COO & Co-Founder, DemandFarm
Cross-selling and Upselling
Recall the last time that you were at McDonald’s (even though it feels like a decade at this point). What did you order? Maybe all you wanted were some fries and coke but the cashier convinced you to convert it into a happy meal. Or maybe you noticed a new addition to the burger suite (at a point when you were hungry enough to devour a buffalo) and decided to try it out instead. If we start inspecting such encounters closely, an interesting pattern emerges. For instance, walking into a shoe store and being subtly pitched to add a pair of socks or shorts to the cart.
What is this? And more importantly, why does it seem to work so well for almost all organizations, no matter their industry?
What is Cross-Selling?
At its worst, Cross-selling is an advanced sales tactic. But at its best, it is a customer-success story that corporate leaders yearn for. As we have seen in the examples above, Cross-selling is the process of satisfying the additional needs of customers that the primary product is unable to fulfill. In other words, it means encouraging customers to buy complementary products with their purchases, increasing the overall cart value.
This places the strategy miles away from cold reach-outs and sales prospecting simply because it taps existing customers instead of new ones.
What is Upselling?
Up-selling is the first conceptual sibling of Cross-selling where the end goal is to increase the cart value not by introducing new items but by increasing the size or quantity of the initial purchase decision. For marketers (or salespeople) this may translate to selling a higher-end subscription to the customer with more features or integrations. In most cases, upselling works much better than Cross-selling since it is easier to improve the commitment of a purchase decision that the customer has already made!
What is the difference between Cross-selling and Upselling?
More often than not, Cross-selling and Up-selling are used interchangeably, marking a conceptual error. The best way forward is to think of Cross-selling as a complementary product and Up-selling as an upgrade. For instance, upgrading an economy airplane ticket to business class would be an Upsell. But shopping from the in-flight product catalog, such as a pair of headphones, would be a Cross-sell (since you have already bought the plane ticket).
Upselling is almost always associated with a higher-margin product. Cross-selling deals with similar priced complementary products with no significant enhancement in the margin. Thus, margin expansion is a function of upselling. Cross-selling helps boost order value and volume. The following examples will make the difference vivid.
Why are Upselling and Cross selling Important?
When Brian Halligan, CEO of HubSpot, made his way onstage to deliver a keynote at Inbound 18, no one expected what was coming next. He officially shattered the traditional concept of Sales Funnels – a cornerstone of marketing strategies since 1898. His argument? Funnels are inherently outcome-centric. They do not care about the customers once the sales process is over. The solution? Delighting customers with the new Flywheel model instead.
As HubSpot explains, by using the momentum of happy customers, companies can drive more referrals and repeat sales. This is a strong indication of the direction in which the digital world is headed. With increasing transparency and customer awareness, businesses today have no choice but to invest their energy into delighting existing customers. Why? Simply because in present hyper-competitive landscapes, acquiring a new customer is 5 to 25 times more expensive than retaining an existing one, as reported by Harvard Business Review.
In other words, upselling and Cross-selling are much better business strategies than Sales and Customer Acquisition. Here’s why you should be paying close attention:
1. Revenue Growth
Both Up-selling and Cross-selling have a direct positive impact on your average order value. This is a rather obvious outcome when customers are motivated to opt for higher-priced alternatives or add-ons. To put the benefit in perspective, here’s what Neil Patel explains happened in 2006 when Amazon added Up-selling capabilities with the phrase – “customers who bought this item also bought”. They clocked a 35% boost in sales! Source
2. Strong Customer Relationships
The fact that customers are willing to buy is itself a testimony to existing strong relationships. Successful cross-selling and up-selling can strengthen this relationship to the point of co-dependence, provided that you can deliver on your promise. But this also comes with a word of caution – never try to pitch products/services that buyers do not need. And even when you do get the pitch right, always be willing to take no for an answer.
3. Increased CLV
For certain businesses, such as in the SaaS space, upselling and Cross-selling can amount to as much as 70-95% of the revenue. This means that in a modest scenario, initial sales can rake in only 5% of the revenue! This brings us to another important revelation – the effect on Customer Lifetime Value (CLV). With most of the revenue being a direct result of the day-to-day experience of customers with the business’s products/services, Up-selling and Cross-selling also have a direct bearing on the overall CLV.
How to Cross-sell and Up-sell in Key Accounts?
Up-selling and Cross-selling is an art form where customer success teams need to target the sweet spot between under-delivering and under-pitching and Account Planning plays a major role in making this possible. Here are some of the best practices that will help you paint the canvas with more conversions:
1. Understand Customer Needs and Goals
Even though it may look tempting, don’t just bombard your customers with product suggestions. The right Upsell/Cross-sell opportunities are hard to come by, leaving no room for squandering. The best way forward is to prospect customers first and answer questions like:
- What were they looking for in the first place?
- What are their short-term and long-term goals?
- Is there any budget or operational constraints?
- And more…
Once you know everything about them, proceed to take the right call – Upsell or Cross-sell?
2. Find White Space Opportunities
One of the best methods to identify Up-selling and Cross-selling opportunities is to use White Space Analysis. It involves identifying new sales opportunities within existing customer accounts. How does it work? By leveraging the best decision-making weapon that the digital age has given us – Data.
White Space Mapping provides deep insights into customer behaviors and buying trends such as the products purchased, additional demands, factors influencing sales, and more. A quantitative approach gives you a tangible framework to identify gaps between products and services that your customers have already bought from you and the ones that you can sell to them.
3. Make Customized Recommendations for a Win-Win Scenario
It is always frustrating to be at the receiving end of a sales pitch with a thousand possibilities. When you swamp your customers with overwhelming information, you are potentially endangering your entire relationship with them. Instead, put an effort to know their definition of a win. Then find a way to help them achieve it, even if it means going out of your way to offer customized product/service packages or matching them to the perfect one (if it already exists). Whatever you do, it will always be a win for you since you will end up boosting the cart value.
