Blog 76: Grow revenue stream: Upsell and Cross-sell

Upselling and cross-selling are effective strategies to grow revenue (refer to blog 87: Delving deeper into product revenue metrics), boost bottom line and improve customer satisfaction. These strategies become generally relevant in the fourth stage (Action stage) of the marketing funnel.

Refer to related blogs: blog 42 to learn about the marketing funnel stages; blog 54 on the different customer acquisition channels across the marketing funnel; blog 65 to learn more about the lifecycle marketing strategy; blog 69 on what is a viral loop?

Upselling is the process of nudging customers to buy a more advanced version of a product they are already considering. For example, a café attendant asking a customer if he/she will like to go for a large portion of popcorn instead of the small (see image below).

Cross-selling is the process of suggesting complementary products in addition to the current purchase. For example, the same café attendant asking the customer if he/she would like to order a soda along with the popcorn (see image below)

Two key things to keep in mind:

Firstly, the upsell or cross-sell proposal must be a win-win scenario for both the firm and the customer. Taking the same café example. The large portion of popcorn must offer a lot more popcorn with a marginal increase in price. Thus, the customer receives a greater value, and the café boosts its top and bottom line (if the product is priced right). According to Bitcatcha, upsells shouldn’t be more than a 40% increase in the price of the product.

Secondly, the upsell and cross-sell proposal must feel like a natural progression and not something that we are pushing down the customer’s throat. Hence, we need to follow a process to avoid jumping the gun. There are broadly 4 steps to executing a upsell/cross-sell strategy i) focus on the original purchase ii) find an appropriate upsell/cross-sell opportunity* (a win-win scenario) iii) introduce or trigger the upsell/cross-sell proposal at the appropriate time iv) follow up if necessary.

*The step ii of finding the appropriate upsell/cross-sell opportunity will mostly involve data analytics (i.e., leveraging demographic, customer behavioural data etc.). The outputs or suggestions post analytics must be tested with relevant group of customers. These upsell/cross-sell opportunities could involve partnerships with external products.

SaaS products leveraging upsell/cross-sell (some examples)

Certain products leverage user psychology techniques to upsell. For example, ‘limited time’ offer to create a sense of urgency (see image below).

Leveraging user psychology is also a growth hacking technique (to learn more refer blog 45: Growth marketing and growth hacking two sides of the same coin?).

SaaS products (in sectors such as e-commerce, OTT platforms, etc.) build recommendation systems to cross-sell. These systems analyse several data points to arrive at suggestions for customers. For example, Amazon’s ‘Buy it with’ and Netflix’s ‘We think you’ll love these’. These products also ensure their UX is as intuitive and engaging as possible.

Eventually, the upsell or cross-sell technique we choose will depend on our product/service.

In this endeavour of identifying the appropriate upsell/cross-sell opportunity we get a good understanding of our customers’ needs (through analytics and data science). If our upsell/cross-sell strategy is successful, we will be able to improve our average order value and customer lifetime value. Thus, boosting top and bottom line.

Jump to blog 100 to refer to the overall product management mind map.

All the best! 😊