May We Suggest

Cross-selling is one of the tried-and-true techniques of successful retailing. It’s why stores for years have displayed the shirt with the tie and the sweater. Or the hammer with the toolbox. And why catalogers train their inbound telesales reps to close every order with an offer for something else.

But what’s second nature in stores is not always easy to translate to the web—and retailers today are finding that cross-selling on the web is harder than in the store. In a recent informal survey of clients of consultants Mokrynski and Associates, 40% of those who responded to a request to provide information about cross-selling do not offer cross-sells on their web sites. A survey of 100 sites by consultants The E-Tailing Group Inc. showed 23% of 100 retail sites did not offer cross-sells or upsells on the product page. Beyond the product the amount of cross-selling goes down ever further. Only 57% offer cross-sells or upsells in their shopping carts and 34% in their order confirmations, the E-Tailing Group reports.

Tough to execute

More aren’t offering cross-sells and upsells because they’re difficult to execute and until now attention has been focused elsewhere, analysts say. “Every online retailer would probably say they want to offer cross-sells,” says Lauren Freedman, president of the E-Tailing Group. “But it’s not that easy. Some may not do it because of system limitations and others may not do it because of resource challenges.”

But cross-sells and upsells are well worth doing for several reasons. “For catalogers and direct marketers, it’s an important part of their P&L,” says Pete Bather, Mokrynski vice president, “What they do outside of selling their core products can be 3 to 5 points of their P&L.” With many companies operating on a profit margin of 9-10%, he adds, “it’s important when half can be coming from non-core income opportunities.”

But not all of the reasons for offering cross-sells and upsells relate to increasing revenue. Just as important is the chance to use cross-selling to expose more products to customers. “With a catalog, customers can see 100 pages of products in a few minutes,” Bather says. “But on the Internet, customers are limited to six or seven page views in the same amount of time. So retailers have to be aggressive in finding ways to get people to see more stuff.”

In fact, that’s one of the prime benefits that DiscoveryStore.com, the online retail operation of the Discovery Channel, derives from its cross-selling program, says Kathy Greif, online merchandise producer for Discovery-Store.com. “We’re known as a TV company, not as a retailer,” Greif says. “People don’t know what products we sell, so this is a way of showing them.”

Some retailers also believe that cross-sells improve the shopping experience by making sure that customers find the products they need. Especially on the web where cross-sells are usually done with a soft-sell approach, customers can appreciate the suggestions of additional products they might find useful, some retailers say. “Our goal is to satisfy our customers’ needs, not necessarily to maximize our revenue possibilities,” says Dennis Laughlin, e-commerce coordinator for travel gear retailer Magellan’s International Travel Corp. “We look at this as another opportunity to help customers get the travel items they need.”

Does this work?

However, because the Internet is still evolving as a retailing medium, few retailers can tell if their cross-sell promotions are working. Freedman reports that an informal survey of 25 of her clients turned up only five who could tell how many customers clicked on cross-sells. “There’s a lot of interest in this area, but most people couldn’t come up with an answer very readily,” she says. “There’s a lot of room for assessing cross-sells and upsells.”

“As an industry we’re still in the dark ages,” Laughlin says. As for the percent of revenue that comes from cross-sells, Laughlin says, “The only thing we can tell is the line items sold.”

It stands to reason, Bather argues, that cross-sells generate additional sales. As many as 20% of customers calling in an order to a cataloger accept an add-on from a telesales rep, he notes. Some web merchants—those who can actually analyze their cross-sales—report getting 5% uptake. Bather believes the industry number is closer to 2-3%.

Anecdotal evidence shows that at least there is some acceptance of cross-sells and upsells. DiscoveryStore, for instance, underwent a makeover of its merchandise strategy less than two years ago, dropping its entire inventory and re-launching with a focus on proprietary products and high-end, well-known brands. With the re-launch behind it, DiscoveryStore.com began focusing this year on cross-selling and upselling. That focus has resulted in an increase in the average order value by 10%, says Christina Zamoff, e-commerce manager. “Revenues and conversions are way up, and cross-sells are part of the story,” she says.

