Cross-sell and upsell: What’s the difference?

Cross-sell and upsell: What’s the difference?
October 05, 2023
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Cross-selling and upselling represent two of the most common ways to increase sales revenue. In this blog, we'll cover the essentials of cross-selling and upselling and how to use them effectively. First, we'll explain the difference between cross-selling and upselling, with examples of each. Then, we'll offer some best practices for increasing your sales using these powerful tactics. Finally, we'll share how to improve the effectiveness of your cross-sell and upsell campaigns with the right technology.

What is cross-selling?

Cross-selling is a sales strategy that encourages customers to buy additional products or services that complement the item they already purchased or likely will purchase. You've experienced cross-selling if you've ever bought a burger at McDonald's and the cashier asked if you wanted to order some fries, a drink, or a meal with that.

As a business strategy, cross-selling grows sales revenue by increasing the average transaction value you generate per purchase. Accounting services provider SBO Financial estimates that a McDonald's franchise can increase its gross profit margin per sale from 20% to 61% each time a customer buys a Big Mac meal instead of a Big Mac.

However, effective cross-selling depends on matching the cross-sell offer with the customer's potential needs as reflected in their purchasing decision. The McDonald's cross-sell strategy works because customers who buy burgers are likely to be hungry or thirsty enough to want fries or drinks.

Cross-selling examples

Cross-sell strategies are applicable products and services, whether sold through brick-and-mortar stores or digital channels. 

Amazon provides a familiar example of digital cross-selling. The retailer's website uses various cross-selling features to increase sales. For example, if you're shopping for a TV on Amazon, you might see a "Buy it with" offer below the product, inviting you to purchase an additional soundbar and wall mount. Amazon uses similar cross-sell techniques by making purchase recommendations on its homepage, product pages, shopping cart pages, and thank you pages.

Brands that sell digital products such as software have also developed cross-sell techniques that work online. For example, video conferencing provider Zoom increases revenue from its packages by offering optional add-on features such as schedulers, whiteboards, and cloud storage.

Not to mention brick-and-mortar stores use cross-sell techniques extensively. For example, Walmart uses the back-to-school season to cross-sell items such as backpacks, notebooks, and pens to shoppers in the store buying essential items, such as groceries and household goods. Endcaps showcase items on sale, such as snacks for holiday parties, while checkout aisles invite shoppers to make last-minute purchases of candy bars and tabloids. Additionally, stores may bundle items often used together, such as electronic devices and batteries. Even further, stores may train floor staff and cashiers to offer cross-sells to customers shopping for specific items.

What is upselling?

Upselling is a sales strategy that invites customers to buy higher-priced products or services than the item they originally considered. This can be a higher-priced version of the same item or a higher-priced alternative to the initial item. 

For example, a McDonald's cashier might ask if you want a large fries, drink, or meal at a discount instead of a smaller item. Like cross-sells, upsells grow revenue by increasing average transaction value. Successful upsell offers depend on persuading the buyer that the higher-priced item delivers enough additional value to merit the extra cost.

Upselling examples

Technology companies frequently use upsell strategies to promote sales of product upgrades. For example, when Apple released the iPhone 14, it took the opportunity to promote preorder sales of the more expensive Pro and Pro Max models. The upsell campaign resulted in 80% of iPhone 14 preorders generated coming from the Pro and Pro Max models.

Brick-and-mortar stores also use discounts to promote upsells. For example, as the holiday shopping season approaches, stores that sell electronic items drop prices on TV sets to get customers in the store, then encourage upsell purchases of higher-priced sets.

Software as a service providers have developed several effective upsell strategies. One method is the "freemium" sales model, which uses a free version of a product to introduce the customer to the app's benefits before extending them an invitation to buy a premium subscription. An alternative is the free trial, which lets the customer use the app for free for a limited time before offering them the premium version.

5 cross-selling and upselling best practices

Use these five best practices to increase the effectiveness of your cross-sell and upsell campaigns:

  1. Know what your market buys.
  2. Use recommendation engines.
  3. Engage prospects with personalized offers.
  4. Match offers to customer journey map stages.
  5. Offer discounts and incentives.

Now, let's dive into some tips on how to implement these guidelines.

