Aug 19, 2019

How Cross-Selling and Upselling Increases ROI

Acquiring new customers is expensive and takes a considerable chunk out of your profit margin. Lowering your ACOS (Advertising Cost of Sale) is essential to get more profit, but so is increasing your ROI (Return on Investment). The Harvard Business Review found that it is anywhere from 5 to 25 times more expensive to acquire a new customer than retaining an existing one. By selling to the customers you’ve already acquired, you are increasing your average order value, and improving your customer lifetime value in the long run. This means an increase in the return you get from your initial investment to advertise to that customer.

Given the opportunity, 60% of your customers who committed to a sale will add a last-minute item to their purchase, if it is something that provides value. That’s a high statistic, and if you’re not presenting them with that offer, you lose out on a lot of revenue. In the private label skin care market upselling and cross-selling is extremely effective, especially since customers might pay more for an individual item if it is from a brand they know and trust.

What is Upselling

Upselling means offering a matching product with higher value than the product your customer is already looking at. If your customer has selected a daily moisturizer, offer an improved and slightly more expensive formulation that contains, for example, hyaluronic acid for added moisture. You already know that your customer is looking to combat dry skin, give them the option to choose an advanced product to solve their problem.   

Upselling is far more effective than cross-selling. In fact, predictive analysis data and intent monitoring show that upselling converts into sales 20 times more often than cross-selling. This tells us that the more closely related your upsell opportunity is to the original purchase, the more likely it is that your customer will buy. It shouldn’t seem like a separate purchase from the customer’s perspective, just an adjustment of their preference for the same product with the same purpose. It is an essential step in the customer’s purchasing journey.

Upselling a New Product

This being said, you can upsell to existing customers long after they’ve left the shopping cart. You might have loyal customers who have been using your skin care cream for months. Maybe you’ve decided to add an ingredient to the formulation of your existing product line. Are you getting ready to launch a new product that also fights the signs of aging by reducing wrinkles? Implement upselling by presenting your new, upgraded and pricier formulation to your existing customer base. For them, it would be an easy step to upgrade to an anti-aging lotion without having to change anything about their skin care regimen or their brand.

How Much is Too Much?

Remember the Rule of 25. There are no strict guidelines as to exactly how much you can upsell, and what the optimal ROI increase should be, but the general rule of thumb seems to be 25. Don’t increase the price of purchase by more than 25% through upselling. Any more than this and the customer might feel pressured and bail on the purchase altogether.

What is Cross-Selling

Cross-selling is offering a product that complements whatever your customer is purchasing. It is essential that the product you are offering is targeted and relevant. Your customer will lose interest if the product doesn’t meet the same or a similar need that they are addressing with their initial purchase. They will also feel as though you are just showing them your catalog, and not taking a genuine interest in them as individual buyers.

Watch the Price

While upselling is about offering a product that is more expensive than the one your customer was looking at, cross-selling is about keeping the price of the add-on item lower than their initial purchase. Think 50% or less. Your cross-sell item should be an add-on to their main purchase, something that enhances it but doesn’t replace it. Once your customer with the dry skin has selected their preferred moisturizer, consider offering a cheaper exfoliating mask to complement the product.

When to Implement Upselling and Cross-Selling

The different stages in the purchasing process require different approaches to upselling and cross-selling. Online behemoths like Amazon have conditioned buyers to expect to see recommended products on their product detail pages. We can lead the buyer to make additional purchases by placing prompts in the correct places.

There are three chances to upsell and cross-sell to customers online. Before they purchase, during the checkout process, and when they’ve completed the purchase.        

Before they purchase – On the product detail page, many sellers choose to offer products that are slightly more expensive and can, therefore, be seen as the “upgraded” version, which would be an upsell offer. Customers can evaluate the different features and select the product that meets their needs. Cross-selling would involve adding recommended products below your main products on the product detail page.

During the checkout process – While customers are going through the steps to complete their purchase, you have an excellent opportunity to add items to their list. Since customers usually pay careful attention to the checkout process, ensuring that their billing and shipping information is correct, you will have their attention to present any add-ons that are relevant to their purchase.

After they completed the purchase – Email receipts have a high open-rate, approximately 71%, since customers want to review their purchases. Use this opportunity to cross-sell any items that would complement their purchases, or that matches their buyer behavior. Include coupons for these items to incentivize them further, and watch your ROI grow.

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