3 Simple Things You Can Start Doing Today to Increase Your Revenue
Your revenue is the lifeblood of your online business. Without revenue, your company won’t be able to hire staff, manufacture products, provide services and deliver goods. Simply put, if your company is not producing any revenue, there is no room for it to grow in the future.
There’s an estimate of 110,000 Ecommerce websites that generate a revenue of more than one million dollars in sales each year. (RJ Metrics). How do you ensure that your company will be one of them?
For your online store to gain substantial profit so it can continue growing, you have two options: aside from the painfully obvious option of decreasing your expenses and operating costs, you can also look into increasing your revenue.
According to a self-report of vendors, they had as much as 300% in revenue upon using product recommendation. On the other hand, independent analysts report a conservative increase of as much as 20% of total website revenue can be attributed to the use of product recommendation. (By Reputation). Whichever way you look at it, though, there’s no denying that implementing product recommendations is a significant sales tactic that can contribute to an increase in your revenue.
There are several tactics you can utilize for you to experience an increased revenue using product recommendations, but for this article, we will focus on upselling, cross-selling and bundling.
Upselling
If you have ever heard of the statement “Would you like to Super-Size your meal? It’s only a difference of $1,” then there’s a big chance that you already have an idea what upselling is all about. In 2006 alone, Amazon has reported that 35% of its revenues can be attributed to their cross-selling and upselling efforts.
What is upselling?
Upselling is a sales technique where you offer your customers the chance to purchase upgrades (better features, better specifications, more volume) or to get the more expensive version of what they’re buying so you can maximize the value of their purchase (higher price). The key point here is that you offer items that can add value or improve the user experience of your client.
How Upselling Works
In a study done by PredictiveIntent, it was discovered that upselling is 20 times more effective than cross-selling online. (eConsultancy Blog). According to the statistics, customers who were shown “People who bought this item also bought…” contributed to 0.2% of the sales. On the other hand, clients who were shown more expensive but similar items contributed to 4% of the total sales!
Strategic salespeople like you should know that customers are more likely to give you their trust – and their money – when these customers have already convinced themselves that now is the best time for them to buy.
Generally speaking, upselling implies selling something that is more profitable or otherwise more preferable for the seller.
For example, your customer can book an “Economy” ticket for $600, but if they add $150, they can upgrade to “Economy Premium” so they can get more comfortable seats and better location.
Examples
Let’s learn from Amazon’s upselling efforts so we can observe one of the factors that can influence their continuous growth.
Let’s say that we’re looking for bluetooth headphones. Here’s one that we found for $35.99:
So far so good. However, if you take a look just below the item, there are four other options that we can choose to buy for a different price:
Note that two of the items are cheaper, one has the same price with the item we’re currently viewing and one is more expensive. This encourages you to click on the items and find out why they were priced accordingly.
You can also observe upselling in the case of booking your airline tickets. For example, after booking an Economy ticket, Delta Airline will present to you the following upsell offer:
In line with Amazon’s upselling efforts, Lazada also joined the upselling bandwagon by showing this on your checkout page.
You are viewing an item worth SGD 199.00:
But under it, you are shown differently priced products which customers ultimately bought:
Naturally, the art of psychology here is that showing different prices will encourage your website visitors to decide which among your products they want to buy, instead of deciding whether to buy your product or not.
How To Get Started with Upselling
- Include your upsell tactic in your customer’s checkout page.
- Minimize the options in your upsell. When presented with too many options, customers have a tendency to completely refuse your offer. Dealing with three choices is optimal: include “good”, “better” and “best” packages.
- Make sure that there’s just a small difference in price between the item they’re viewing and the item you’re selling to lessen the friction on buying.
- Remember that your upsell must be relevant to your visitor. As such, the key features of the original item and the upgraded item should match. Upselling from a $49 iPod shuffle to a $2,499 iMac wouldn’t help you drive your sales.
- If you are offering an upgrade, emphasize the “extra benefits” that the client will get once they avail of your upsell.
Cross-selling
If giving options for upgrades is upselling, cross-selling is giving options for “add-ons”. In the earlier situation, an example of this can be the famous “Do you want fries with that?”
What is Cross-selling
Cross-selling is a sales tactic where sellers present additional products that can complement, enhance or improve the main product they are selling. In a way, you are giving your customers different options to help them accessorize their main item.
How Cross-selling Works
The idea of cross-selling is to make it a no-brainer for your customers to add the items without distracting them from the purchase that they’re making.
For example, a good cross-sell for a bouquet of flowers is a flower vase; an idea cross-sell for a printer is a pack of printing paper; and, a recommended cross-sell for a television is a DVD player to go along with it.
Based on PredictiveIntent’s study that we mentioned earlier, customers who were shown “People who bought this item also bought…” contributed to 0.2% of the sales. But did you know that in the same study, it’s been discovered that cross-selling can drive 3% of the sales when shown on the check-out page? (eConsultancy Blog).
Cross-selling is meant to be viewed as helping your customers get the most value out of your store and saving them time along the process.
