Cross-selling And Up-selling: Demystifying The Code

By July 27, 2020Blog & Articles
Cross-selling Up-selling

Cross-selling And Up-selling


Recall the last time that you were at an Mc Donald’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 order 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 Up-selling?

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, Up-selling 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 Up-selling?

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 Ups-ell. 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).

Why are Up-sells and Cross-Sells 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 to retain an existing one, as reported by Harvard Business Review. In other words, Up-selling 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 are able to 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, Up-selling 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’ products/services, Up-selling and Cross-selling also have a direct bearing on the overall CLV.

How to Cross-sell and Up-sell?

Up-selling and Cross-selling is an artform where customer success teams need to target the sweet spot between underdelivering and underpitching.

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 Up-sell/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. With a quantitative approach, this 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 possibly 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 increase. 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 typical Org Chart to also include informal hierarchies, mapping the best possible path of Cross-sell or Up-sell.

Source

5. Deliver the Right Message at the Right Time

There is a thin line between helping and pushing. With Up-selling 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 Up-selling and Cross-Selling Strategies 

There are multiple strategies that can work in your favor in this space. You need to narrow down your choices with constant A/B testing and feedback analysis.

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.

2. Automation:

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.

Examples of Cross-sell and Up-sell

Now that we have covered most of the theory, let’s see it in action through some handy examples.

At the Sales Level

Godaddy is a web domain registrar and hosting provider that has cemented itself as the epitome of Up-selling and Cross-selling.

Every time you make a 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.

Driving 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.
  • 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?

Author Milind Katti

Milind is CEO & Co-Founder of DemandFarm. Having practiced and evolved the ‘account farming’ principle for over a decade he established DemandFarm and is passionate about delivering the best B2B key account management tool to serve the needs of key account managers. Milind also serves on the Board of LeadEnrich & is a Strategic Adviser. He was instrumental in developing & conceptualizing the idea behind LeadEnrich when he worked full-time for the first year. Prior to this, Milind co-founded QEDbaton & built the process frameworks for Delivery & Operations. Milind is an Electronics & Communication Engineer with MBA in Marketing. He is also an avid sports fan, voracious reader & above all a humanist.

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