To cross-sell, or to up-sell, that is the question

By Moira McCormick on December 2, 2015

If you are keen to generate more profit, then perhaps it's time to try up-selling or cross-selling. They are often confused but there are subtle differences between the two.

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What is Cross Selling?

Cross-selling generally occurs when the sales representative has more than one type of product to offer customers that he or she considers might be of interest to them. It is particularly prevalent in the banking and financial services industries; a customer may go into a bank to sign up for a current account and later be sold an investment account or insurance. The salesperson has identified a need and recommended an additional product to the customer.

Different businesses will define cross-selling in different ways. Some elements that will influence the definition might include the size of the business, the industry sector and the financial motivations of that particular business. The overall objective will be to increase the income from clients or to protect the relationship between your business and client. It can even be used as a strategy when you're at risk of losing a deal. If the current product on offer is not hitting the mark, it might be time to present an alternative option.

Cross-selling does involve an element of risk that an existing relationship with your client could be jeopardised in some way. It is therefore essential to ensure that what you are offering your client enhances their perceived value, holds their attention, and keeps them coming back.

It's true that large businesses usually combine cross-selling and up-selling techniques to increase their revenue and efficiency. Vendors that sell more services to a client are less likely to be displaced by a competitor. The more a client buys from one seller, the higher the switching costs will be to change to another supplier.

Selling add-on services is another form of cross-selling. This happens when a supplier shows a customer that it can enhance the value of its service by buying additions from a different part of the supplier's company. When a customer buys an electrical appliance, for example, the salesperson will offer to sell insurance beyond the terms of the warranty. Though common, this kind of cross-selling has (sometimes justifiably) received a bad press.

Another kind of cross selling could be offering your client a solution to a problem. If you are selling air conditioners for example, why not offer an installation service as well. You have identified a need and are selling your customer a whole supply and install package.

Other examples of cross selling include:

  1. A Life Insurance company suggesting its customers sign up for holiday or health insurance.
  2. A mobile phone retailer suggesting a customer choose a particular network.
  3. A laptop retailer offering customers additional accessories.

 

What is Up-Selling?

Up-selling differs somewhat from cross-selling and occurs when the salesperson is looking to sell a higher-end version of the product the customer originally wanted to purchase. It happens a lot with car sales - you're shown the basic model and then progressed through to the luxury model with all the additional features. The salesperson will be building value into the product being offered, extolling the virtues of the better (and more expensive) model. You may well just be offering other options that the client had not initially considered.

In restaurants upselling is commonplace and an accepted form of business. In car sales however, the customer's perception may not be so positive and an attempted upsell might have the opposite to the required effect.

Some more examples of upselling include:

  • Suggesting that a customer purchase a faster CPU, more RAM or a larger hard drive when servicing a customer's computer.

  • Selling luxury finishing on a vehicle, such as leather upholstery.

  • Suggesting that a customer purchase a more rigorous car wash package.

  • Asking the customer to go for a bigger meal at a fast-food restaurant, or adding extra toppings to a pizza.

 

How to engage in up-selling

These days companies train their employees to upsell products and services and offer bonuses or incentives to their most successful salespeople. There is a danger though that unless sales personnel are properly trained they may risk offending loyal customers - so any upselling should be subtly utilised. It would be a shame to break the level of trust between the customer and employee - and that trust may be difficult (if not impossible) to re-establish.

A common technique for successful upselling is to get to know the customer's background and budget, thus allowing the seller to understand their customer better, what they value most - or might come to value with successful upselling. When customers are offered products or services that they actually want and will use, their perception of your company becomes more positive as they feel that you are taking more time to understand their needs and wants, rather than pressing to make some form of sale. Interacting with your customers in this way is a broadly recognized, widely-implemented strategy for managing and nurturing clients and potential sales prospects.

Call centre employees should be continuously coached on ways to gather and record valuable data from customers. Your business can then use this information to establish more customer centric strategies to ensure long term growth. The overall goals are to find, attract, and win new clients, nurture and retain existing customers, entice former clients back into the fold, and reduce the costs of marketing and client services.

 

Have you tried Configure Price Quote (CPQ) software yet?

This software helps companies adopt more data-aware systems and thus support in cross-selling and up-selling oppirtunities. It is in the 'Configure' element that cross-selling/up-selling occurs. It underpins what is presented to the customer on a website at a certain stage in the check-out process, or what is presented to the sales-force when they are trying to close a deal.

When you're selling complex products and services, or just too many to remember, CPQ takes away the strain and automates the recommendations. For further details on What is Configure, Price, Quote Software, this earlier article is definitley worth a read.

Did you know, Innoware provides it's own CPQ system? For a tour of The Configurator, please visit here.

 

Conclusion

Of course, both upselling and cross selling offer customers additional value but up-selling benefits the customer by providing higher quality, whilst cross-selling adds benefit by providing additional quality.

 

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Sources

https://hbr.org/2012/12/the-dark-side-of-cross-selling/ar/1

https://hbr.org/2011/09/selling-is-not-about-relatio/

http://deeperweb.com/business-research/sales/benefits-of-upselling-research-trends-surveys.html

Harding, Ford (2002). Cross-Selling Success. Avon,MA: Adams Media. 

Wittmann, Georg (2006). Cross-Selling Financial Services to Small and Medium Enterprises via E-Banking Portals. Göteborg: Proceedings of 14th European Conference on Information Systems.

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