Upselling is a sales technique aimed at encouraging customers to purchase a more expensive, upgraded or higher-end version of the product than what they originally intended to purchase. It provides value to the customer because it offers them to pay a little more but end up with a better product. It's a mutually beneficial deal, as the seller can increase the average order value (AOV), while the customer walks away with a better product.
For instance, you are going to Starbucks and thinking to have a "Small" Caffé Latte for Rs.200. But then you see or the sales executive offers you the "Large" Caffé Latte for Rs.250, which is just Rs.50 more but the cup seems significantly larger. This makes you think that the larger one has more perceived value. So, you are going to get a large one instead of a small Caffé Latte, which you initially intended to buy.
When someone is looking for a product, you offer them similar but better and enhanced features that fulfil the same needs and more. One of the best ways to do that is to use product comparison tables. It’s prevalent in selling software-as-a-service (SaaS) products.
Cross-selling is a sales technique which recommends any other complementary product or service to be purchased in combination with the primary product or service.
It is also called “Attachment Selling”, as you are attaching a secondary product to a parent or primary product. Cross-selling increases Average billing size and Average ticket size. In addition to generating more revenue, cross-selling also strengthens customer relationships.
For example, consider going to a food chain outlet like a KFC or a McDonald’s to have a burger. The employee or counter sales executive asks if you want fries and/or a drink with your burger. This is a cross-sell. The fries or drink is a complimentary “product” to the burger.
In e-commerce, cross-selling is used all the time, as customers are browsing, when they’ve added products to carts when they’re in checkout, and even post-purchase. Let us say you have added a laptop to the shopping basket. One could see related product recommendations on the checkout page like a mouse, a printer, keyboard, Pendrive or hard disk, prompting to buy additional items by showing as “frequently bought together” that increase the value of the transaction.
Both cross-selling and upselling strategies are built on the premise that sales are driven by recommendations.
It's easier to upsell or cross-sell to existing customers than to sell to a new prospect. They are methods of increasing sales to existing customers but use slightly different approaches. They offer distinct benefits and can be effective in increasing the overall profitability of a sale. They provide maximum value to the customers and increase revenue without recurring costs in different marketing channels.
Upselling grows the revenue by promising a higher-end product, while cross-selling does the same by recommending more products for the customer to buy. Each of these strategies works well in B2B and B2C markets.
Down-selling is a strategy of offering lower-priced alternatives for products and services that customers want but can't afford. It is the opposite of up-selling and aims at retaining customers and increasing the conversion rate. This strategy is effective for customers who prioritize affordability over value. Down-selling can also be appropriate when dealing with budget-conscious customers, while upselling works best when prospects are willing to spend more.
For example, you are about to buy a car and the sales executive shows you one which you cannot afford. The executive will give you other options which are having similar features and are within your budget. This is called down-selling.
Usually, businesses combine some form of cross-selling and up-selling along with down-selling techniques to increase revenue/profit or to increase average transaction value by acquiring more customers.
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