Role of cross-selling in e-commerce?

Cross-selling has emerged as a pivotal strategy for enhancing customer experience and boosting sales. It is known that McDonald's profits from fries are higher than from burgers and meal kits. Likewise, many e-commerce stores using PIM software get more value from add-ons and accessories than from their core inventory. This is especially effective within branched marketing strategy. In case if you offer free or flat-rate shipping so that the shipping cost does not exceed the price of the additional item.

According to Forbes, Amazon’s cross-selling on Prime accounts for 35% of the company's profits. This editorial delves into the concept of cross-selling, exploring its definition, methods, examples, benefits, potential drawbacks, and its distinction from upselling and ways how PIM works.

Definition

Cross-selling is the practice of offering customers additional, supplementary products based on their current selection. This method is widely used on product pages optimized using PIM solutions and at checkout points on e-commerce platforms. For example, in many stores, smaller items (chocolate, batteries, etc.) are displayed around the checkout area to encourage impulse purchases in addition to the already selected items.

The same principle works in e-commerce but with an additional bonus. Cross-selling recommendations can be directly related to the products the customer has added to their cart. For instance, a customer who has added a bicycle to their cart will be shown additional items such as helmets, clothing, and shoes. This can encourage the user to add other necessary items and convince them to spend a bit more.
Unlike cross-selling, upselling is designed to persuade customers to spend more, not by adding additional items to an existing order, but by purchasing a more expensive version of the product data they are considering. That is, the key goal here is to convince the customer to buy more expensive products. As an example, one can recall Apple, which displays two versions of the MacBook. Thus, customers considering the cheaper version can see the potential advantages of a more expensive purchase.
Cross-Selling on Product Pages. This term refers to the strategy of suggesting related products or accessories on the product experience page that a customer is currently viewing. This approach aims to enhance the customer's shopping experience by providing them with options that might be of interest, based on the item they are looking at.
Cross-Selling at Checkout. This strategy involves presenting customers with options to add additional items that complement their purchase at the point of checkout. It targets the moment when a customer is finalizing their purchase, offering them supplementary products that could enrich or complete their original selection.

Methods of Use Cross-selling Strategy

Recommend an Accessory. This method involves suggesting accessories that are essential for the optimal use of the product catalog. For example, when a customer is looking at a camera, the site might recommend buying a memory card or a camera bag.</li>
Group Related Products. This approach bundles complementary products together, encouraging customers to make additional purchases. An example is offering a smartphone with a case and screen protector as a package deal.
Reduced Price for Comprehensive Products. Offering bundled items at a discounted rate makes the deal more attractive. For instance, buying a laptop might come with an offer for discounted antivirus software or an extended warranty.
Demonstrate Additional Products. This involves showing customers how supplementary products can enhance their primary purchase. A classic example is displaying a dress with matching shoes and a handbag on a fashion retail website.
Overcome Potential Objections. This method addresses customer hesitations by highlighting the benefits of the additional product data. If a customer is hesitant to buy a high-end smartphone due to its fragility, a retailer might highlight the durability and protective features of compatible phone cases.

Key takeaway: Cross-selling is a strategy where customers are offered additional, related products based on their current selection, enhancing their shopping experience. Used on product pages and checkout points, it includes methods like recommending accessories, grouping related quality products, offering discounts on bundles, demonstrating additional product benefits, and addressing customer hesitations. This approach contrasts with upselling, which focuses on persuading customers to buy more expensive versions of their chosen items. It can be used by SEO teams.

Examples of Use Cross-selling Strategy

Amazon generates a significant amount of profit through cross-selling, which is achieved through options like "Customers who bought this item also bought" and "Frequently bought together", placed on each product page. This approach allows the retailer to encourage an existing customer to buy a compatible or necessary product content. This scenario can be easily controlled by the high quality PIM systems.

Cross-selling is especially effective when the additional purchases are small compared to the initial purchase. For example, a car represents a significant investment, so an extra hundred or two dollars for additional or extended features is unlikely to meet much resistance.

Cross-selling doesn't necessarily have to involve an offer aimed at maximizing profit. An effective scenario for using this tool implies not only bringing in additional income but also increasing the satisfaction of existing customers and attracting new ones. Here are a few more examples of cross-selling strategy implementation:

Electronics Store. A salesperson in an electronics store suggests a memory card to a customer purchasing a digital camera with demonstrating digital asset. This not only provides the customer with a necessary accessory for their new camera but also increases the store's sales.
Fast-Food Restaurants. Cashiers at fast-food restaurants often offer fries or a drink as an add-on to the main meal. This strategy leverages the customer's existing purchase decision to increase the order value.
E-commerce Checkout. During the checkout process, e-commerce websites often propose related products or necessary accessories. For instance, a site might suggest a phone case or screen protector to a customer buying a smartphone.
Car Sales. Car salesmen frequently encourage buyers to add accessories like extended warranties, upgraded sound systems, or custom rims during the initial purchase, enhancing the car's functionality and aesthetics while increasing the sale value.
Clothing Retailers. Retailers selling clothing often demonstrate complete outfits, such as showing a shirt, pants, and accessories together. This prompts customers to consider buying the full set for a coordinated look, thereby boosting sales.

Potential Downsides of Cross-selling

Disruption of Customer Relationships. If cross-selling is too aggressive or poorly executed, it can lead to customer dissatisfaction. This happens when customers feel pressured to make additional purchases or when the recommended products are not relevant to their needs. Such negative experiences can harm the long-term relationship between the customer and the brand.
Increased Return Rate. Cross-selling can sometimes result in customers making impulsive purchases of additional items that they don't really need or want. This can lead to buyer's remorse, where customers regret their decision post-purchase. As a result, there may be an increased rate of returns, which not only affects revenue but also incurs additional handling and processing costs for the business.

