Cross-selling vs Upselling: What is the Difference
The goal of any business is to sell and make a profit, ideally increasing its size. Expanding your customer base is not enough to increase revenue. There are other marketing tools that can help you attract and retain customers, improve their experience, and establish strong relationships with them, such as cross-selling and upselling. Below you will find analysis of cross-selling vs upselling.
What Is Cross-selling
Cross-selling is the sale of a related, supplementary product in addition to the main one. For example, a coffee shop offers customers pastry to go with their coffee, and a car dealership offers alloy wheels for a new car. Initially, a customer was not going to spend money on these products. But it is very difficult to resist an additional purchase — sweet pastries will cheer you up, and fancy discs will distinguish a car from the street traffic.
For businesses, cross-selling isn't just an opportunity to make more profit from one deal. Using this tool, the company gains other benefits as well:
- Customer loyalty by meeting additional requirements. After such a purchase,a customer will firmly associate both products with a particular brand.
- Plus to the reputation of the business. Once the deal is done, "word-of-mouth marketing" begins to work. The probability that the customer will recommend the brand to friends and acquaintances will significantly increase.
- Improving your marketing investments. Cross-selling also requires some costs, but they are less than the cost to attract a new customer.
What Is Upselling
Upselling is the sale of a more expensive version of a product that a customer initially intended to purchase. For example, a coffee shop offers a customer a latte macchiato or flat white instead of a simple Americano with milk, and a car dealership offers premium equipment for a car. In both cases, a customer had a clear intention to purchase a particular product. But the salesperson offered a higher-end product that will make a customer more satisfied with the purchase.
For businesses,upselling is one of the ways to increase profits quickly and relatively easily. Upselling has the following benefits:
- Effective advertising. In an advertisement a company can indicate a favorable price, which attracts the attention of consumers. In reality, however, the average purchase amount will be much higher. And if a client continues to insist on his own, a seller will still receive income, albeit less.
- High status. By offering a higher-end product, a company helps a customer to stand out from the crowd. In the future, a customer will associate a particular brand with premium status.
- Product policy flexibility. Instead of endlessly expanding a product line, increasing its costs, a company can focus on the more affordable and profitable task of improving one product.
Difference between Cross-selling and Upselling
Both tools have the same goal — to sell more and get more profit from each deal. However, their principles are different — they require different approaches to marketing policy. Let's look at the key differences between Cross-selling and Upselling.
In most cases upselling is more profitable. By offering a consumer an improved version of the same product, a seller spends less on purchasing, advertising, storage, shipping, etc.
Cross-selling will require the purchase of additional products. Advertising costs may be less, but money for purchasing, storage, and shipping of products will have to be spent.
Conclusion: Cross-selling increases revenue, while upselling often increases profits and profitability.
Cross-selling comes first in this regard. If a client already intends to buy a particular product, offering him a supplementary product is much easier. In the worst case, a client will simply refuse and complete the deal he intended to initially.
Compared to this approach, upselling is a real art. A company representative needs to “test the waters" and sense the customer's intention before offering a higher-end product. If a seller is too persistent or fails to know a customer's wish, a customer will simply abandon the deal and go to a competitor.
Conclusion: Although upsales seem to be a more attractive marketing tool, they are less frequently used because of the complexity. This is confirmed by Hubspot research statistics: 66% of companies work with cross-sales and 49% with upsales.
Scope of application
Cross-selling is more typical for retail, restaurant business and other B2C industries. It is more reasonable to use it when the cost of the main product is relatively low. By offering another product at a similar price, a company can significantly increase its income.
Upsales are more common in the B2C sector, in services and in the premium goods trade. A company that specializes in comprehensive SEO is unlikely to find it profitable to start a brand new business project and offer it along with the main product. The same refers to expensive products like cars and real estate — a client will consider buying a top-end configuration car or a renovated apartment more willingly.
6 Tips for Successful Selling
Upselling and cross-selling can be used separately or together. To understand when and how to use these tools, you need to know your target audience and their preferences.
1. Get to know your audience
What kind of product are you going to offer your customer as a supplement or an improved version? In order to answer this question, you have to do the analysis. It will result in different types of segmentation of the customer base — demographic, psychographic, behavioral orby income.
For example, the analysis revealed that the main customers of coffee shops in your city are young people aged 20-30 years with an active lifestyle. This allows you to use marketing strategies as follows:
- Offer an exclusive drink, 10% of the cost of which will be donated to charitable educational programs.
- Sell cookies in the shape of a turtle, half of the profits of which will go to the rescue of ocean fauna.
