Your Customers & Bank Account Will Thank You
Photo by MART PRODUCTION
Retailers, what if I told you that you can regularly increase a transaction's average order value (AOV) by up to 25%, with the potential of making a lifetime customer and having them leave your business with a smile?
As people in the retail and e-commerce industries, we are problem solvers. Customers come to us to fill a need, be it a physical or psychological need. Sometimes we get so wrapped up in our products, that we forget service, most notably customer service, which also ticks the problem-solving box.
So why do retailers make it difficult to market and sell add-on items to a customer's purchase that would complement the purchased item and may be of great help to the consumer?
Explain This to Me
There have been two retail sales techniques in existence since the dawn of time still being used to varying degrees today to increase a transaction's AOV: cross-selling and upselling.
“Cross-selling and upselling are based on the idea that, when you have a compelling product, 10%–20% of your customers are willing to spend a lot more than the average customer. Your goal is to understand what they want, so you can offer those products and upgrades. From there, you can use tools to automate upsell and cross-sell suggestions, or you can offer those recommendations yourself through another method, like email, a phone call, or live chat.” - Alexa Collins - Shopify
Definitions:
Cross-selling is when you market an additional product that is complementary and is priced the same or less than a customer's current or recent purchase.
Upselling is when you offer an add-on that makes sense with the intended purchase that costs more. A famous upselling example is McDonald's super-size offerings at checkout. Would you like to make that extra-large fries with your order? This offer makes a lot of sense as extra-large fries are only marginally more expensive than the intended purchase.
The main point is that retailers need to offer a relevant item to what their customers originally came looking for. Random offerings are not going to be as successful as it is obvious that you're just trying to see what sticks. Complementary or personalized add-on product suggestions are more thoughtful and increase your chance of monetary and customer success.
For example, The Perfume Shop adds gift wraps and bags to increase their AOV. By staying relevant, they save the user time when looking for a gift bag. Although simple, this can be quite effective, especially during the holiday season.
Let's Do the Math
If you have an average order value of $11 and you make ten sales in a day, your total sales for that day is $11 x 10 = $110. Over an average month of 30 days, this would equate to $3,300.
With the power of cross-selling and/or upselling, you can increase this amount with the same number of customers.
You have now added strategic cross-sell and upsell promotions to your products. Your same customer numbers are spending more. As a result, your AOV has gone up to $14.
With your AOV at $14 for the same ten sales a day, that’s $14 x 10 = $140. Over the same period of 30 days, this would amount to $4,200. That's an increase of over 25% which is $900. Over a whole year, that's an extra $10,000.
Convinced, yet?
Photo by Sam Lion
Cross-Selling vs. Upselling
Okay, now you may be asking yourself, what's a better sales technique for my retail business, cross-selling or upselling?
Studies show that cross-selling is 20 times more effective than upselling.
According to PredictiveIntent’s case study, e-commerce sites which upsell perform 20 times better than cross-selling offers.
Puzzled?
As a retail copywriting specialist who uses 26 years of retail experience to assist in implementing retail marketing strategies for my clients, the decision to up- or cross-sell depends on the needs of your audience. Remember, we are problem solvers first and foremost.
“Try segmenting your customers based on the amount they spend and target customers who spend less with cross-selling and those who spend more with loyalty programs.
In the beginning, do not implement cross-selling and upselling at once because it will be more difficult to analyze what method is raising your AOV.” - Deirdre O’Donoghue, Senior Content Marketing Specialist at G26
With the McDonald's example, don't let your overall pricing strategy prevent you from exploring options that make sense for your audience.
Test to see if cross-selling or upselling works best for your customers. Look at the occasions that performed best for each sales tactic and then continue along that path.
Consider:
Self-explanatory products perform best during cross-selling or upselling opportunities at checkout.
When choosing upsell and cross-sell products to display, avoid suggesting products that increase the overall order by more than 25%. For example, if the original product the buyer is looking at is $100, you want to avoid showing customers cross-sells and upsells that cost more than $25.7
“We’ve tested upsells/cross-sells at various price ranges and products between $10 and $30 perform best.” - Splitbase
You can use store shelves, retail touchpoints, trained retail associates, checkouts, product pages, checkout pages, live chat, and emails to reach customers with cross-selling and upselling suggestions.
