Why Focus on Upselling and Cross-Selling?
How many times have you walked into a McDonald’s or KFC and been asked if you would like to have a side of fries or a can of coke with your burger? Should be 9 times out of 10.
Companies, for obvious reasons, are always looking to sell more to their customers. Sometimes these tactics are subtle and sometimes they’re not. They also want to give equal attention to their existing customers and give them more ways to engage with the brand.
Upselling and cross-selling are two widely used strategies to drive more sales from existing consumers and extract more value from them. Although confused as being the same, they are different from each other.
What are Upselling and Cross-selling?
Upselling refers to the situation in which the customer is encouraged to buy a more expensive version of what he originally set out to buy. For example, if a customer came in to buy a 13-inch laptop and you convinced him in favour of a higher-priced 15-inch model, it would be an upsell.
Cross-selling, on the other hand, refers to any additional or complementary items that customer is encouraged to buy with his original purchase. These are generally from a different category of items. The McDonald’s example we talked of earlier is clearly cross-selling. Similarly, selling a keyboard protector or external hard disk drive with a laptop is cross-selling.
While both of them bring added value to the company, it is crucial to know when upselling is the right tactic and when cross-selling is. You need to understand the customer’s expectations and needs and offer the right products at the right time.
Why Focus on Upselling and Cross-selling?
Companies can gain a lot from upselling and cross-selling if implemented properly. Here’s why these two strategies deserve to be in the spotlight.
Boosts Revenue
The most obvious benefit that can be derived from upselling and cross-selling is additional income. Existing customers are already aware of your offerings and value proposition. It is easier for employees to push them to buy more rather than convince new ones who are yet to engage with the brand.
Leverage the trust that consumers have in you and offer them more of what they will enjoy. The customers will keep coming back and your topline will benefit from it.
Improves Unit Economics
The two key unit metrics that most companies track are the Customer Acquisition Cost (CAC) and the Lifetime Value (LTV). By way of cross-selling and upselling, you have a great opportunity to improve your LTV in particular. The same customer is likely to give you more business and more revenue when you try and sell extra to him each time.
Additionally, you can also ensure that customers engage with the brand time and again. What this means is that not only do you extract more value but also do so for a longer period of time. Nothing better!
Helps in Customer Retention
Companies are always looking to expand their customer base and acquire new ones. During this time, it is actually quite easy to overlook the expectations of existing consumers and not give them what they seek. Upselling and cross-selling are the easiest strategies to implement that show customers that they are still valuable and the brand understands their needs.
By offering relevant suggestions and selling products or services that will suit the customers, you will be able to retain customers fairly easily. In fact, it has been proven through studies that a marginal increase in customer retention rates can significantly boost profitability.
Boosts Customer Loyalty
Companies exist to solve a pertinent pain point and make the lives of customers easier. Upselling and cross-selling are not confined to being just money-making tactics but add to the value that a company offers. It shows that you are willing to offer more to customers, cater to individual needs and in turn, allow them to have better experiences.
Customer loyalty is key because word of mouth marketing can lay the foundation for attracting new users. When loyal customers advocate for you, there is enough proof and trust established for those who are yet to engage with you.