2. Model a customer journey
This is a simple and very popular tool for marketers. The customer journey is a detailed description of all events that starts from the need of purchase and finishes with the intended use of a product. Describe what stages of decision-making your consumer goes through, what doubts he has, what factors he considers. This will help you choose the best moment for cross-selling & upselling.
For example, you offer a text content generation app based on artificial intelligence. Most customers won't know about all advantages and features of the product until they evaluate the functionality themselves. So take your time — give subscribers 1-2 months to get acquainted, and only then offer a premium version.
Another example — your company delivers pizzas. You develop your advertising campaign based on spontaneous purchases for parties or evenings at the TV. In that case, you don't have to waste your energy on including drinks in combo sets and promotions. Just offer them before order processing — most obviously forgetful customers will not only pay full price, but will also be happy with a caring attitude.
3. Use a simple, clear message
Business beginners often have the desire to surprise potential customers with dozens of promotional messages, pushing product combinations and premium versions offers. This is a totally wrong approach. It annoys consumers and forces them to choose your competitors' offers. To succeed, make one or two simple messages with the clearest rules possible.
Take, for example, a car dealership. Do not offer customers dozens of promotions at the same time, trying to make the most out of each deal. Instead, it's better to choose the best option for each product:
- Offer a set of accessories for a budget-class car and emphasize the usability of such accessories.
- Focus on advertising the top version of a premium car. Demonstrate the technologies which will attract a consumer's attention. Turning to you, a customer will surely want to choose a better equipped and expensive car, even if he initially looked for a more affordable option.
4. Always look at the situation from the customer's point of view
Businessmen tend to constantly increase sales by any legal and ethical means. But is a customer interested? Don't confuse your needs with the requirements of your customer. Offer only supplementary products and improved versions that will be of real use. Absurd quick-hand combinations don't work, on the contrary, they o hurt the company's reputation.
For example, your company provides cleaning services:
- An extended cleaning service with professional, safe cleaning of kitchen appliances would be a good example of upselling. And as an additional service, you can offer dry cleaning of furniture and curtains.
- If you offer cleaning together with disinfection, a client may perceive such an offer as a personal insult. Even if you provide such a service, do not offer it to everyone. A bad example of upselling is cleaning with premium cleaning products. In this way you show that in all other cases you are saving on consumables, not caring about the comfort and safety of your customers.
5. Create combo offers when it's relevant
Walk into any fast food restaurant and see that buying a set of a burger, fries, and a drink is much more profitable than each of these products separately. The offer is so tempting that it attracts most customers. Similar approach can easily be integrated into your business.
To sell more, put together combo offers and manage your marketing policy wisely. For example:
- if you sell laptops,offer affordable prices for a mouse, case, stand and other accessories — so the customer will get a ready all-in-one offer and won't worry about minor things;
- If you offer an online cinema subscription, set the rates so that the most reasonable offer looks like a top subscription containing all the technologies like 4K, HDR, interactive cinema, etc.
6. Choose the best way to contact your customers
To make an offer most effective, you need to take care of its proper presentation and tone of voice.In case of direct sales that involves negotiation, be sure to instruct the personnel in charge. Do not save money on training — send employees to training courses.
In indirect sales, it is important to use the tools that have the maximum conversion rate in your segment — for some people it will be e-mail, for others — push messages in applications.
For example, you provide financial analysis services. During negotiations it is important for you to demonstrate all the benefits of the VIP-package or additional services. You can say it directly, or implicitly — it all depends on your goals and the format of a business meeting.
Different tools are also available for on-line sales. These can be banners, timers, and pop-ups. The latter are especially effective for cross-sales and upsales. They appear precisely at the right moment — when a visitor begins to hesitate or already tries to close the tab.
Cross-selling or Upselling: What is Better
It all depends on the specific situation. In each case, the decision is made individually. In a supermarket with a budget pricing policy, cross-sales work better, and in a premium car dealership upsales methods are more appropriate. In online commerce, it is often possible to combine these marketing tools, and even make them work in different channels — online, in social networks, in e-mail, etc.
Whatever method or combination of methods you choose, using them will require careful preparation. It's important to determine not only your marketing strategy, but also the ways you implement it. One of the best options for increasing online sales is Claspo.io.
This tool allows you to add pop-ups without programming, assembling them according to the "builder" principle. It can be used to collect data for customer segmentation and choose the best ways to apply them, generating offers for cross-sales, upsales and their combinations.
Claspo is easily integrated into absolutely any CMS. And tariff plans are suitable for any business — from a small coffee shop to an online store of international scale.