How Ecommerce Shops Cross-Sell and Upsell to Increase Customer Lifetime ValueDeep Dive
To extract more value from these customers, though, store owners are faced with two options:
- Cross-sell them
- Upsell them
These efforts can help you increase your average order values and customer lifetime value when you encourage customers to add additional items to their shopping carts before completing their order, to upgrade their existing order with extra features, or to return after their initial purchase and place a new order with other products in your inventory.
Quick definitions of each are:
- A cross-sell is designed to get customers to buy complementary products. For instance, if you’re buying a camera, then you can buy a case for it, maybe another lens, a memory card, or a book about how to use it.
- An upsell, on the other hand, is designed to get a customer to spend more money on the same thing. For example, if you’re purchasing a PC, you might want to buy extra storage space on the hard drive or a more advanced graphics card. You’re still purchasing the main item in question, just with augmented features.
Thoughtful execution of cross-selling and upselling not only leads to an increase in revenue for your ecommerce store, but it enhances the relationship you have with customers when you suggest items or upgrades they enjoy and receive a lot of value from.
Three criteria to determine the perfect cross-sell or upsell
According to retail expert Francesca Nicasio, three important questions to ask yourself before attempting to cross-sell or upsell customers are:
- Does the product complement the item that the customer is buying?
Upsells and cross-sells only work when they’re relevant to the original purchase. When you’re upselling or cross-selling an item, see to it that it’s a) a better version of what they’re buying or b) a product that goes with their purchase.
- Will this product really benefit them?
Sometimes, an add-on item may complement another product, but it won’t benefit the customer. For example, while a certain type of lens may go with that camera your customer just bought, it wouldn’t be a good cross-sell if they don’t have a need for it. Get to know the customer before selling them more merchandise. Ask how they’re going to use the product, then, if you have items that would benefit them, go ahead and bring them up.
- Are they open to spending more?
If the customer has made it clear that they’re on a budget or they’re only after one product, then respect their wishes and don’t try to sell them anything else. You might send them packing if you insist on upselling or cross-selling.
Nicasio also adds, “If you answered ‘Yes’ to all three questions, then you can proceed to suggest upgrades or additional products.”
Still not convinced you should cross-sell or upsell your customers? Read on to discover why this should be a priority for your ecommerce store.
Why store owners need to prioritize cross-selling and upselling existing customers
The first thing you need to know is: Cross-selling and upselling are huge opportunities because you’re selling to existing customers who already like and trust you.
To prove this point, check out this shocking graphic by help desk provider Groove:
What you can see on the left bar of the graphic is the probability of selling to a new prospect. On the right bar, you can see the probability of selling to an existing customer.
You’re as much as 14x times more likely to sell to an existing customer compared to a new prospect. Plus, it costs less to retain a customer than to acquire a new one.
Store owners should keep in mind that, once you convert a lead to a customer, that’s when the real opportunity starts to manifest. You’ve already invested in the following steps:
- Identifying that prospect
- Marketing to them
- Convincing them to visit your store
- Prompting them to complete a purchase
- Delivering an amazing post-sale experience
Now, what if you could just focus on steps four and five, skipping one, two, and three altogether?
This way, you allocate more resources to extracting more value from customers who are already excited about your business (who also have a higher likelihood of converting), while expending fewer resources on the harder and less fruitful challenge of bringing in new buyers.
How Amazon, Best Buy, Verizon, and other brands employ cross-selling and upselling
The four main types of cross-sells and upsells ecommerce stores use are:
- Premium offerings
- Package deals
- Volume discounts
And they can be implemented in various ways:
- In your shopping cart or during the checkout stages
- In your email receipts
- In your email drip campaigns
- Through direct contact
Now that you know the types of cross-sells and upsells to use in your store, let’s explore a few real-life examples of how big and small e-commerce companies apply them to their businesses.
Alienware computers have an almost cult-like following. Hardcore gamers depend on Alienware consoles from Dell to provide high-quality graphics, ensure gaming uptime, and power their live streams.
And shoppers of the Alienware Area-51 gaming desktop can buy the basic version at $1,699.99 or upgrade to Alienware’s most advanced model, priced at $3,649.99.
Knowing that its customers are particular about their computer’s specifications, Dell offers the coveted Area-51 model at four tiers of pricing, making it possible to upsell its premium desktops to the most devout gamers.