4. Find the Right Person to Reach Out
The likelihood of sales drastically drops as the number of decision-makers increases. Harvard Business Review reports an average sign-off of 5.4 people on each purchase. Hence, you need to connect with customers at a deeper level, identify all the decision-makers, and help them reach a consensus. Relationship Mapping or Account Mapping can come to your rescue here. It involves a visual representation of data points and the relationship dynamics that exist within your customer’s organization. It is often used by salespeople to identify key decision-makers and goes a step beyond the typical Org Chart to also include informal hierarchies, mapping the best possible path of Cross-sell or Up-sell.
5. Deliver the Right Message at the Right Time
There is a thin line between helping and pushing. With upselling and Cross-selling, you would not want to be even in the same zip code of the latter. During their journey, if customers feel that they are being duped or that they cannot trust you, they will vanish quicker than you can say “Please Stay”. Once prospecting is complete, be up-front about your commitments, pricing, contracts, and more – anything that helps you build a rapport. Then demonstrate the real value of the offer by sandwiching the pitch between successful case studies and positive testimonials.
Successful Strategies for Cross-selling and Upselling
Multiple strategies can work in your favor in this space. You need to narrow down your choices with constant A/B testing and feedback analysis via an Account Planning Template within your CRM. Here are some Up-selling and Cross-selling strategies that can work as great starting points:
1. Focused Conversions
Creating lists of past buyers, segregating them into various personas, and personalizing your communication strategy with the right offers.
Deploying smart remarketing tactics that automate your Cross-sell and Up-sell efforts (or a part of them) by running dedicated ads with the right messages.
3. Incentivize Customers
Using past customer data and getting personal. Make buyers feel valued with loyal customer discounts or freebies when they upgrade or reach a specific cart value.
4. Retarget Abandoned Carts
Repeat customers with abandoned carts are often the result of mere distractions. Having a communication plan will remind them about what they almost purchased!
5. Offer Trials/Demos
Don’t just tell, show instead. A taste of the solution can often convey much more value to customers and can work much better at scale, especially if you have a tech product or service.
Cross-selling and Upselling Examples
Now that we have covered most of the theory, let’s see it in action through some handy examples.
At the Sales Level
Go daddy is a web domain registrar and hosting provider that has cemented itself as the epitome of Upselling and Cross-selling. Every time you purchase on their website, the provider is quick to identify complementary products and services that can be intuitively bundled together with the purchase. For instance, a domain buyer will receive additional options to add hosting and domain privacy to their carts.
At the Customer-success Level
Dell has been one of the first computing brands to introduce various ‘Help Me Choose’ sections on their website. For laptops, this means giving customized recommendations based on the information that customers have provided. Such offerings help customers to make better-informed decisions and purchase products that are a perfect fit for their needs or budgets. Hence, they are more satisfied in the long run and much more likely to come back.
E-commerce succeeds with Cross-selling and Upselling
“Customers also bought”, “Frequently bought together” or “Related items” with a list of items that you should consider purchasing is something you would have noticed countless times whenever you are about to check out on any e-commerce site. This is cross-selling and it is a profit-boosting tool for the e-commerce business for both B2C and B2B scenarios. This increase in profit, however, is only sustainable if the customers are offered a valuable product or service as the cross-sell option and a positive customer experience is ensured. On the other hand, if you are pushy and the customer is annoyed, you might end up missing out on a potential repeat sale. The strategy here should be to tread lightly with “You might also like” options. If you are sure, a particular product will add value to your customer, go ahead and place it in their suggestions. This might not only increase your profit margins but also develop customer loyalty.
Another thing to be kept in mind while cross-selling is to not overwhelm your customers with too many options. Keep them limited to ensure they complete the purchase and are not distracted by choice overload.
On the other hand, you must have also seen the option of “Similar Products” or “Compare with similar items” displayed side by side when you are trying to make a purchase. One would be your choice and the others choices with slight differences and upgrades. This is up-selling and the best strategy to let your customers know that just spending a little more could amplify the return on that purchase. While up-selling, the rule of thumb is to ensure that the product you are suggesting is under 25% more than the cost of the product your customer has chosen. Other additional features can be added by default while giving the customers the option to deselect. Much like what GoDaddy does with its offerings.
All in all, in both cases, the focus should be on value addition and a worthwhile customer experience and shouldn’t come across as another unsavory sales tactic.
Driving Cross-sell and Upsell Opportunities with Account Management Software
So we have understood how current customers are statistically more likely to buy from you. This makes Cross-selling and Up-selling a natural ingredient to drive growth into your Key Accounts. The role of a Key Account Manager is no less than being a magician. He/she has to bypass customer rejections, cut through the noise, and inject growth in even the most optimistic projections. But while doing so, it is important to remember that growth in such complex scenarios is a function of patience and consistency. But does it also have to be a function of intense leg work? Not necessarily. Enter – Key Account Management Software, such as the one from DemandFarm. Here’s how it delivers a perfect vantage point to leaders:
- Aggregated critical account data from disparate systems.
- Analysis of key ongoing and upcoming trends.
- Recommendations engines with intuitive reports.
- Automated workflows for key account planning strategies within the account planning tool.
- Visualization and mapping tools with Org Charts.
- And more…
Key account growth cannot occur if your customers are unable to see and perceive the value in your proposition. It is your responsibility to meet their needs and showcase how you’ll never drop the ball. And as we have often seen in this digital age, the foundation of successful business strategies that outperform their peers is built on data.
Now the only question is – what are you going to do about it?