With the immense competition today, businesses need to constantly look for ways to increase revenue and audience loyalty. One way to do this is to utilize cross-selling. This is an offer that seamlessly complements and extends the value of a customer’s primary purchase.
By advising the audience on relevant products, it is possible to significantly increase the size of the average check and increase the overall profitability of the business. As practice shows, the introduction of such a strategy can raise business turnover by an average of 30%.
The tool is widely used both in offline trade and in the online space – on the websites of online stores, in e-mail newsletters and in welcome letters to the customer immediately after registration or order placement.
The main principle of working with this technique is unobtrusiveness and relevance. Properly implemented cross-sale not only increases profits, but also improves customer satisfaction, fully covering all the basic needs of the audience.
In our article, let’s understand what cross-selling is, how to properly work with this tool, what mechanics are most effective and what mistakes should be avoided when working with it.
What is cross-selling?
Cross Sales is a method of raising the average check in a store by selling the customer complementary goods to the products he ordered. For example, if a person buys the latest MacBook in an electronics store, a competent salesperson will offer him a bag for storage and carrying or even an external battery.
This approach finds wide application in various spheres of business. For example, fast food restaurants often offer French fries and a drink to accompany the main course. Banks recommend buying insurance when applying for a loan. Online stores, on the other hand, use automatic recommendations based on the products added to the cart or viewed by the customer.
It should be understood that cross-sale is not the imposition of unnecessary purchases, but a favorable deal in which both parties should win. The proposed add-ons should be really useful and relevant. Only then will they be perceived positively and strengthen customer loyalty.
Successful implementation of this mechanics requires a deep understanding of the target audience, the right choice of related products and effective work of the company’s staff (because you need to offer to buy an additional item unobtrusively and at the right time).
What are the advantages of cross-selling?
Increase in average check and overall margin. By putting this approach into practice, a business can significantly increase revenue per transaction. Suppose a clothing store sells a winter jacket for $150 with a yield of $15. If the seller offers the customer to buy an additional hat for $9 (yield $3), a scarf for $8 (yield $3), and gloves for $15 (yield $5), the total margin will be $26 ($15 + $3 + $3 + $3 + $5). That’s a 73% increase over the original profit margin on the main product.
No additional budget is needed. When you place an order in an online store, the system will automatically suggest add-ons based on the analysis of the completed shopping cart. In an offline outlet, this function is performed by a sales consultant. In this way, the company gets the opportunity to demonstrate a wider range of products without incurring additional advertising costs. Even if a person does not purchase the add-on immediately, he or she will be informed of its existence and may well come back for it later. This allows you to stimulate repeat orders without involving marketing resources.
It is easier for the customer to morally agree to such a purchase. The price of complementary offers is usually much lower than the main order. If a person is already set on a major purchase, it is not a problem for him to pay a little extra to get more benefit from the main purchase. For example, if a joystick for a game console is bought, it needs batteries anyway. What difference does it make where exactly to buy them?
The ability to provide discounts on the main product. Sometimes it can even be sold with zero profitability. So, this approach is often used by online hypermarkets, attracting the audience with low prices for the flagship product, but, at the same time, earning well from add-ons.
Increasing customer loyalty. By using cross-selling, the company demonstrates attention to each individual customer and concern for their comfort. Suppose someone buys a package tour to Madagascar. If a travel agency offers him transfer services, a sightseeing program, a stock of necessary medicines and insect repellent, it will significantly improve the quality of the trip itself. That is, the customer will receive a “turnkey” offer and will be able to fully concentrate on the rest, without wasting time and energy on searching and organizing those services that have already been taken care of by the travel agency. This will clearly stimulate repeat business and build long-term loyalty.
What types of Cross Sales are there?
Necessary. These are add-ons without which it is impossible or difficult to use the main product. For example, a charger if the manufacturer does not include it with the smartphone, batteries for interactive children’s toys, specialized paper for watercolors, and much more. By recommending such things, you increase the value of your purchase in the eyes of the consumer and increase the average check.
Related. These items help to use the main product more safely, efficiently or with greater convenience. For example, the service of engraving Ukrainian letters on the keyboard of a laptop, installing the same software on it. Another example is a tripod for a camera.
Priority products. These are products that need to be sold first for some reason (e.g. due to expiration date, stock outs, newer model release). Such things are better placed next to popular, well-selling products, or by creating sets of them. For example, you can give away an outdated model of a fitness bracelet at a discount when you buy a new smartphone that sells well.
Impulsive. These are inexpensive things that are bought spontaneously, “just for fun”. Usually they are bright, interesting, funny. It is better to place them in the checkout area, where people spend some time in line and may well be tempted by a cute trinket. You’ve probably noticed candy bars, gum, 3-in-1 coffee packets, batteries – these are all examples of Cross Sales being used to stimulate impulse demand.
Seasonal. These are additions to the main product, which are relevant only in a certain period of the year. For example, a hat with built-in Bluetooth headphones will allow you to comfortably listen to music from the purchased gadget in winter, but is absolutely useless in summer.
What techniques are used for cross-sale?
Marketers can use a variety of approaches to effectively implement cross-selling. Among the most popular:
Offering related products. When the customer has already chosen what he will buy and added it to his cart, he is shown an item that complements his purchase.
