These” instead of “We Recommend”.
- Get Emotional: Use emotionally connected words in your related offer copy such as “need” and “want” – “Need Batteries?” or “Want a Camera Bag Too?”
- Communicate Value: Use offer copy for your product suggestions that will properly communicate the value you are offering such as “Special Discounts,” or “Great Deals”.
- Create Urgency: Use copy that will convey urgency such as “Offer Ends Soon” or “Limited Quantities Available.” Amazon.com effectively creates urgency by listing product availability data “Only 2 left in stock – order soon!”
There are a few “best practices” that you should follow when employing these techniques. Some of the items outlined below might be more useful for retailers with larger product catalogs, but all of our recommendations are very useful no matter what your sales volume or size of your product catalog is.
We’ve outlined our ten most recommended tips for the effective use of cross-selling and up-selling here:
- Stay Relevant: Attempting to cross-sell unrelated items should be considered one of the cardinal sins of cross-selling. For starters, unrelated product suggestions are simply not helpful for your customers and only serve to distract them with additional noise and clutter while they’re in the buying path. Unrelated suggestions can also damage the credibility of more relevant recommendations. Do not undermine the legitimacy of your recommendations with; keep them on target and as relevant as possible.
- Exercise Restraint: Resist the temptation to cross-sell a large number of products all at the same time. Too many product suggestions will only serve to confuse and dilute your customers’ attention. Keep your related item suggestions tight and focused. Exercising restraint and limiting the number of items that you recommend will keep the customer’s attention focused and will help to improve your conversion ratio.
- Build Credibility: One way to cross sell and up-sell successfully is to cite specific recommendations or “top rated” suggestions from customers, professionals, or experts. Displaying review content and recommendations from actual customers, in particular, goes a long way to build credibility and trust for those items.
- Location is Critical: Where and when you display your related items is critical for success. You can employ cross-selling and up-selling anywhere on your site, but two of the most effective locations are the product pages and the view cart page prior to checkout. You should experiment, however, with other locations to see what works most effectively for your customers relative to your business. The home page and product category pages, for example, are effective locations for a “Most Popular Items” list that might be worth testing.
- Low Involvement vs. High Involvement: You need to separate your low involvement related-item recommendations from your high involvement recommendations. Low involvement items are your “no brainer” sales items that are typically low margin, easy sellers that don’t require much information for the customer to understand prior to purchase. You should display your low involvement related-item recommendations on the view cart page closer to the point of purchase. Display your high involvement, higher margin alternative product suggestions on the product pages though. Compared to low involvement products, high involvement products typically require deeper examination by a customer who might want to read some customer reviews or get product specifications. Presenting these alternative product suggestions on the product page helps to avoid apprehension or indecision about these products on the view cart page.
- Detail Your Add-Ons: You also need to make sure that you provide enough detail information on the view cart page for any of your add-on items (price, thumbnail and brief description). If you don’t provide enough information, the customer might abandon the cart altogether to gather more information about the product and never return.
- Grease the Wheels: Regardless of how you segment your related-items, you need to make it easy to navigate back and forth from to the product page to the view cart after the customer adds a suggested item. Customers that find it difficult or cumbersome to toggle back and forth between the product page and view cart are easy to lose.
- Automate Your Recommendations: If you have a large number of products, try to use a shopping cart platform that can automate recommendations for you based on past purchase data. Keep in mind, the shopping cart will need purchase data to actually make those recommendations though. If you’re just launching your site or you have very little purchase data, you will need to manually implement related-item suggestions until you have enough purchase data to be useful for automated recommendations.
- Try Bundling Discounts: Bundling is a common tactic to incent shoppers to buy not just a single item, but a whole set of complimentary items that can go together. Offering a price break on bundled items will certainly make this tactic more effective.
- Customer Service Sells: Providing excellent customer service is one of the best ways to encourage repeat sales. Cross-selling and up-selling will be much easier with repeat customers after providing an initially positive customer experience.
For first time website owners just starting out with these concepts, you’ll need to experiment extensively, mixing and matching different items to find just the right combination of offers. Online retailers really need to use these techniques in some form or fashion. Failure to do so represents a significant lost opportunity and the prospect of leaving a substantial amount of revenue and profit per order on the table.