What e-commerce stores can learn from this is that they can upsell customers by offering luxury versions of their products for those who may prefer their purchase with all the available bells and whistles.
In the image above, we see an example of how Amazon cross-sells customers. This screenshot was taken from a Canon camera product page, which also features a three-product camera package deal and an assortment of related products too.
You can see these two cross-selling approaches when you observe:
- The three bundled products next to the yellow “Add all three to Cart” button. Clicking the button allows shoppers to add all three related products to their order.
- Below that, Amazon has also shared recommendations for similar products, which other customers have purchased along with the Canon camera, including a laptop backpack and several memory cards.
This type of cross-selling works best when you sell a product that complements many other items in your inventory, such as related accessories. You can highlight these “extras” with your shoppers.
On the Express.com website, the clothing brand is offering a special deal on many of its products. Here, we can see:
- A sale on men’s dress shirts, where customers can buy one and get the second for $19.90.
- A sale on women’s shorts, where shoppers can purchase one and buy the second for $29.90.
- A sale for women’s tees, where you can buy one and get 50% off your second women’s tee.
This is a brilliant example of targeted cross-selling in action. A consumer who decides to snag a dress shirt from Express may feel incentivized to purchase another one at a discount, increasing the number of products in his shopping cart and his average order value.
Other ecommerce brands can mimic this approach by offering similar “buy one get one” deals or volume discounts, whether it be a dollar or percentage savings on single products ordered in bulk or a recurring subscription order.
Another way you can increase your revenue and customer lifetime value is through product warranties.
Best Buy offers this on most of its higher-priced purchases, as do most electronics companies. Amazon, too, prompts its gadget buyers with an option that reads, “Add a protection plan,” which typically costs tens of dollars.
Similarly, Apple offers a warranty on its products. After shoppers buy something from Apple, the marketing geniuses behind the brand may offer their warranty service, AppleCare, as an add-on after you’ve checked out and completed your purchase or in a follow-up email before your product is delivered.
Shopping cart and checkout prompts
Ideally, the checkout process of any ecommerce company walks you through a number of options to enhance your purchase. These “extras” are a way to upsell customers.
Finally, after the upsell options, there should also be a “Recommended For You” section.
Smart ecommerce marketers know the shopping cart and checkout process capitalizes on the impulsiveness of shoppers and is a prime time to tempt customers with items you offer that they may also need and want.
Pro tip: Don’t forget to include purchase options (and even a discount) in your transactional email.
Direct contact selling
Finally, you have direct contact selling.
When you engage a customer, either deliberately through direct outreach or as the result of an inbound customer service interaction, you have the opportunity to sell them upgrades to their existing purchase or complementary products based on their interests and past orders.
Though this may feel overly aggressive, the important thing to keep in mind is genuinely personalized recommendations—whether they’re a cross-sell or upsell—demonstrate to customers that you care and want to help them.
A case for downselling
In some instances, you may encounter customers who are resistant to cross-sells and upsells. In fact, they may be reluctant to purchase from you at all. To salvage the relationship, consider something counterintuitive: downsell them. Marketing expert Neil Patel advises,
- “If someone doesn’t take your upsell offer and you know they want it based on the survey data, chances are they can’t afford it. One option is to create payment plans. Another option is to downsell them.”
- “Offer them a cheaper alternative that doesn’t include all the bells and whistles that the original version has. By removing features, you can reduce your price and increase your conversion rates.”
- “Just make sure your downsells still contain all the major features that allow the product or service to work. The last thing you want to do is to downsell something that is useless to your customer.”
By conservatively employing downselling, ecommerce stores can increase their conversions among hesitant shoppers, improve overall customer happiness when shoppers get exactly what they need (no more, no less), minimize customer service headaches among buyers who paid for extra features they don’t understand, and prevent returns from clients who may feel price tag remorse.
When ecommerce stores are challenged to grow, two of the smarter ways for them to achieve their goals is by using cross-sells and upsells to increase average order values and customer lifetime value.
Just remember to be empathetic rather than opportunistic when providing cross-sell and upsell offers; your customers won’t have a positive experience if you try too hard to push more products they don’t need, but they’ll appreciate thoughtfully suggested add-ons and related items.
These steps are a simple way to increase customer satisfaction and conversions, making your business truly unforgettable. And why not have an email strategy to match? Start sending unforgettable ecommerce emails today with CM Commerce.