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Chris: Thanks for joining us today. I’m Chris Malta.
Colette: And I’m Colette Marshall. I’m sitting in for Rob today.
Chris: Many online sellers think of product sourcing in terms of finding a product to sell rather than building a complete product line, but your customers are usually interested in other related products as well, and by sourcing them you can greatly improve your customer sales and satisfaction. Today we’re talking to popular eBiz author, Dr. Ralph Wilson, who has been quoted by everyone from ABC online to the Wall Street Journal about using cross-sellers and up-sellers to move your business’s bottom line.
Chris: Dr. Wilson, welcome to the show.
Dr. Wilson: Hello.
Chris: Great to have you here, it’s been a long time since we’ve talked.
Dr. Wilson: Yes, thank you.
Chris: So how do define cross-selling and up-selling?
Dr. Wilson: Well, cross-selling is where you’re selling one product they might be looking at, but you’re also giving information about similar products as well as accessories to the product. So if you’re selling revolvers, you sell silver bullets.
Chris: Right.
Dr. Wilson: If you’re selling silver bullets, you’re also selling an ammunition belt.
Chris: Right.
Dr. Wilson: So the idea is that they’re there for one visit, but instead of just buying one item they might buy two. They might buy an accessory or something with it. So that’s cross-selling. Up-selling is where they come looking for one product, but end up buying something that’s somewhat more expensive. So they come looking at good and buy better or best.
Chris: You know, we use an example that relates to up-selling all the time where you use a loss leader, for example, something that you don’t actually make a lot of profit on, or even lose profit on. Say, for example, a cheap 2-slice toaster, and then you put it right next to the big 4-slice bagel master, right.
Dr. Wilson: Yeah.
Chris: And that’s a form of up-selling, correct?
Dr. Wilson: Oh, yeah.
Colette: How do cross-selling and up-selling affect conversion rates Dr. Wilson?
Dr. Wilson: Well, if someone comes to your store looking for a particular product, maybe they’ve come in through pay per click advertising or maybe they’ve come through some search engine thing has brought them to your site looking for a product, they’ll take a look at the product and say, is that what I want, yes or no? But if you offer not only that product, but two or three that are similar to it, now they have a choice, and the chances of them buying are a whole lot better than if you just had one product. I think the real masters at this are Amazon.
Chris: Yes.
Colette: I was about to say that myself.
Dr. Wilson: I mean, they keep track of what you’ve looked at in the past and what you purchased. And the next time you come you may be looking for something entirely different, but they’re going to be showing you different things. And when you look at their conversion rates, last time I looked, I haven’t looked this year, last time I looked they were at 14% conversion rate.
Chris: Oh, that’s huge.
Dr. Wilson: Now, that doesn’t come just from cross-selling, it comes from people having confidence in them as a retailer.
Chris: Right.
Dr. Wilson: But when someone comes to their store, the chances are 14% that they’re going to walk out having bought something, and it often isn’t the kind of thing they came in to buy.
Colette: Like you said, sometimes people aren’t exactly sure what they’re wanting to buy, so if you put it up in front of them you just give them choices, and more likely they’ll buy instead of going somewhere else.
Dr. Wilson: And it may be that when they come in the door, as you say, they’re not sure of what they want, but in the process of looking at the three or four choices that you give them, now they say, okay, I think this is what I want, and why. Otherwise, they might be doing that shopping through several stores or several pay per click ads, they’re making their decision on what they want to buy. Now they’re doing it in your store.
Chris: Now, we find that a lot of people who start an eBiz online don’t do this at the beginning, right? For example, we find a lot of people who get married to a single product they want to sell and that’s all they want to sell. They don’t want to hear about anything else, but there’s so much opportunity here.
Dr. Wilson: Yeah. Well, that’s how people get started. They get excited about selling some particular thing, but that’s not how they end up succeeding as an online retailer.
Chris: Yes.
Dr. Wilson: They have to grow and mature. And we probably have some listeners now that have one or two products that are doing okay, but the next step now is to broaden what they’re offering within a narrow niche.
Chris: Right. Let’s talk about placement, Ralph, what is the recommended placement of cross-sell and up-sell promotions?
Dr. Wilson: Well, there are several things to do. One is you always ought to have on the homepage of your store various new products or high markup products, something that’s going to attract attention, and rotate those. The ones that you show that are popular are likely to sell quite well. So they may have come to your store looking for something else, but they see that on your front page and click into it and start looking at it. So your homepage of your site is one place. A second place that you’ll want to put cross-sell kinds of items is on the product page with the item that they may be looking at. So let’s say I’m looking at a down vest to keep me warm in the winter, on the right side at Land’s End it will show several other down vests or vests of that type that are alternatives. So on your product page is a great place to show the accessories or the similar kinds of items.
