Last Updated on April 12, 2022 by LAUNCHTIP
What is upselling and cross-selling?
Upselling and cross-selling are normally used in the later stages of conversion, once a consumer has decided they’d like to purchase an item. Both strategies provide products that are similar to the original item being viewed or purchased by the customer.
Upselling is a way to get customers to upgrade the products in which they are interested. The end goal is to get customers to purchase a higher price item than the one they were originally going to choose.
For example, a customer could be looking to purchase a 50 inch TV but you upsell a 60 inch TV to them instead. The product being promoted is typically more expensive and can help to increase the average order value.
Cross-selling invites customers to purchase complementary products to the product they were going to buy. When the cross-sell items are complementary, the customer has more reason to purchase them.
For example, the customer might purchase a phone case. As a merchant, you might cross sell the same customer a screen protector; both products complement each other.
How to upsell and cross-sell
Upselling and cross-selling are essential methods to increase your average order value (AOV) and profitability. Each has its own way of contributing the AOV; upselling typically means the consumer will upgrade to a higher margin item or service whereas cross-selling adds value by adding additional items.
As a merchant, you’ll be able to understand which method suits your business model better.
For example, cross selling works if you’re selling a product for $30 with a 50% gross margin, $3 flat shipping cost and $2 acquisition cost, the net profit will be $10. If you can then cross-sell the customer an item worth $8 with a similar gross margin, you could combine both products together which shouldn’t affect your shipping costs and increase your net profit to $14.
By getting your customer to add a small complementary product to their order, you can easily increase your profit.
On the other hand, upselling to get consumers to upgrade to a higher priced item may work better.
For example, if you sell high-end electronics, you might find that shipping costs are negligible compared to the price of the item. If a customer upgrades to a more expensive item, it can impact the profitability more instead of adding a smaller item.
Examples of upselling and cross-selling
DIPSODA is a phone case and women’s fashion accessories retailer. When a customer adds a phone case to their cart, the website immediately displays a cross-sell by offering a screen protector. The customer is able to select the correct screen protector for their device.
Apple uses upselling to show various hardware and software coverage plans when purchasing an Apple product. The plans are very easy to understand and indicate which is the best for the customer.
Upselling and cross-selling are both great strategies for boosting profit and increasing your average order value. They can be used separately or together, depending on your business model and industry.
To help get you started, we’ve already created a list of 14 best Shopify upsell apps that will help you boost your sales and achieve everything above. Upselling and cross-selling has never been so important to use in 2022.