You could call Lauren Freedman a site doctor. As president of the E-Tailing Group, a Chicago-based e-commerce consultancy, a wide array of online merchants seek her advice. E-commerce executives from companies like Crate and Barrel, Circuit City, the Discovery Channel and others ask her how they can increase the dollar amount of their average orders.
Freedman teaches these e-tailers two essential strategies, two closely related techniques that have become a cornerstone of e-commerce success whether you operate a small business or a larger one: cross-selling and up-selling. To cross-sell is to offer a related product; if a customer selects a digital camera, an e-tailer also attempts to sell them a camera bag. Up-selling, for example, is presenting a mid-range product, say, a $300 camera, then offering a $500 camera right next to it the good-better-best concept.
|"Cross-selling is about informing your customers about the depth of your selection. They already know you sell, say, DVDs. Use your cross-sell/up-sell offers to let them know you also sell DVD players."|
Merchants "spend a lot of time on up-sells and cross-sells because the bottom line is that it increases the average order," Freedman says, noting that when it gets harder to acquire a new customer, cross-selling is an alternate way to boost revenue.
We spoke with Freedman about her cross-selling/up-selling strategies. What, in a nutshell, does she tell her clients?
Before we get to our Top 10 list, a little background: The E-Tailing Group conducted a survey of 300 senior executives with responsibility over e-commerce, to determine industry attitudes toward cross-selling.
When executives were asked which features they would most like to add or enhance on their sites, the three most frequently mentioned were personalization, improved search and cross-sells/up-sells.
In terms of how important cross-sells/up-sells is to their current site, 57 percent said extremely or somewhat important. Just 16 percent of online merchants use no form of cross-selling.
As to how often merchants changed their cross-sell offers, 20 percent changed them monthly, with 13 percent making new offers on a quarterly basis. "In many instances you don't need to change the cross-sell very often, because it's related to what the item is, not the season," Freedman notes. Two very active groups of e-tailers, nine and 11 percent, respectively, changed cross-sell offers daily or weekly. Not surprisingly, 12 percent offered new cross-sells to coincide with catalog mailings.
Ten Tips: Increasing Order Size with Cross-selling/Upselling
Although cross-selling and up-selling techniques vary greatly based on what a merchant sells, the following 10 points sum up Freedman's advice across many e-commerce businesses:
- Consistently position up-sells and cross-sells on every product page
In the real world, Freedman concedes, it may be impossible for many smaller merchants to place a cross-sell on every page it would require a huge site redesign, or a huge rethinking of inventory. Given real world constraints, "figure out where in particular on your site you want to place an up-sell," she recommends. Look through your site to find the most strategic points to place offers. The critical point to bear in mind is that, "You want to educate the shopper," she says. In other words, make sure they know where to find every related item. Also, cross-selling is about informing your customers about the depth of your selection. They already know you sell, say, DVDs. Use your cross-sell/up-sell offers to let them know you also sell DVD players.
- Capture last-minute impulse sales with up-sells and cross-sells in the shopping cart
If you can only place up-sells in one spot, this is the spot to do it, Freedman notes. It works like this: Once a customer has placed items in his cart, and goes to the check-out page to complete the sale, place hot products right there. The E-Tailing Group survey indicated that 38 percent of e-commerce sites use this tactic; it could be used profitably by a much higher percentage.
One of the key points Freedman tells her clients: It is usually best to offer a mix of price points at the check-out page. "You don't want to offer a $1,000 item on this page," she says. Also, don't forget one of the great truths of e-tailing: low-dollar items make impulse purchases more likely.
The consumer electronics retailer Crutchfield, for example, uses its check-out page to ask customers if there's any related gear they need, like batteries or connecting wires. Clothing e-tailers will present an offer like, "you bought the pants, do you want the shirt?"
Merchants use two different technologies to make these last-minute shopping cart offers: They either use a relational database or they make a generic offer. Merchants with large budgets use a database that relates past buying patterns to link the specific items a customer has in their cart with probable cross-sells.
For e-tailers that don't have an expensive database on their site, it's still effective to simply post a best-guess generic offer on this page. "I would put the top three of the top ten best-selling products," Freedman recommends. Or, offer something really new, or a product with current buzz.