Colette: And bundling would be another thing that you could put right there in your site, that’s another form of up-sell.
Dr. Wilson: Exactly.
Colette: And it’s very popular lately.
Dr. Wilson: Exactly. The third place is on your checkout pages. So they put something in their shopping cart and you show them an accessory to it. Or perhaps you show them something even better, or something, as you mentioned, bundled. So on the front page, on the product page, on the checkout page. Another place that some of the larger companies particularly are doing this, is they have their pay per click ads come into a sectional page that will show a number of items in a section. So that’s a form of cross-sell right there.
Chris: Right. Now, when you talk about accessories, Ralph, that’s one thing we recommend. We see so many people who start out in this business and want to start on electronics, that’s always the thing. They always want to sell the Wii’s and the Nintendo’s and the cell phones and all these kinds of things, where the real money in those markets is often made in the accessories, isn’t it?
Dr. Wilson: Yeah. I’ve always thought about HP sells these printers for really low prices.
Chris: Oh yeah.
Dr. Wilson: But have you ever tried to go and buy ink (laughter).
Colette: (Laughter)
Chris: Yeah, and cables?
Dr. Wilson: It’s locked in.
Chris: It’s ink and cables, that’s where they make their money. I’ve actually talked to people, you know, at some of the big box stores about that. The printers themselves, they’re getting some manufacturer’s rebates and so forth, because they’re buying so many at a time, but they’re selling the printers for just about a break-even, sometimes even less. But they know they’ve got you for that ink and they know they’ve got you for a $30 cable.
Dr. Wilson: Yeah.
Chris: So yeah, we tell so many people that, look, if you want to sell electronics it’s a tough market, but where you really can make some money is in the accessories and I think that’s true for just about any kind of product.
Dr. Wilson: Yep, I think you’re right.
Chris: So, Colette mentioned bundling as a form of up-sell, and bundling, of course, has been going on for a long time. Why would you say it’s so popular?
Dr. Wilson: Well, when you think about it, if you sell one product with, say, a 30% margin or 40% margin, you make 40% of $10.
Chris: Right.
Dr. Wilson: But if you sell two products bundled together your margin might not be quite as high, but now you’re making 35% of $30.
Chris: Yes.
Dr. Wilson: And so bundling makes a huge amount of sense. Amazon does this with their books. I’m a big book fan, so I go and look at a book and right below the description of the book it will say, you can buy this book and this book together for only such-and-such.
Chris: I was just there last night doing the same thing (laughter).
Colette:/Dr. Wilson: (Laughter)
Chris: I was looking for a book and I saw three other books, yeah.
Dr. Wilson: The deal that they offer is really not all that good, as far as extra savings.
Chris: Right.
Dr. Wilson: But they must be successful at it or they wouldn’t keep doing it.
Chris: Oh yeah.
Dr. Wilson: So it’s going to be a money-maker for them. Just the idea of buying this with this, just suggesting that to the customer, really puts the thought in their mind. And enough people buy that, they’ve made a little bit of extra money right there.
Chris: Right, and that’s where your bundling is actually a form of associating other products with the original product.
Dr. Wilson: Exactly.
Chris: Now, in some cases you can also bundle products together from the beginning.
Dr. Wilson: Right.
Chris: You know baskets, or just an assortment of just products that fit together.
Dr. Wilson: Mm-Hmm.
Chris: And when you do that, then you eliminate people’s ability to cross compare pricing, right?
Dr. Wilson: Yeah.
Chris: So if you’ve got one popular item, but you bundle it together with two other accessories that go with it and you set one price on the whole thing, then people can’t go cross check the pricing on the original item on other sites, right?
Dr. Wilson: Right. Some companies, I think, the larger companies do this by getting a special model number from the manufacturer that’s a little bit different than anybody else so you can’t do price comparisons quite as easy on it.
Chris: Oh.
Colette: You know, the other thing it gives you is a unique product that’s on your site. When you create your own gift basket and bundle that together it’s something unique that buyers may not find anywhere else.
Chris: It is time for a quick break. Subscribe to our free product sourcing newsletter at ProductSourcingNews.com to stay up to date with the latest product sourcing news, check for upcoming tradeshows in your area, and find spotlighted suppliers you can use in your ebusiness. We’ll continue learning more with Dr. Ralph Wilson when we return. I’m Chris Malta.
Colette: And I’m Colette Marshall.
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