Upselling vs Cross Selling: Definition and Key Differences
The primary objective of a firm is to maximise its revenue by increasing its sales. They can adopt various price and quantity combinations to make their product dearer to the customers.
While some firms choose to differentiate their products to maximise revenue, others might choose to up-sell or cross-sell their products to achieve the same goal. This article introduces the terms and explores the debate of upselling vs cross-selling.
What Is Upselling?
When firms encourage purchase of upgrades, enhancements or premium options while selling the primary product, they upsell their product to the customers. By upselling, firms are ‘stacking on’ on a primary product instead of introducing complementary products.
Consider a Haldiram outlet situated in a metro city serving a considerable number of customers per day. A plate of dosa costs around Rs. 100 without any additional toppings. When the firm wishes to upsell its sale of dosa, it can offer multiple options for a more elaborate dosa.
Customers can obtain an upgrade to their normal dosa in the form of a cheese slice or additional chutney at a premium over its MRP. Or, the firm can offer a better dosa base or a spicier vegetable mash inside their dosa at an additional cost. This way, the firm ensures their dosa sale is more profitable owing to the enhancements.
What Is Cross-Selling?
Firms can also encourage purchase of an additional product that is connected directly to the primary product. Cross-selling involves offering additional products that can add to the customer experience of purchasing the primary product. Firms can generate additional income from the sale of such complementary products.
Taking the example that has been described above, a supplementary confectionary can be used to cross-sell the primary product. Instead of introducing upgrades or additional options, Haldirams may offer a glass of cold lassi or a cold drink to complete the dosa meal.
The firm is not offering an upgraded version of the dosa but separate products that complement the dosa. Thus, cross-selling essentially refers to a combination of related products that complements the primary product.
What Is the Difference Between Cross-Selling and Upselling?
The primary difference between up-selling and cross-selling is their approach to projecting their primary product and making it more desirable. When firms up-sell their primary product, they offer additional options or upgrades to complete the purchase.
However, cross-selling involves making a combination of products that complements the purchase of the primary product. The differences between the two strategies are given below:
|
Parameter |
Upselling |
Cross Selling |
|
Definition |
A revenue maximisation technique that involves adding options at an additional cost to a primary product to make it more desirable. |
A technique that involves adding additional products to complement the purchase of the primary product. |
|
Customer perspective |
From a consumer’s perspective, upselling a product triggers the desire to purchase it. |
By cross-selling, customers may consider purchasing additional items to complement the purchase. |
|
Firms’ perspective |
Firms usually upsell their primary products to sell their more expensive products. |
Firms usually cross-sell when they intend to impart knowledge of the items associated with the primary product. |
|
Sale of primary products |
The sale of the primary product rises without any substantial change in profit making. |
The firm can sell multiple products simultaneously, implying greater profit making |
What Are the Advantages of Upselling and Cross-Selling?
Despite the upselling and cross-selling difference, the principal idea behind adopting upselling and cross-selling is to maximise revenue and sales. However, experts believe these strategies can boost customers' willingness to purchase the primary product. Some advantages of upselling and cross-selling include:
- Personalised approach: When firms adopt the technique of upselling and cross-selling, they want customers to feel special. Consider a firm upselling their product by adding customer-specific customisations. They can also cross-sell their product with a combination that satiates customers' needs.
- Revving up customer footfall: Statistics show that these strategies help firms acquire a promising sales value. It further reveals that more than 60-70% of the existing customers find the prospect of expanding their options feasible. Further, about 30% of the loyal customers feel the importance of purchasing a combination. Thus, these strategies help retain customers by providing them with a plethora of options and upgrades.
- Enhancing trust and customer lifetime value: Data reveals that upselling and cross-selling help customers build more trust in the firm and its products. From a customer’s perspective, more options and complementary products imply catering to their interests.
Also, relevant recommendations can bring more customers and thus maximise revenue.
Firms adopt the policies of upselling and cross-selling their products to make them more sellable. These strategies boost sales and help build customer trust. However, an entrepreneur should look into the upselling vs cross-selling prospects wisely to avoid confusing customers with their promotions.