Benefits

Enhanced Customer Understanding. By offering tailored recommendations, businesses can make customers feel valued and understood. This personalization shows that the sales teams is paying attention to the customer's preferences and needs, which can significantly improve the customer experience.
Boosted Loyalty. Personalized experiences, achieved through well-implemented cross-selling, foster customer loyalty. When customers feel that a business understands their needs and offers relevant products, they are more likely to return and make repeat purchases.
Increased Revenues. Cross-selling can drive higher revenues. By encouraging customers to add more items to their purchases, businesses can increase the total value of each sale, contributing to overall revenue growth.

Larger Order Sizes and Profit. Bundling products often leads to customers making more significant purchases. Bundles that offer a good deal can entice customers to buy more than they initially planned, which can increase both the order size and the profit margins.

Increased Customer Value. Through cross-selling, customers receive more value from their purchases. By getting all the items they need in one place, especially if they complement each other, customers feel they are getting a better deal and a more satisfying shopping experience.

Improved Customer Service Quality. Thoughtful and relevant product suggestions can enhance the overall quality of customer service. When a business effectively identifies and suggests products that meet the customer's needs, it demonstrates a high level of customer care and service.

Key takeaway: Cross-selling strategies, exemplified by Amazon’s "Customers who bought this also bought" feature, enhance profits by encouraging customers to add compatible or necessary products to their purchases. This method is effective even in case of lack of marketing data. It's not solely profit-driven; it also aims to increase customer satisfaction and attract new buyers. However, aggressive cross-selling can disrupt customer relationships and lead to higher return rates.

Cross-selling vs Upselling

Cross-selling and upselling are designed to increase profits, but there is a significant difference between these strategies. Upselling is aimed at increasing the value of a single purchase while cross-selling increases the total number of products purchased. While upsells focus on one product, cross-selling involves selling several at once.

In both scenarios, the customer is initially focused on one item. Upselling should encourage them to purchase a better or higher quality version of what they want. Cross-selling goes further and offers various products that are not what the customer intended to buy but can make the purchase more enjoyable, comprehensive, or balanced.

Complexity

Upselling is the sale of a more expensive product, which is often significantly easier to achieve than cross-selling, which requires considerable sales experience. Moreover, cross-selling requires additional information about the customer, including their desires and needs. Cross-selling is not complicated, but to do it correctly, some research and knowledge are necessary.

Earnings

With upselling, your revenues increase as the customer spends more on a larger or improved product. When you execute cross-selling of products, you increase your revenues because you sell more products from the same company.

For example, an upsell to a customer wanting to buy flip-flops might mean convincing them to buy a premium pair with greater foot support, rather than a basic pair.

Technique

At first, cross-selling may seem complex and confusing, but in reality, it is a simple way to quickly increase your earnings. In fact, the cross-selling strategy has many advantages that many companies already enjoy.

FAQ

How does cross-selling benefit the customer? Cross-selling benefits customers by offering them complementary products that enhance their primary purchase. This provides a more complete solution to their needs and often improves their overall satisfaction with their purchase.
Can cross-selling be automated in e-commerce? Yes, cross-selling can be automated in e-commerce. Algorithms can analyze customer behavior, purchase history, and preferences to suggest relevant complementary products.</li>
How do businesses determine what products to cross-sell? Businesses often use data analysis to determine products for cross-selling. This includes analyzing purchase histories, customer preferences, and market trends to identify products that are frequently bought together or complement each other.
What is the main difference between cross-selling and upselling? The main difference is that cross-selling involves suggesting additional, complementary products, while upselling encourages the purchase of a higher-end version of the chosen product.
When is the best time during the customer journey to introduce upselling and cross-selling offers? The best time is usually at the point of purchase or during the checkout process. However, it can also be effective when customers are viewing products or after a purchase has been made, in follow-up communications.
What is the role of PIM solution in improving the cross-selling strategy in e-commerce? PIM tools play a pivotal role in enhancing cross-selling strategies in e-commerce by providing accurate, consistent, and detailed product information, enabling personalized recommendations, and offering valuable insights for strategic decision-making.
How can businesses measure the effectiveness of their cross-selling and upselling strategies? Effectiveness can be measured by tracking metrics such as increased average order value, conversion rates, customer retention rates, and overall sales growth attributed to these strategies.
Can upselling and cross-selling strategies be used simultaneously, and if so, how? Yes, they can be used simultaneously. For example, an e-commerce site can offer a higher-end model of a product (upsell) along with complementary accessories (cross-sell) at the checkout.
What are some common mistakes to avoid in both cross-selling and upselling? Common mistakes include being too aggressive, not aligning offers with customer needs, lack of personalization, and overwhelming the customer with too many options.
How important is customer feedback in refining cross-selling and upselling tactics? Customer feedback is crucial as it provides insights into customer preferences, satisfaction levels, and potential areas for improvement in both tactics.
Are there specific industries or sectors where cross-selling or upselling is more effective? These strategies are particularly effective in industries like retail, hospitality, automotive, and technology, where there are opportunities to enhance a primary product with additional features or complementary items.

Conclusions

Cross-selling in e-commerce is not just a sales technique; it's a customer-centric approach that enhances the shopping experience, builds loyalty, and drives business growth. By effectively implementing cross-selling strategies using PIM solution and related pimcore products while being mindful of their potential pitfalls, ecommerce teams can significantly enhance their customer engagement and profitability.