Difference Between Cross-selling and Up-selling

This post tells the difference between cross-selling and up-selling.

Cross-selling identifies products that satisfy additional complementary needs that are unfulfilled by the original item. It points users to products they would have purchased anyway by sharing them at the right time to ensure a sale. For example,

  • Comb sale to a customer buying a blow dryer
  • Credit card sold while registering a saving account
  • Insurance suggested when buying a car
  • Wholesale mobile retailer suggesting a network or carrier after purchasing a mobile phone
  • Television brand suggesting a home theatre of its brand
  • Laptop seller offering a mouse, pen-drive and/or accessories
  • Wait staff suggesting side order with the main dish
  • Retailer suggesting tie-clip with purchase of a tie

The benefits include:

  • A highly effective technique for generating repeat purchases demonstrating the breadth of a catalog to a customer
  • Alert users to the product they did not previously know a retailer/business offers
  • Encourages customers who buy a product to buy a related/complementary product
  • Items which are cross-sold after having higher margins than the main sale e.g., warranty on consumer goods have a high total profit margin usually split between selling and warranty organization

It should be used sparingly and meaningfully e.g., a study from Harvard Business Review in 2012 found that cross-selling can result in profit-losing strategy because some customers return or cancel a large number of goods and services or withholding spending in other areas to spend on cross-selling promotions.

Up-selling is a sales technique where the seller induces the customer to purchase more expensive items, upgrades or other add-ons in an attempt to make a more profitable sales. Normally, it encourages customers to purchase a comparable high-end product than one in question. It offer employs comparison charts to market higher-end products to the customer. For example,

  • Suggesting a premium brand of alcohol when a brand is not specified
  • Selling extended service contract for an appliance
  • Suggesting faster CPU, more RAM or a bigger hard drive when servicing a customer’s computer
  • Selling luxury finishing on a vehicle such as leather upholstery
  • Suggesting more expensive/ extensive car wash package
  • Supersize a meal or adding extra topping on a pizza
  • Mobile check-in services to send upgraded seats or service offers to a flyer

The benefits include:

  • Educating customers about their options and why the items are distinctly priced
  • Informing customers how higher value items could benefit them

Both cross-selling and up-selling focus on providing additional value to the customers instead of limiting them to already encountered products. Businesses combine both to maximize profits. However, to make this work, the strategy should be to meet the customer’s needs and that is where customer relationship management comes.

The personal notes are gathered from different websites and authors.

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