Think about it: the customer will always need something aside from the product he’s buying, so you’re actually making it more convenient for him to accomplish his purpose for buying his main item.
Examples
This simply classy page from ProFlowers invites you to purchase a flower vase for the bouquet of flowers that you want to buy. Note also that the default marker is on one of the items for cross-selling. This way, it’s easier for the visitor to choose the default option.
Take it from the guys at Avast – they do not offer protection only to desktops, they can help protect your Android device, too!
How To Get Started with Cross-selling
- In your products description copy, you can subtly advertise different items belonging to different categories by using this line: “For best results, use in conjunction with (product of choice).”
- Cross-sell works better when the items you’re cross-selling are lower than the price of the main item being purchased. When a customer is buying a shirt, cross-sell a tie, not a suit. When they’re buying a phone, suggest a phone case.
- Generally, don’t try to cross-sell when your customer hasn’t even decided to make the purchase yet. For best results, only introduce the suggested items for cross-selling once the customer has clicked on the “Add to bag/cart” option.
The Three P’s of Cross-Selling
Finally, consider the three Ps of cross-selling:
Placement
Once you’ve ensured that your suggested items are related to the main purchase, you can place your suggestions horizontally along the bottom or vertically along the right-hand side. You may also look into flashing your suggestions on a separate page.
After you purchase a printer from Best Buy, surely you would need an ink cartridge, wouldn’t you?
Presentation
You can also present your cross-selling items on your product page after your customer has already added an item on his cart/bag. This way, your customer is still in the “choosing & buying mode” rather than the “paying & checkout mode”.
Persuasion
Stop using generic statements like “Similar items” or “Suggested products”. Instead, persuade your visitors to click and browse around your online store by showing persuasive pictures (similar or related items) together with persuasive call-to-action (free shipping for orders above $x!)
Product Bundling
As a marketing and pricing tactic, product bundling can be summed up as the Happy Meal option or combo meal in fast-food chains. Really, now, how many times have you experienced going to a fast-food chain because you wanted a burger but you ended up with a value meal anyway?
Since you’re bundling together products that naturally fit together, your clients feel like they’re getting a bargain on the items that they want.
What is Product Bundling
Product bundling is a sales tactic where merchants group similar products together and offer them at a discounted price compared to the sum of their separate purchase prices.
For you to increase your order value and to encourage your customers to try out related products that may be beneficial to them, product bundling may be your best bet.
How Product Bundling Works
Product bundling benefits the customer by:
- Allowing them to benefit from a single value-oriented purchase;
- Informing them of the substantial discount they can get when buying your bundle; and,
- Exposing them to products that they may potentially benefit from as it’s related to their main purchase.
As for you, the seller, product bundling can benefit you by:
- Simplifying your pricing strategy;
- Speeding up your execution process; and,
- Selling a greater volume of products overall.
For online store owners, product bundling may cause you to earn less money per product but more money on the total owner value.
On their paper “The Dynamic Effects of Bundling as a Product Strategy”, Kumar and Derdenger found out that even if consumers tend to value the bundle less than the individual products, Nintendo still sold the most products when it offered a bundle option (video game console and a game) coupled with the option to buy each item individually. This mixed bundling option was responsible for approximately 100,000 more hardware sales and for the jump in software video game sales by over a million units.
Not bad, right?
When dealing with product bundling, though, keep in mind that mixed bundling is better than a pure bundling option. When a bundle is your customer’s only option, they may be more likely to abandon their cart.
Case in point: when Nintendo implemented the pure bundling option, they experienced a 20% drop in their revenue compared with the mixed bundling example.
Examples
McDonald’s gives you the option to order different meal bundles according to your preferred meal:
Looking to buy a cellphone? Amazon offers you a product bundle for a discounted price.
Are you in the market for a word processor? Why don’t you just get the whole package for a bargain?
How To Get Started with Product Bundling
- Practice product bundling with accessories or complementary items to the main purchase. For example, don’t just sell a video game console – why don’t you add two games, a wireless controller, a cable, a power supply and a chat headset to seal the deal?
- You can also bundle your main product with similar products, such as in the case of this example where you can purchase a variety of apps at a discounted rate.
Conclusion
As the world of Ecommerce is considered to be a rapidly developing industry that grows at a rate of 30% per year, it only makes sense for you to step up your game and put your effort into tapping product recommendations so you can boost your revenue – starting today.
Not all Ecommerce merchants are taking advantage of upselling, cross-selling and product bundling. Take note: it took 18 years (1994-2012) for Ecommerce sales to reach $1 trillion worldwide. However, it only needed 2 years (2012-2014) to reach $1.5 trillion in sales.
Worldwide Ecommerce has been predicted to reach $2 trillion in sales this 2015. (BigCommerce). Now, more than ever, you are given the chance to execute these simple tactics to help you increase your revenue.
The question is – will you take that chance and contribute to the estimated $2 trillion in sales?
Or will you simply bookmark this article, not do anything about it and wonder why you aren’t making any improvement in your sales?
The answer is up to you.
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