1. Know what your market buys

Cross-sell and upsell offers work when buyers perceive they'll get more value for their additional investment. This makes it critical to craft your offers to appeal to your audience's problems and benefits. That means knowing what types of added value will appeal to buyers of specific products. In other words, what do customers who shop for one product most likely need with it?

The best way to learn this information is by studying your customers. Survey customers who buy specific products to find out what else they need. And track what products customers frequently buy together.

However, don't stop there. You can gain additional insight by using other resources, such as studying your competitors' cross-sell and upsell strategies, reading market research reports, and analyzing what customers say in product reviews.

2. Use recommendation engines

A recommendation engine (also called a recommendation system or personalization engine) is software that suggests purchases to customers based on their customer profile, browsing history, or shopping history. 

For instance, Amazon's recommendation engine generates suggestions for products related to an item or products that might appeal to a customer based on their shopping history. You can use recommendation engines from software providers, or your tech team can build a customized solution.

3. Engage prospects with personalized offers

One purpose of using recommendation engines is to help you better engage customers with more personalized cross-sell and upsell offers. Personalized offers then reflect the preferences and needs of individual customers as revealed by their customer profile, shopping behavior, and purchase history. Matching offers to your customers' personal needs improves the customer experience by making your cross-sell and upsell offers more relevant, increasing the likelihood of a sale.

In addition to recommendation engines, you can make cross-sell and upsell offers more personal by using customer segmentation tools. For example, you can design offers tailored to the interests of customers who have already purchased a specific product. Marketing platforms that support email and messaging segmentation can help you implement this strategy effectively. Twilio Segment's customer data platform provides a centralized database for segmenting data from all your communication channels, including email, chat, voice, and video. See our Ultimate Guide to Customer Segmentation for tips on how to use this powerful strategy effectively.

4. Match offers to customer journey map stages

Your customer journey consists of the steps a client experiences as they progress through their relationship with you. It begins with brand awareness, progresses through their first purchase, and continues as long as they keep buying products from you and recommending your products to others.

You can enhance your customer journey and improve the effectiveness of your cross-sell and upsell offers by making your offers relevant to where clients are in their journey with you. For example, a customer who just purchased a specific product may be in the market for a cross-sell that goes well with that product. Similarly, an upgrade offer may be more appealing to a customer after they've spent a few months using a less expensive version of your product.

Match your cross-sell and upsell offers to your customer journey by creating a detailed customer journey map that identifies the steps in your customers' relationship with you, their experiences at each step, and their potential needs. Then, use your map to chart cross-sell and upsell opportunities. Finally, don't forget to track the success of your cross-sell and upsell campaigns over the course of your customer journey to optimize the timing of your offers. You may find that certain offers sell best when delivered after specific intervals or events, such as a certain number of days after a purchase of a particular item.

5. Offer discounts and incentives

You can increase the appeal of your cross-sell and upsell offers by enhancing them with discounts and incentives. For example, you might offer a discount to customers who purchase certain items bundled together. Or you might offer customers who upgrade now an exclusive bonus.

When offering discounts and incentives, use A/B testing to learn which price points and offers generate the best results. You may find that changing a variable such as the percentage of a discount significantly affects your sales. Just be sure to track which offers sell best to repeat results that work (and make adjustments when needed).

Improve cross-sell and upsell strategies with Twilio Flex

The cross-sell and upsell strategies recommended here work best when paired with suitable technology. For example, to deploy recommendation engines, personalized offers, and customer journey mapping effectively, you need communication tools that empower you to segment your audience. That's where we come in.

Twilio Flex supports effective cross-sell and upsell campaigns by helping you engage prospects with personalized communications throughout the customer journey. Flex augments your existing communication channels through a single user interface that lets you engage customers through the channel of their choice while accessing data from all sources for more personalized interactions.

Whether engaging customers through SMS, Facebook Messenger, WhatsApp, WeChat, voice, video, or other channels, you have access to all the data you need for personalized cross-sell and upsell offers. Flex's customization options allow you to tailor your offers to your customer journey, and built-in analytics give you insights into how to optimize your offers. 

View an interactive demo to see how Flex can help you engage customers with relevant, personalized cross-sell and upsell offers that increase sales and enhance the customer experience.