Photo from Burberry
Above, the luxury fashion brand Burberry is using both cross-selling and upselling techniques on a product page for one of its signature handbags.
You can speak with a personal shopper live on Burberry and they will undoubtedly try to offer cross-sells or upsells tailored to your needs. This is very smart and a new way forward for retail as people are looking for more human interactions on and offline.
In the second screenshot, you can see that Burberry is directly letting the buyer know what would pair well with this handbag (cross-sell).
The third screenshot at the bottom of the product pages offers upselling suggestions.
Cross-Selling Opportunities
Great cross-selling examples:
When a customer is looking for printer paper, offer them a deal on print ink on shelves, product pages, or checkout.
At grocery stores, display wine pairings with different meats and cheeses and again on your online product pages.
When someone has purchased knitting needles from you, send them an email for a discount on yarn.
Make it clear that if a buyer spends over a certain threshold, they will get free shipping. ‘If you just send $6.50 more, you will get free shipping on this order.’ Then offer a relevant cross or upsell.
If someone puts a tent in their checkout cart on your website, offer to sell them a sleeping bag with the tent at a slightly lower bundled rate.
Argos in the UK does this directly on its product pages:
Courtesy of Argos
Upselling Opportunities
“When a customer adds a product to their cart, we’ll offer them the next model up for 10% off. This results in a decent upsell for 10-20% of purchases.” - Will Hatton of Hotel Jules
Upselling is more effective on the product page before the customer has committed to buying a particular item. Timing is everything as you need to reach customers when they are ready to spend and are excited about their purchase. A customer is more likely to impulse buy at the last minute.
Upsells usually take the form of premium versions of a product. For example, when purchasing a computer from Apple, for just a bit more money you can get extra RAM and data storage space, cause you never know when you'll need more space for all those photos you plan to take, right?
Like with cross-selling, you can offer upsells while a customer is shopping, during checkout, in an after-sale thank you email, or in a follow-up email.
Strategy is Everything
Cross-selling and upselling are two strong sales strategies that can do wonders for additional revenue. The important thing is to implement them correctly. Follow your brand guidelines and tone of voice to ensure that your buyers are getting the best user experience possible than just receiving spam-esque content, like random pop-ups that can easily steer them away.
As retailers, your main focus should always be to add value to your customers’ buying experience. Remember that you are offering items that your customer already want and that make sense with their purchase. Maybe the customer has not seen or known about a certain product or service you offer. You’re just being clear about the added value you offer your customers. Great customer service is always good for business.
Sources
‘Alexa Collins, ‘How to Market a Product: 10 Highly-Effective Ways,’ Shopify, 18 May 2022. https://www.shopify.com/blog/how-to-market-a-product#aov
Fabian Alvares, ‘Increase Ecommerce Cashflow with 7 Tactics to Boost Average Order Value and Revenue, Relevant Upsells,’ Neil Patel, accessed 22 May 2022. https://neilpatel.com/blog/boost-average-order-value/
‘Shopify Upsell Case Study: 27% increase in Average Order Value,’ Launchtip, 7 January 2022. https://www.launchtip.com/shopify-upsell-case-study-27-increase-in-average-order-value/
Shanaz Khan, ‘3 Most Important eCommerce Metrics? AOV, CR, RPV,’ VWO, 28 June 2021. https://vwo.com/blog/important-ecommerce-metrics/
Fabian Alvares, ‘Increase Ecommerce Cashflow with 7 Tactics to Boost Average Order Value and Revenue,’ Neil Patel, retrieved 22 May 2022. https://neilpatel.com/blog/boost-average-order-value/
Kiera Abbamonte, ‘12 Effective Ways for Increasing Your Average Order Value,’ Databox, 30 August 2021. https://databox.com/increase-average-order-value
Sara Yin, ‘How to Upsell and Cross-Sell on Your Online Store, Do Not Go Over 25%,’ Shopify, 1 November 2020. https://www.shopify.co.uk/blog/upselling-and-cross-selling
‘5 Strategies for Shopify Stores to Increase Average Order Value (+15 Examples from DTC Brands),’ Splitbase, retrieved 22 May 2022. https://splitbase.com/blog/increase-aov-shopify
Abbamonte, ‘12 Effective Ways’