Ecommerce sellers are often looking for ways to boost sales. You may think there’s a simple solution to that: just sell more. It’s just not that simple. There are many nuanced tactics sellers can take in order to net more profits.
Cross-selling and upselling are two tactics that help increase revenue. Often incorrectly used interchangeably, they work very differently to achieve the same end-goal.
While one company might find it best to increase their average order value (upselling), another might opt to try and increase the average number of products sold within each order (cross-selling). Determining which tactic to take should be based on your product mix and your fulfillment support. Cross-selling and upselling require very different back-end support and have distinct fulfillment implications.
Below is a breakdown of upselling and cross-selling, the difference between the two, and how sellers can utilize each or both to increase revenue and profits from online sales.
What is Upselling?
The classic upsell is “Would you like to supersize your order?” Upselling incentivizes the customer to purchase items that are higher-end or more expensive. If you’ve ever supersized your order you know that it means you get slightly more of the items you already ordered, for an additional fraction of the original cost. An ecommerce brand may use this to sell a phone with larger storage capacity (64GB instead of 32GB), a bigger pack of razors (three month’s supply instead of one month’s supply), or a slightly larger piece of carry-on luggage (20% extra room!).
Upselling works by increasing your brand’s average order value (AOV) by increasing the frequency that higher-priced goods are purchased.
Unsure what your AOV is? It’s an important growth metric to have. To calculate your AOV, divide the total revenue from your store by the number of orders placed within the same time frame. Here’s an example: if you make $1000 total per day from 25 orders, your average order value is $40. That means your customers cart total is, on average $40. If you were to try to increase that, you might set a goal of $45 or $50 per order (depending on the value of most of your products).
Tips for Sellers Using Upselling to Increase AOV
Before you go telling your customers to spend more money, step back and strategize a bit. A sales technique like upselling is based on human psychology. There’s a sweet spot between suggesting higher value items and going too high that it’s out of the range where customers will take your lead. Here are some tips that work for upsells:
- Recommend as a friend would – experts suggest you offer upsells in the same manner a friend would, not unreasonably high, but high enough to increase your AOV.
- A/B test until you get it right – with ecommerce technology platforms (like Shopify) you can often test two or three different options at once. Collect the data you get from a month trial and see which offer seemed to work best. Continue testing until you feel you have enough data to see what works and what doesn’t.
- Use urgency – promoting upsells as a limited time offer is a proven way to help encourage customers to add the higher-value items promptly.
If your company doesn’t have a large enough product mix to upsell or cross-sell yet, there are still ways to increase AOV (average order value).
1. Add custom messages to the package.
2. Gift wrapping is a great upsell during the holiday season
3. Customize the packaging to add personalization with colored inserts or special stickers
Work with your fulfillment partner to include these fulfillment-related upsells. If you partner with an experienced 3PL they will likely have ways you can add upsells that you might not have thought of before.
What is Cross-selling?
A completely different method of increasing AOV, cross-selling is incentivizing customers to purchase more products, often related or complimentary items.
The classic cross-selling technique is “Would you like fries with that?” By adding complimentary items to their cart, your customers are doing two things: buying a wider variety of products and increasing the overall value of their order.
An extra benefit of cross-selling is it tends to generate repeat purchases. A customer who is interested in adding a complimentary item is more likely to come back and order the same item again or try a different item in the future.
Examples of cross-selling in ecommerce include adding earbuds or a specialty charger when buying a new phone, shaving cream to go with the pack or razors, or a few luggage organizer inserts to go with a suitcase.
Ways to Implement Cross-selling
One of the most efficient ways to cross-sell is to bundle products together. Creating kits of related products will increase the perceived value of buying related items. The incentives can be based on how the product works (night and day skin care products) or with a financial incentive (buying two similar products is $5 cheaper than buying them each individually).
Putting together product bundles can be complex operationally. Working with a fulfillment provider experienced in bundling will make a big difference in ensuring your orders are accurate, on-time, and looking really polished. Modern 3PLs use virtual bundling to increase the efficiency and speed up the kitting process for sellers. Virtual bundling is when a seller can assign products to a bundle via inventory management software and the fulfillment provider can execute that bundle (and new SKU) as its ordered.
“Bundles have saved us a lot in terms of shipping costs. We also see less waste in our packaging. It took less than a week to be up and running. DCL helped us set up the kitting and the bundles. Then we synced that with our ERP system, and everything has been working really, really smoothly.”
A few tactics to successful cross-selling include:
- Drop the price (just slightly) of big-ticket items when customers add items to their order.
- Add a pop-up for easy, one-click add-ons in the cart area of your site.
- Suggest items together in a customer newsletter.
- Send influencers product bundles when you start to offer them online.
- List the names of related products in your marketing and advertising.
If you are looking for a fulfillment provider who can help you implement upselling and cross-selling, reach out to DCL Logistics. Our team can give you a quote and help determine which tactics are best suited for your brand.