Want Fries and Shoes With That?
By Shari Altman
Improve Your AOV With Well-crafted Upsells and Cross-sells.
When you visit McDonald's or Hardee's and place your order for a burger or chicken sandwich and a beverage, you will almost certainly be asked, "Would you like fries with that?" At its core, upsells are just like those french fries—an added item that "goes with" your initial purchase. In fact, a telemarketer I worked with years ago even used the term "french frying" as a pseudonym for upselling. Cross-selling really is a variation on upselling, where an item is offered that doesn't necessarily "go with" your customer's initial purchase, but that you know she is likely to be interested in based on what she just purchased or has purchased in the past.
First, a clarification: Much of the time, the difference between upselling or cross-selling is treated as a matter of semantics. But upsell and cross-sell offers are made for different reasons. If the customer calls to order a navy dress, upselling gets her to upgrade to the outfit including the matching navy jacket; cross-selling offers the dress buyer a new set of decorated, black high-heel pumps, not because they "go with" the navy dress, but because historical buying patterns show that dress buyers are also high-heel pump buyers, or because this customer has purchased high-heel pumps from you in the past.
Upselling and cross-selling often are ignored as tactics, or given no more than last-minute consideration. The most important advice I offer any client about upselling and cross-selling is simple:
1. Do it!
2. Manage it!
Appropriate vs. Custom
Upselling and cross-selling can add 5 percent to 25 percent to your average order value (AOV) for a minimal incremental cost. If you've ever run a promotion where increasing the average order by 5 percent to 25 percent could take your promotion from a loss or breakeven to profitability (and who hasn't?), it's not hard to understand the value of implementing upsells and/or cross-sells on your inbound and outbound calls.
Management of your upsell and cross-sell promotions is what makes the difference between 5 percent and 25 percent added to your AOV. This means managing what is being sold to whom to increase the value of upsells and cross-sells accepted (increasing prices and number of upsells), as well as increasing the frequency with which your customers accept your upsell and cross-sell offers.
Mark Hardy, founder of Advantage Line Telemarketing and now a telemarketing consultant, concurs. His rules for what percent of buyers will convert to an upsell or cross-sell offer are:
1) Try nothing, get nothing,
2) Try something that is appropriate for your audience, but not customized or targeted to individual customers or segments, and get 20 percent to 25 percent acceptance, and
3) Customize and target your upsell offers, and get 35 percent to 50 percent acceptance.
Examples of the difference between merely appropriate offers for your audience and customized and targeted specials:
- A tea and food cataloger that offers discounted cookies as an upsell has increased its AOV by 20 percent.
- A sporting goods outfitter that upsells a membership club with instant savings on the current purchase to customers who are not already members gets up to 50 percent conversion for this offer.
Fine-tune for Success
Many times, making the most of upsells and cross-sells means practicing CANI—constant and never-ending improvement—making offers, reviewing results, listening to customer reactions and response to upsells on monitored or recorded calls, revising scripts and offers, etc.
In doing this, I helped a fitness equipment marketer take its increase in average order value from 17 percent over the base average order amount up to 24 percent over the base average order amount in the course of six months. If the base average order is $100, this means going from a $117 average order to a $124 average order, just by paying attention to details and managing the process. All for the same cost per order. How many other marketing tactics can make this sort of claim?
Each change in upsell script or offer had an impact that helped us take the next step in refining and prioritizing the upsells. In fact, this client offers a total of six upsells, including an expedited shipping upsell and a free bonus to buyers who convert from multiple installment payments to a single payment. It sounds complex and a bit too much, but since each upsell was developed to support and enhance the main product, customers are not put off.
In addition, two of the upsells are, in fact, down-sells from other upsells. In other words, customers are offered the full set of workout programs for three payments of $29; if this offer is too much for their budget, they are offered the down-sell from this upsell of four workout programs. Together the workout program offers (upsell and down-sell) convert 25 percent of the customers; alone each only converted 10 percent to 15 percent.
Where to Draw the Line
What kind of upsell or cross-sell value should you consider? While some feel a general rule is 20 percent to 25 percent of the original order value, years of experience have shown me that relevancy is more critical to customers than the exact amount. The fitness equipment marketer I mentioned has one upsell that runs 60 percent of the base price of the original order. A cosmetics marketer is able to upsell skin care items for a price point 30 percent higher than the base price of the original order and still garner a 35 percent cross-sell conversion. A word of caution: Don't try to move items no one wants; you won't be able to give away $5 items, no matter the discount or deal. Using upselling as a means of liquidating unwanted merchandise is a waste of time.
The Rep Factor
It's important to make sure your phone reps are offering upsells consistently. Every call in which upsells and cross-sells aren't offered is a sure-fire zero percent conversion.
Getting outbound reps to offer upsells consistently is much less challenging than with inbound reps; outbound reps are focused on selling. But many inbound reps have dual responsibility for customer service as well as taking orders.
Because of their dual roles, inbound reps may be careless about consistently presenting upsells and cross-sells on the phone. They also may need training on why upsells are important and how these offers are opportunities for customers to save money, get better value from their purchases, etc. Consider incentive plans for reps to gain consistent compliance and enthusiastic participation in the process. The opportunity to make a few extra dollars each day by presenting and closing upsell and cross-sell offers can galvanize rep attention.
If you're offering upsells to repeat customers as opposed to first-time buyers, results will deteriorate if upsells and cross-sells are not changed frequently enough. How often is often enough? Every business is different, but a good rule for catalogers is every 30 to 60 days.
Technology Can Help Target
To truly make the most of upsells and cross-sells, use technology to your advantage, and employ segmentation techniques. Let your system enable you to offer a different upsell to customers placing their first order with your brand than the upsell for a customer who has been with you for years. Think about what buyers of certain product categories are likely to want, and let your system ensure that upsell offers are made in accord with the category purchased. Definitely program your system to avoid having a phone rep upsell an item at a discount to someone who just purchased that same item at the catalog price; instead, the rep should offer the customer a deal on a "two for."
Every brand has unique characteristics, but the key to success with upsells and cross-sells is to pay attention and make offers that are relevant to as many unique customer segments as feasible. If you do this, and manage the process with an eye for continuous improvement, you're bound to find effective ways to upsell and cross-sell your brand for greater profitability.
Shari Altman is president of Altman Dedicated Direct, a direct marketing consultancy specializing in retention, continuity, auto-replenishment and loyalty marketing. Prior to launching Altman Dedicated Direct in 1999, she spent 20 years as director of marketing for major direct response marketers and catalogers. She can be reached at (336) 969-9538, firstname.lastname@example.org or visit www.altmandedicateddirect.com.