An overview of cross-selling – LogRocket Blog

Have you ever ordered a burger at a fast-food restaurant and been enticed by the offer of fries and a drink combo to “complete your meal?” That’s the essence of cross-selling where you encourage customers to purchase additional products or services that complement their initial purchase.

However, cross-selling goes beyond boosting short-term sales. By mastering its techniques you can build long-term customer relationships and increase your customer lifetime value (CLV).

In this article, you’ll learn the ins and outs of cross-selling, including how it differs from upselling and its accompanying benefits.

The case for cross-selling

Let’s illustrate this with a scenario that’s a little closer to home. Imagine you recently acquired 1,000 new paying customers through an influencer marketing campaign that cost $20,000. At face value, this translates to a customer acquisition cost (CAC) of $20 per customer. The CAC is calculated as:

CAC = $20,000 / 1,000 = $20 per customer

So how can you make the most of the value you derive from each customer so that you can reduce the impact of this high CAC and achieve a better return on investment (ROI)?

Let’s imagine you acquire a customer for $20, but they only make one purchase before churning. In this scenario, maximizing value from that single purchase becomes critical. You can leverage cross-selling by trying the following strategies.

Offering high-margin add-ons

This involves offering attractive add-on products or services with high profit margins alongside your customers’ initial purchase. This can significantly boost revenue from that single interaction.

Compiling strategic bundles

You can create bundled packages that combine your core product with frequently purchased add-ons at a discounted price. This incentivizes customers to spend more upfront and potentially discover valuable new products that could keep them coming back.

Encouraging impulse buys

Here, you present relevant complementary products at checkout to capitalize on the customer’s buying mindset and increase their average order value.

Strategies like these not only help you recoup your CAC faster but also foster customer satisfaction and loyalty, ultimately leading to a higher CLV.

Cross-selling vs. upselling

While these two terms are often used interchangeably, they’re quite different.

Cross-selling is a sales strategy that involves selling a completely different, but complementary, product to the same customer. Cross-selling focuses on offering items that enhance or add value to the customer’s existing purchase.

For instance, a customer buying a new phone might be offered a case, screen protector, or headphones to go along with it:

On the other hand, upselling is a different sales technique where you encourage a customer to purchase a more expensive version of the product they’re already interested in. Upselling usually involves emphasizing the benefits of upgrading to a higher-tier product within the same category.

For instance, a customer using a free version of a product might be presented with the advantages of upgrading to a paid version with better features. They’re already interested in the product, but are encouraged to purchase a more expensive version that would typically offer additional features or benefits. This is the case with Figma:

Figma’s tiered pricing structure is a perfect example of upselling. In the image above, you can see that Figma offers various subscription plans with increasing functionalities and user limits as the price goes up. Figma leverages upselling to cater to a wider range of users and their specific design collaboration requirements.

How does this capture upselling in action?

• A user might start with the free plan to try Figma’s basic functionalities
• As their needs evolve and they require collaboration features, Figma might suggest upgrading to the professional plan
• For large organizations needing extensive features and user management, Figma’s organization plan would be presented as the most suitable option
• The enterprise plan then offers additional advanced features including guest access controls and link sharing controls

Key points to note:

• Figma doesn’t force users to upgrade. It offers a free plan to get users started
• The tiered pricing structure highlights the limitations of the free plan and presents the professional and organization plans as upgrades with additional features and user limits
• This approach entices users who find value in Figma to consider a more expensive plan that better suits their evolving needs

Cross-selling cases studies

To get a better sense of how you can implement cross-selling within your product teams, let’s look at examples of it within real-life organizations.

1. Amazon

Amazon is widely considered the poster child for successful cross-selling strategies. Its cross-selling strategy exemplifies how this technique can be a powerful tool for not just boosting sales, but also building long-term customer relationships with customers and maximizing customer lifetime value.

Personalized recommendations

When a customer searches for an item, Amazon will display sections titled “frequently bought together” or “customers who bought this also bought.” These sections analyze past purchase data and suggest complementary products that other customers have frequently purchased alongside the item you’re viewing. This strategy taps into the idea that customers who buy similar products might have similar needs, prompting them to consider additional items that enhance their initial purchase:

Discounted product bundles

Amazon curates product bundles that combine frequently purchased items at a discounted price. This incentivizes customers to purchase the bundle, increasing their average order value and potentially introducing them to new products they might find useful.

AI-powered recommendations

Amazon employs sophisticated algorithms that analyze your browsing history, purchase behavior, and even search queries. Based on this data, the platform can recommend highly relevant products that go beyond just “frequently bought together” suggestions. This level of personalization increases the chance of capturing your interest and leading to additional purchases.

Targeting Amazon Prime members

Amazon Prime members enjoy faster shipping at no additional cost alongside other benefits. They are then shown complementary products that qualify for free Prime shipping alongside their initial purchase. This entices Prime users to take advantage of their membership perks and potentially add more items to their cart.

Benefits of cross-selling for Amazon

By utilizing this mix match of cross-selling strategies, Amazon achieves several benefits that contribute to higher CLV including:

• Increased average order value (AOV) because customers purchase more than just their initial desired item
• Happier customers who are able to find relevant and complementary products. This leads to a more fulfilling shopping experience for them
• More engaged customers, since cross-selling demonstrates an understanding of their needs, fostering trust and loyalty
• Reduced customer churn, as satisfied customers who find value in Amazon’s offerings are less likely to switch to competitors
• A stickier product, as cross-selling recommendations help customers discover additional products that enhance their initial purchase, leading to a more versatile and valuable product experience that keeps them coming back for more

2. Apple

Apple is another exceptional example of a business that highly utilizes cross-selling within its ecosystem. The company’s success in cross-selling highlights the power of creating a cohesive ecosystem of products and services.