"It's not a good idea to overwhelm your shopper with too many cross-sell choices. The recommendation is about three suggestions per product page."
Bed Bath & Beyond, for example, offers an extensive text list, almost up to the level a point-of-purchase display at many stores' cash registers: a list of items for many situations. One highly seductive product to place on this check-out page is a gift certificate, Freedman notes. "It's a no-brainer."
- Include cross-sell/up-sell offers in e-mails
While cross-sells can be included in all customer e-mails, including support and product inquiry replies, one e-mail is particularly good for these offers, Freedman notes: The post-order e-mail sent out with every purchase.
The recipient, after all, is a customer who has already bought from you, so placing an additional product idea just a click away is a significant sales booster. Barnes & Noble, for example, sends out a list of "great deals" with its confirmation e-mails. The Gap reminds customers of its free shipping with order of $100 or more. Staples highlights weekly specials with links back to the site.
Perhaps best of all, eBags offers a row of tabs (presented using HTML) that allows a customer to go back to any of its departments with a single mouse click.
- Recommend an average of three items to complement each product
The old adage about "less is more" comes into play here. It's not a good idea to overwhelm your shopper with too many cross-sell choices. Based on Freedman's survey across several e-commerce sectors, the average is about three cross-sell suggestions per product page. "People really can't absorb any more than that," she says.
- Be sure that the related items are relevant to each product
Online merchants have long experimented with placing related items on each product page. They'll offer a hat next to gloves, a bracelet near a necklace. In the early days of e-commerce, almost anything might have been presented as a cross-sell, but merchants have become a lot more savvy about making relevant offers, Freedman notes. If the attempted cross-sell isn't truly related to the original purchases, it's much less likely to produce a sale.
"One of the newer trends in e-commerce is the 'shop by outfit' concept, in which an entire ensemble is offered as a package deal."
Cooking.com, for example, presents a Mixmaster with extra beaters. Hewlett Packard, with its sprawling inventory, takes it several steps further, offering a complete navigational toolbar a tab for every category which presents a full array of related computer gear.
EBags, in a neat bit of shopper psychology, presents the same related cross-sells to a customer twice, Freedman notes. If a customer doesn't buy any of the related items on the product page, "they'll also show them to you again at check-out." This double offer, of course, requires the site to have a relational database to re-offer the same items later.
- Try category-centric bundling techniques
One of the newer trends in e-commerce, Freedman notes, is the "shop by outfit," concept, in which an entire ensemble is offered as a package deal. This could be a matching dress-shirt-shoes outfit, or in the case of Pottery Barn and Crate and Barrel, a complete furniture package in a room setting.
This takes advantage of a technique that brick and mortar stores have used for years. "They position it that way, so consumer thinks 'oh, I should have all of these items,' " Freedman says, noting that this is cross-selling at its most all-inclusive.
- Present expert and/or customer recommendations
This can be one of the most potent ways to pique your shoppers' interest: Present product recommendations such as "our experts suggest" and "Others who have purchased this have also bought."
Again, relevancy is essential here, Freedman notes. Both the wording of the offer and the offer itself must make it clear to shoppers that the expert recommendation truly relates to the purchase they're considering. Otherwise, a laundry list of expert recommendations will result in little benefit.
- Use promotional offers to entice your shoppers
"Given that changing a cross-sell offer is as easy as changing a link, experimentation can be highly profitable. "
"I don't think the discount has to be very high, you just need to give the customer a sense they're saving money," Freedman says.
- Offer related services as well as products (i.e., extended warranties)
Within specific categories electronics, for example the extended warranty is a major profit center. Yet even business that can't offer an extra warranty can cross-sell a related service.
These related service offers might involve an in-store visit, or, the ever popular free installation of a product. Another possibility is offering related information, whether it's a free instructional manual or book, or a limited time offer of free support.
- Use the Internet's flexibility to test different cross-sell offers, changing them frequently and across channels where appropriate
The key here is to vary your price points on offers to get a complete understanding of what price cross-sells work in any given season or situation. If your average price is $70, you might try cross-sells with items that are $35, $50 and $95, mixing and matching the offers to see what gets nibbles.
Are your site's customers willing to opt for higher up-sells in the summer? What about during the holidays? Given that changing a cross-sell offer is as easy as changing a link, experimentation can be highly profitable.
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