According to the 2019 Keap Small Business Marketing Trends Report, gaining and keeping customers remain the top marketing goals for smalll businesses and based on surveys has remained in the top spot each year for the past four years. Nearly one out of every three (31 percent) small business owners said driving sales was their top goal for 2019. One in four respondents (25 percent) said they're prioritizing retaining or re-engaging the customers they already have.
Unfortunately, a full 75 percent of small businesses are missing the opportunities that lie in their existing customer base. They leave a ton of money on the table because they don't have processes in place to sell other products and services to their existing customers.
Enter: cross-selling and upselling.
What is cross-sell and upsell?
Cross-sell vs upsell. What are they, and when do you use which? Even if you've been around the e-commerce block a few times, the two terms can be confusing. So let's start with some definitions.
What is upselling?
Upselling is suggesting your customer purchase additional items or shift to a more premium version of their original choice. Think of the classic McDonald's line, "Would you like to supersize that?"
What is cross-selling?
Cross-selling is upselling's close cousin, where you suggest related products which copmlement the original purchase. For instance, if you've just added a sleeping bag to your online shopping cart, there's a good chance you may also need a padded mat and maybe even a tent. Amazon mastered the art of cross-selling with the "Customers Who Bought This Item Also Bought" section on product pages.
Imagine you offer housecleaning services, and people hire you because they're having trouble keeping up with basic household cleaning tasks. If you don't mention you also wash dishes and fold laundry, they may never get the additional help they need. By sharing information on these related services, you can drive in-depth awareness of your offerings and provide your customers with additional options.
Creating a cross-selling strategy isn't rocket science, but it does take some planning. Take the time to sit down with a pen and paper and visualize how the process could work in your business. Focus on these three key areas: segmentation, relevancy, and timeliness.
Segmenting your customers into demographic groups by characteristics like location, gender or age is one of the easiest ways to gain insight into your customers. Learning about their attitudes and beliefs helps you better understand why they purchase from you, and further segments your customers into psychographic traits. This combination of demographic and psychographic traits helps you know who your customers are, where they are, what they need and what they're looking to solve.
After you've segmented your customer base, you will need to create a cross-selling strategy so that the products and services you suggest are relevant to the purchase and to the customer type. Write down the products or services that customers frequently purchase together, as well as other related products. Cross-selling works even better when you have a high-priced offering and you offer a lower cost accessory or service.
Perhaps you own a landscaping business with a segment that includes career-oriented, time-strapped pet owners who need weekly lawn care. This customer segment would probably be thrilled to sign up for weekly pet waste removal service, which would save them time while maintaining the beauty of their yard.
Cross-selling also works well when you have two low-cost items. Imagine you own a coffee shop and want to cross-sell your latest donut creation. You might have your staff suggest the donuts to customers since donuts go well with coffee.
Generally, offerings that are naturally bundled together work well in a cross-selling strategy. Regardless of the items that you're pairing together, however, your messaging must come across as helpful and authentic.
Offering intelligent suggestions based on your conversation or observation is the key to successful cross-selling. If you're simply trying to unload overstock inventory, your customers will catch you in the act sooner than you expect.
Most businesses attempt to cross-sell at the time of purchase by suggesting relevant items, sharing what other customers have purchased and displaying items that are frequently purchased together. However, this doesn't always work well for all small businesses.
Inappropriate cross-sell timing can frustrate your customers and impact your reputation. Sometimes it's better to wait until the point of customer satisfaction before offering a cross-sell item.
For example, if you're a fitness trainer who works with clients to help them get in shape, you may not be able to cross-sell vitamin supplements until your client feels that the program is working. You first need to understand the client's goals, build a workout plan, assist with execution and then measure results. When your client's body responds to the program, you can then upsell a diet plan to amplify the success.
Word of warning: Don't cross-sell to everyone
Not all customers are profitable, and cross-selling to the wrong customer could end up costing you more over the long run. According to the Harvard Business Review, there are two types of customers that you should remove from your cross-selling funnel: service demanders and revenue reversers.
Service demanders often overuse customer service channels. They tend to call support for every issue that they encounter, will often ignore service announcements and sometimes reach out to other members of your company to get resolution. When service demanders purchase additional products, your costs rise because they'll utilize support at a significantly higher rate than other customers.
Revenue reversers have the appearance of generating revenue, but only for a short time. They are more likely to return items that they've purchased, default on payments or terminate contracts early. Often times, the more they buy, the more they return, which can cost your company time and money.
When you identify a service demander or a revenue reverser, remember to tag them appropriately in your customer relationship management system (CRM). Using the right tags helps you or your sales team remember not to follow the cross-sell process with these customers.
Upselling sometimes takes a bit more finesse and nurturing than cross-selling, and it's best to create your upselling strategy around an authentically personal approach.
Russel Lolacher offers an example of how not to do upsell. Russel is a self-described frequent Canva user an online service to create infographics and other media. He was disappointed by an email he received from the company. The Canva email starts out:
Hey there, It's not every day that we reach out to users personally but I just wanted to send you a note to let you know you're one of Canva's most active users!
The email then goes on to attempt to sell their premium platform. Russel explains, "When you say 'reach out to users personally' and then express it in a form letter that is anything but personal, you're not showing you value me as an individual customer. 'Hey there' to you too."
The good news is most marketing automation software allows you to personalize emails while still working efficiently.
Russel suggests using customer data to actually personalize the email. Create special offers or ask for feedback using this data. Creating a personal relationship creates customer loyalty which in turn leaves customers more amenable to other offers from the company.