Selling “bundles” or in sets. Several related items are combined into one set at an attractive price. This is beneficial to both the buyer and the seller. The former gets a ready-made integrated solution and saves money (because, as a rule, the price in a “package” is much more favorable than separately). For businesses, it is a way to increase sales and sell less popular products in a set. For example, the entire series of Harry Potter books from one edition at a 15% discount.
Sending personalized offers. Based on past interactions with a brand through an online platform, a regular customer can be advised on similar products. For example, if a person regularly orders sushi delivery, they can be offered a new roll or a bargain multi-roll set that includes their favorite items.
Identification of current needs. In a conversation, a manager can find out what the client needs at the moment. For example, when selling a phone, ask if he or she needs a protective case or a povebank to charge the gadget.
Application of promotions with a threshold in terms of cost. For example, an online store will offer free shipping on orders from 3000 hryvnias. A customer who has collected products worth 2700 hryvnias will be motivated to add something else to the cart in order to “reach” the required amount and save on shipping. In this case, both sides will be in the plus – the seller will sell more products, and the customer will get a big benefit.
Promotion of trending items. What is currently in high demand can be safely recommended without a direct link to the main purchase. Popularity is a powerful incentive in itself. For example, you can offer a bookstore customer a recent bestseller from a well-known author.
Social proof. For example, you can often see “This product is often bought with” blocks on websites. Demonstration of such popular combinations encourages people to follow the example of other people. This technique is especially effective when selling clothes and shoes, when it is important to understand with what things are combined with this or that item of closet to create an image.
Use of advertising. Remarketing or mailings work well to stimulate cross-sale. For example, after buying a new gadget, a person can be sent a letter recommending related accessories. Or on partner sites he or she may be “haunted” by banners with offers to complete a recent purchase.
For maximum efficiency you can use and a combination of several working techniques. The main thing is that the accompanying product should be cheaper than the main product. It is also important to limit the number of options, so that the buyer does not get confused by the assortment and does not go to competitors.
How to implement cross-selling in an online store?
Study the order history and find the products that are most often bought together with your main products. This can be done using web analytics tools. You can also conduct a survey to better understand your audience’s needs and preferences.
Based on the data collected, create a cross-selling matrix. It should include products that complement or enhance the use of the main products, as well as impulse products. For each pair of products, indicate when they are used together. The size of the matrix depends on the breadth of your assortment.
Consider whether you will offer discounts on additional products and in which categories. Sometimes a small discount can be the deciding factor. But don’t forget about profitability – cross-sale mechanics should ultimately lead to profit growth, not eat up margins.
Determine at which stages of the sales funnel you will offer add-ons. This can be a product card, a shopping cart at checkout, a payment page, or an e-mail newsletter after the transaction has been completed. The more relevant contact points you use, the higher the likelihood of cross-selling.
For each additional product, develop a compelling UTP that will encourage customers to buy. The UTP should be concise, catchy and relevant.
Implement cross-selling blocks on the website. If you use ready-made platforms for online stores (Shopify, OpenCart, Woocommerce), they already have built-in tools for this. But for implementation on a self-written engine you may already need the help of programmers. Think through the design of the blocks with presales, so that it fits seamlessly into the interface.
After launching cross-selling, carefully monitor the results – the number of additional products in orders, the dynamics of the average check, conversion rates. Test different combinations, swap out blocks, experiment with the texts of the UTP. Regular data analysis and A/B testing will help you find the optimal product combinations that have the maximum effect.
As you accumulate data on user behavior, move on to personalized recommendations. Modern machine learning algorithms allow you to generate personalized suggestions based on a customer’s browsing and purchase history. A personalized approach ensures higher relevance of presales and increases conversion rates.
An example of a cross-selling matrix looks like this:
How to raise the effectiveness of cross-selling?
Offer only relevant products. They should be logically connected to the main purchase and bring real benefit to the client. For example, it is appropriate to offer a set of replacement bulbs for a table lamp. But an attempt to sell together with the lamp, say, gardening equipment, will look inappropriate and banal will discourage further interaction with your company.
Limit the number of offers. Do not overload the client with too much choice. It is better to focus on a few of the most relevant and interesting items. We recommend limiting yourself to no more than 3-5 products in one cross-sale block.
Keep an eye on the price of related items. Optimally, if it is no more than 10-15% of the main purchase. Too expensive options will only scare off the target audience, so it is important to find a balance between the value of the offer and its affordability.
Make offers at the moment when the customer is most inclined to buy. The most successful variants are when adding an item to the cart, at the checkout stage, right after order confirmation (in the welcome email or on the “Thank you” page). You can also send “follow-up” offers within 1-3 days after the purchase.
Timeliness is a key factor. It is pointless to offer accessories for a smartphone bought a month ago or a discount on summer clothes in the deep fall. Use the moment when the customer has not yet forgotten about your interaction and is ready to cooperate again.
Do not be intrusive. It’s always important to keep in moderation and not to pressure the client. Refuse aggressive pop-ups on the entire screen, daily email newsletters. Excessive persistence can lead to the loss of even regular customers, so act carefully.
Simplify the purchase process. Implement the ability to add a product to the cart in one click directly from the cross-sell block, don’t make a person go to a separate page every time. The less effort it takes to complete an order, the higher the likelihood of cross-selling success.
Train your staff. Motivate managers to collect feedback from customers and make more presales through a bonus system or paying a percentage of each transaction.
