Cross-selling and upselling are two popular marketing strategies designed to increase profits during the sales process.
These techniques are both effective strategies for increasing the lifetime value of a customer, and both are used by online and offline businesses. However, there are five key differences between cross-selling and upselling that you need to understand so you can choose the best tactic for your sales funnel.
Learn about the stages of the customer journey in our beginner’s guide to digital sales funnels
An upsell is an offer made to prospective customers, usually at the time of checkout or purchase. Upselling increases the average order value (AOV) of a sale by enticing customers to upgrade to a higher-value version of the product or add on extra features to their initial purchase.
An Example of Upselling in a Digital Funnel
An online course creator could create tiered membership levels. A basic or standard membership would provide access to the core content and features of the online course. Then, an upsell offer for an upgraded membership level could include additional benefits, such as exclusive content, live coaching sessions, personalized support, or advanced features.
Pricing pages, pop-ups, and check-out page callouts can be used throughout the funnel to highlight the value and unique advantages of the upgraded membership.
A membership upsell could also occur after the initial signup is made by using an automated email marketing series to sell the higher-value benefits as a post-purchase add-on. Imposing time-limits on post-purchase offers adds urgency to the opportunity.
What is Cross-Selling?
In cross-selling, complementary products are displayed on the product or service page while the customer is shopping and during checkout. Anyone who has shopped on Amazon (let’s be honest–that’s probably everyone reading this article!), has been offered extra products that other customers “frequently bought together.” The goal of this tactic is to increase the order value by selling more products in a single purchase. For a cross-sell offer to be effective it should be closely related to the item being purchased.
E-Commerce platforms typically have automated functionality built in to show a feed of related products, but service-based companies can also use this powerful marketing technique through the utilization of funnel software.
Cross-selling has lots of great benefits for new customers at the point of sale:
It’s also highly effective as a follow-up tactic with existing customers because it’s easier to sell to someone who has already had a great experience with your brand!
An Example of Cross-selling in a Digital Funnel
Many companies looking for a new website design need a logo design and other creative services as well. Designers can increase the value of a project by offering to bundle together multiple services like web design, logo design, and business cards for a lower price than purchasing them separately. It’s a win-win for the designer and client!
5 Key Differences Between Upselling and Cross-Selling
1. Product Type Offered
The most basic difference between cross-selling and upselling is the type of offer. In an upsell, the goal is to sell a higher-priced or higher-end version of the product, while cross-selling offers encourage customers to purchase additional products directly related to the new products they’re buying.
2. Timing of the Offer
Cross-selling and upselling can occur at any time along the customer journey; however, most businesses use them strategically during the bottom of funnel sales process to increase the AOV.
An upsell offer for a premium version of a product is most effective on the checkout page, or immediately after the initial purchase is completed. Once someone makes a purchase, they’ll be open to spending even more money.
Cross-selling opportunities are typically placed on the product page or during the checkout process in the form of related products and/or featured bundles. Unlike upselling, cross-selling can also be used to encourage repeat customers in the days and weeks following a purchase. Sales funnel software helps to segment existing customers into lists based on their purchase history so that you can market relevant products to them.
3. Customer Impressions
While an upsell is often a great value and in the customer’s best interests, the sales pitch may not always give that impression. For this type of offer to be done right, the customer needs to see the upsell as an incredible value compared to the original product. If poorly presented, the offer can feel like an overly aggressive marketing strategy that puts the company’s bottom line first. This outcome results in lower conversion rates and a poor customer experience.
Before making a strong upsell push, it’s important to develop a robust understanding of customers’ needs by testing your messaging to learn what resonates with them best.
Cross-selling rarely has this challenge. Cross-selling strategies such as product recommendations are usually seen as helpful. They frequently help improve customer satisfaction and customer retention, which then increases customer lifetime value.
4. Sales Techniques Used
Upsell and cross-sell funnels perform best when the sales approach is tailored for each strategy.
One of the most popular cross-selling techniques is bundling–a sales technique that offers a discount on related products if they’re bought together. For example, an individual product may be priced at $40 with a cross-sell offer to get three for $100. Convenience, speed, or shipping discounts are also effective ways to add value for customers who purchase multiple products or services.
Scarcity is a technique commonly used to create urgency in upsell opportunities. Limited-time offers or openings put pressure on the customer to upgrade their purchase or risk losing the opportunity. For example, a coach’s “inner circle” members might be limited to a certain number of open spots each year, or special bonuses may expire 24-hours after the initial purchase.
5. Metrics Tracked
The primary metric to be tracked when cross-selling is the AOV, or average order value. If your product recommendations and bundling strategies are working, the average sale for each transaction should increase over time. Funnel software’s automation can organize each customer’s purchasing habits and help identify new cross-selling opportunities.
A proper upsell offer should be designed to increase a company’s profit margins. For most businesses, the upsell offer is not only a more expensive product, but also it’s a product with higher profit margins.
Want to explore more types of funnels? Check out our guide,
Which Type of Funnel Should I Use?
Whether you choose an upsell or cross-sell funnel — or a combination of both — your marketing strategy will depend on your business structure and goals:
An Example of Combining Upselling and Cross-selling
A photographer offering a newborn photoshoot could upsell a multi-session package covering the baby’s milestones throughout the first year of life, and cross-sell a “First Year” photo album for the family to receive after the first birthday.
Automate Your Upsell and Cross-Sell Funnels Online With Kartra
Whether you’re a small business, online course creator, coach, or B2B service provider, sales funnel software makes it fast and easy to build automated, effective digital funnels.
Kartra offers an all-in-one marketing platform with access to all the features you need for planning, creating, optimizing, and tracking your marketing campaign performance. Plus, our funnel simulation feature lets you project your funnel’s potential results to see which types of funnels will work best for your offer!
Click here to learn more about how funnel software can revolutionize your sales strategy.
This content was originally published here.