Don't make the upsell an afterthought
While increasing revenue may be your top priority, it doesn't need to sound like that to your customers. Communicating your company's other values is another way of improving the relationship with your customers and increasing the possibility of upsells. This is how Karolyn Fox, owner of the apparel brand Military Hippie, turned an email communicating product shipping delays into almost $2 million in sales.
When complications with one of their manufacturers caused Military Hippie to miss a shipping deadline, Fox sent out an honest "shipping delay" email that offered $25 off any item as a form of apology.
While $25 off is no small matter, the email itself was written to communicate the brand's values and spurred other positive results. Karolyn wrote:
A bit of an explanation on the delay, this is our first time as a company custom making larger sizes for our customers, we are aiming to offer 1x/2x in all our products in the next months, the rose sweater is the first one we tackled. In doing this we are striving for perfection to make sure the sweaters fit beautifully. The first round we asked our vendor to make a few inches bigger because we believe this was better for our customers.
While the email included a sales pitch, the overall message included the brand's values. It read like an email to a colleague or a friend, which is one reason why readers interacted with it. The campaign had a 64.1 percent open rate and a 2.47 percent upsell conversion rate.
5 Ways automation can help you supercharge cross-sells and upsells
When done well, cross-sells and upsells delight both the customer and the entrepreneur: You're able to predict their needs without them having to ask while generating more revenue from the purchase.
Here's how automation can help you do it:
1. Offer pricing incentives for leveling up
Drew Sanocki, former CMO of Karmaloop.com, writes a compelling blog on BigCommerce about the power of cross-selling and upselling and its massive potential boosts to the bottom line. He explains savvy ways to use discounts to incentivize bigger purchases.
On the BigCommerce platform, for example, customers can be incentivized all the way from the product to the checkout page, with offers such as "Free Shipping on orders over $100."
You can create a variety of packages to entice people to increase their order value with cross-selling options or opt for a more expensive version of the product. These suggestions, built into various pages along the buying journey, act like your digital sales assistant, bargaining with the customer and luring them into a good deal.
2. Do the thinking for the customer
Put yourself in the buyers' mind when deciding what to recommend. Cross-selling works best when it makes complete sense to the buyer.
Robert Garcia runs the e-commerce site ipatioumbrella.com, and he says he was taking a run-of-the-mill approach to cross-selling until it dawned on him that he was missing a crucial opportunity. He wasn't answering the potential pain points for the customer, fine-tuning recommendations that were intelligent and useful. He realized he needed to bring cross-selling into part of the discovery process itself.
"We were leaving too much money on the table," he explains. "And customers were getting frustrated that they were not getting the benefit of the product availability on our site." He started to think about what the customer would need alongside that specific umbrella. This meant both upselling and bundling together ancillary accessories that buyers wouldn't realize they would need until actually unpacking the umbrella on their patio. These recommendations increased the company's average order value by up to 50 percent. "Your customer is so focused on what they want, that they forget to ask what they need," says Garcia.
3. Throw in freebies
Paul Jarrett is the co-founder and CEO of Bulu Box, an e-commerce business built upon the gold of bundling products together. Bulu Box sells boxes of health supplements, allowing people to try out a variety of bite-sized samples all in one go.
Jarrett says that offering a gift with a product proved to be a powerful tool to increase sales. "Sales of a $24.99 low calorie, sugar-free protein increased 30 percent during a promotion where the customer received their choice of a thermogenic pill or cleanse and detox product as a gift with purchase," he explains. "We have combined this with an upsell don't buy one of this product, buy two boxes and get a free gift. If the margins make sense, it can bring in high revenue and profit."
4. Offer premium service upsells
What can you offer that's more valuable than any product in your shop? Your own time. You, after all, are the expert, and your customers are likely to bite at an opportunity for a 1-on-1 consultation with you.
Consider an example cited by Sinocki: A friend who ran a framing shop was looking for ways to expand revenue, but most customers wouldn't spend more than a few hundred dollars at a time. He helped her develop a segmented upselling strategy to customers who were already buying framing services: A personalized art advisory service, in which she'd hold Skype consultations to review the customers' style and provide customized artwork recommendations, for $1,000 each. Not all customers bought into the service, but many did.
This is the creative part of the business-building process, an ability to dream up new services and provide solutions to the pain points of your customers. Is there a related service you too could dream up?
5. Reach back out
Finally, your upselling and cross-selling shouldn't end the moment the customer leaves your site.
Howie Zisser spends his days helping e-commerce fashion clients with the Chicago-based digital marketing agency Matchnode. His recommendation is to analyze your customer segments' order sizes and frequency, looking back over historical data to understand your most valuable customers and what their average order size is. Then be strategic in touching base with them.
"Say they typically reorder every eight months," says Zisser. "We will begin specifically retargeting this cohort about five months after their last purchase." He says this brings two key benefits: reorder rates are shortened, and you can provide offerings based on their purchasing history.
Zisser also emphasizes the need to have an "abandoned cart" reorder campaign automated into your site for all those souls who get distracted away. "These people are literally telling you what they're interested in, so a well-crafted retargeting campaign featuring that specific product can be very effective," he says.
Cross-selling and upselling serve your customers as much as they serve your small business
By plotting some of these cross-selling strategies and upselling strategies into the buyer journey on your website, you will begin to tap into a bigger pool of potential sales. Focus on delivering natural offers that feed organically into what your customers are likely to be interested in and optimize your timing to catch your prospects when they're most primed to make a purchase.
Then, automate these steps using intelligent online tools that do the work for you, so you'll be able to create and capture more sales opportunities with less effort.