For any consumer market, the real profits are not in the first sale, but in the ongoing customer relationship that leads to a lifetime basket value. Brand loyalty leads to customer retention, and as you get to know your customers, the opportunity to up-sell, cross-sell or down-sell can benefit your brand with increased revenue at the same time as offering value for money and a great, personalised experience for the customer.
Each of these three sales techniques kick-in after the customer has already agreed to buy your product or service. But what are they, and how do they work?
Upselling is the technique of showing your customer a similar but more expensive or luxury product than the one in view. It can also include offering a complementary add-on, increasing the overall basket value of the sale.
Up-selling might mean offering an extended warranty, a bigger or higher-spec version of the product, an ongoing subscription instead of one-off purchase, or even just a larger cup of coffee. In digital marketing, upselling can involve upgrading a one-off sale to a long-term subscription.
Across the board, as a sales strategy, up-selling drives over 4% of sales compared to just 0.2% of sales driven by cross-selling.
In ecommerce marketing, up-selling has fewer restrictions than in retail. In retail, if a customer is interested in buying a certain product, up-sells must be closely relevant to that product. However, online, products only need to be loosely relevant, and are often non-essential ancillaries.
Be careful to make your up-sells appropriate and transparent, ensuring that the customer understands the implications of buying a more expensive product. It is not uncommon for online up-sells to involve bad practice such as leaving a box checked which means the customer is entering into a recurring payment every month. This kind of deceptive up-selling is likely to put customers off rather than build brand advocates.
Cross-selling is a technique that tempts a buyer to supplement an initial purchase with a product or products that complement it. Ecommerce giant Amazon attributes up to 35% of its revenue to cross-selling: Its pioneering ‘Frequently Bought Together’ and ‘Customers Who Bought This Item Also Bought’ sections promote related products when any other product is viewed.
In cross-selling, products or services that are not necessarily directly related to the first product are brought in front of the customer. Instead of offering an upgrade, an extra product is suggested. A much-used example is the McDonald’s server, “Would you like fries with that?” This technique is employed to increase revenue but it can also be used to build a brand-customer relationship by analysing buying habits and offering products that might be of genuine use or interest to that person. If you think about it, it’s actually quite nice to be shown things that interest you and tempted to treat yourself.
Whenever a customer abandons their cart or clicks away from a purchase, the down-sell can help. The down-selling technique is used to offer a cheaper product to a customer who is undecided about their purchase. In many cases, the lower cost option has a higher chance of being accepted.
The goal here is customer acquisition. The value of the initial sale is somewhat sacrificed for the purpose of getting that customer on board. Once a relationship is established, that customer’s value is likely to increase. In this way you can bring new customers into your backend sales funnel and up-sell to them at a later date, once you have built up trust and interest.
Examples of down-selling:
Offer a mini version or light version of your product
Offer a no-frills version with fewer bonuses or features
Offer a related but less expensive product or service
Offer a digital only version of your physical information products
Offer Platinum, Gold and Silver versions of your product or service
Also relevant to down-selling, the ‘contrast principle’ is based on the idea of showing the customer a higher-priced product first. This technique makes the price of the less expensive option seem like more of a bargain, and can leave the customer feeling they have been offered a better deal than if you begin by up-selling from the lower to the higher-priced item.
A customer-centred strategy
Marketing is very much about perception – of a good deal, a trustworthy company, a quality product or service. Offering relevant, personalised up-sells, down-sells and cross-sells can be a great way to increase sales and to engage the customer with a satisfying purchase experience. Provide your customers with good-value solutions to their problems, but never try to trick them into spending with deceptive marketing techniques. Remember; loyal, happy customers will become an invaluable asset as brand advocates, driving long-term success.
If you would like to speak to Rezcomm about customer-centred marketing using our CRM system, contact us today.
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