Seamless integration within its hardware and software ecosystem

Apple products are designed to work seamlessly together. When using an iPhone, prompts or suggestions might appear to connect to other Apple devices (e.g., suggesting AirPods for calls or iPad for AirPlay). This effortless integration creates a user experience that incentivizes owning multiple Apple products within the ecosystem.

Cloud services are also integrated

iCloud storage, Apple Music subscriptions, and Apple TV+ work seamlessly with Apple devices. During device setup or while using core products, Apple strategically positions these services as natural extensions of the user experience, encouraging subscriptions and recurring revenue.

The App Store showcases recommended apps that are optimized for specific Apple devices

These recommendations often highlight apps that leverage features unique to Apple products, like integrating with Apple Watch health data or utilizing the high-resolution display of iPhones. This approach subtly nudges users towards apps that further enhance the value of their existing Apple devices.

Accessories are a major gateway to additional income for Apple

It offers a variety of branded accessories like charging cables, cases, and Apple Pencil for iPads. These accessories boast seamless compatibility and greatly influence purchase decisions towards a complete Apple product experience.

Benefits of cross-selling for Apple

• Apple users are encouraged to purchase additional devices, services, and accessories, thus increasing the average order value for each customer
• The seamless integration and user experience across Apple products fosters brand loyalty and a preference for staying within the Apple ecosystem
• Subscription services like iCloud and Apple Music generate recurring revenue streams, contributing significantly to customer lifetime value.
• Through analysis of user data, Apple personalized recommendations for apps, services, and accessories, increasing the relevance of cross-selling efforts

3. Hellofresh

HelloFresh, a popular meal kit delivery service, offers a unique approach to cross-selling that personalizes the customer experience and fosters long-term engagement. Its approach is a very unique take on cross-selling within the subscription service model that keeps customers subscribed, encourages exploration, and ultimately increases customer lifetime value.

Offering recipe customization and add-on options

HelloFresh allows subscribers to customize their weekly meal kits by swapping out proteins or opting for vegetarian alternatives. Additionally, it offers add-on options like desserts, breakfast items, or even oven-ready meals. This approach caters to individual preferences and dietary needs, while subtly introducing the idea of purchasing additional items beyond the core meal kit.

Discovery of new meal kits through meal planning

HelloFresh’s platform showcases a diverse range of meal options each week. This allows customers to explore new cuisines and potentially discover recipes they might not have considered otherwise. This exposure to variety paves the way for future purchases outside of their regular meal kit selections.

Partnering with other brands

HelloFresh occasionally partners with other brands to offer additional products alongside their meal kits. These partnerships might include wine subscriptions or dessert pairings that complement HelloFresh meals. This strategy exposes customers to new brands and creates a more complete dining experience, potentially leading to additional purchases.

Benefits of cross-selling for Hellofresh

• Customization options, add-ons, and meal kit upgrades contribute to a higher average order value per customer
• Personalization through recipe recommendations and customization options keeps subscribers engaged, preventing menu fatigue, and reducing the chance of churn
• Catering to individual preferences and offering a variety of choices allows HelloFresh to foster stronger customer relationships and build brand loyalty
• Exposure to new recipes and partner offerings through cross-selling can lead to future purchases outside of the core meal kit subscription

When to apply a cross-selling strategy

If there’s one thing you should take away from this article, it’s that there’s no one-size-fits-all approach to this. That said, there are some factors you should consider when deciding if and when to implement a cross-selling strategy:

1. What are your customer needs and what is their purchase behavior?
   1. Look at their purchase history to identify complementary products customers frequently buy together. This will require data analytics
   2. Consider the context of the customer’s current purchase. What additional products or services might enhance their experience or solve a related problem? Why did they buy that product or service? What do they want to achieve in the long-term? Ensure the cross-sell product genuinely complements the initial purchase. It should add value or enhance the core product’s functionality
   3. Segment your customer base by demographics, interests, or purchase behavior. This will allow you to tailor cross-selling recommendations to specific needs and preferences
2. What will your business gain from adopting a cross-selling approach?
   1. Ensure that cross-selling will bring your business closer to your north star. If your north star is increasing CLV, cross-selling encourages customers to spend more per purchase, directly impacting this metric. If your north star is to increase brand awareness, adopting cross-selling may require you to focus more on certain touch points while sacrificing revenue
   2. Also be sure to review the profit margin of the cross-sell product. Ideally, it should be high enough to offset any promotional costs and contribute to your overall profitability

Bonus tip — Make sure the cross-sell product is readily available to avoid frustrating customers who can’t complete their purchase. Inventory management is key here.

1.  When is the best time in the customer journey to offer a cross-sell?
   1. Be obsessive about adopting customer journey mapping to determine where cross-selling opportunities exist in the customer journey. Usually, you can offer suggestions during product browsing, at checkout, or even through post-purchase emails
   2. Always be mindful of overwhelming customers. A subtle suggestion would certainly be more effective than a forceful push

Final thoughts

Cross-selling is a great, tried and tested strategy for business growth. But, it’s important to remember that the goal is to offer genuine value that enhances the customer experience, not just bombard them with additional products. This could mean recommending high-margin add-ons, creating enticing product bundles, or strategically placing impulse buys at checkout.

The case studies you explored in this article show you how industry leaders like Amazon, Apple, and HelloFresh leverage cross-selling to achieve impressive results. When done right, cross-selling becomes a win-win situation, increasing your bottom line while building a loyal customer base.

Featured image source: IconScout