DiscoveryStore.com began its cross-selling approach with an offering of batteries as accessories to products that require batteries but do not include them. Its merchandisers chose the proper battery configuration for each product so all a customer has to do is check the “All required batteries” box. “We saw a huge uptick in sales,” Zamoff says. “Battery sales increased by 1,000%.”

In October, Discovery-Store.com began offering accessories for telescopes. Just as it does with batteries, DiscoveryStore lists telescope accessories as a line list rather than as thumbnails. Customers can click on the item for a full description. If successful, the store will consider accessory listings with other appropriate products.

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The store clerk’s view

While cross-selling and upselling are logical approaches, retailers are finding that implementing a viable cross-sell or upsell program can be difficult. 80% of retailers, by Mokrynski’s estimates, undertake cross-sells and upsells manually. “We were surprised at how daunting a task it can be to manage cross-sells online because every product needs copy and imagery,” says Tim Diaz, director of electronic commerce for outdoor shoe, apparel and accessory manufacturer and retailer The Timberland Co.

Just like at Discovery-Store.com where Greif is responsible for the cross-sells and upsells for the site’s 2,000 products, Timberland uses manual selection for cross-sells. Six months ago, Timberland began transferring employees who have worked in the stores to the e-commerce operation to choose cross-sells for the web site. “A lot of people will spend money on clickstream analysis to let a machine tell them what people will buy,” Diaz says. “We hire people who have worked in stores.”

The EC operation looks for someone who’s observant and notices additional products that customers pick up with each purchase, Diaz says. “We start with the knowledge that cross-selling is not Internet specific,” Diaz says. “We get people who have seen real live, breathing customers in the store thinking about what to cross-sell. The Internet is a different medium but it’s the same business.”

Most sites aren’t using automated cross-sell and upsell programs because they just can’t afford them, Bather says. Further, retailers just trust their merchandisers’ instincts more than they trust technology. “Choosing cross-sells is more art than science,” Diaz says. “That’s how you have to start.”

Some rules

In spite of the art component of cross-selling and upselling, retailers do set some rules for their cross-sells. Levenger Inc., for instance, a retailer of reading- and writing-related products, has certain guidelines for cross-sells: Cross-sell items must not be more expensive than the main item, they must complement the main item, they must be in stock, there are usually three, no more no less, and none of the cross-sell items can be sale items, says Lynnette Montgomery, Internet marketing manager. In addition, she adds, “We always try to get products that are performing. We figure if the cross-sell product is doing well, it might help out the main product.”

In addition, some retailers do back up their instinct with analysis. Timberland, for instance, uses web analytics software from Omniture Inc. to run item affinity reports as well as reports on previous-page and next-page navigation so it knows where customers come from and where they go. “It becomes a second way to check on the cross-sell decisions,” Diaz says. Levenger will install an analytics program in January, Montgomery says. “We really want to know statistically that the wallet goes with the purse,” she says.

kurt@verticalwebmedia.com

The marriage of live chat and cross-selling

There is one area of cross-sells where retailers can see immediate feedback and that is the additional sales that take place after the initial sale has closed. Those sales usually involve products other than a retailer’s core product. A staple of direct marketing for years—many consumers are familiar with the cross-sell material that comes with delivery packages from online or catalog orders or that are in the monthly pitches from book or record clubs—such cross-sells gain an added level of interaction on the web.

BonusAmerica.com, which operates five web sites, offers post-order cross-sells powered by inQ Inc., a company that employs live chat to sell consumers coupon books, discounts packages and other items that are add-ons for retail sites. Once a customer has completed a transaction, a live chat window appears on the web page and the customer receives a message telling her that there is a live person behind the chat window with a special offer and instructing her to type “Hi” or “Hello” if she’s interested in the offer. InQ operates the chat sessions and pays a commission to BonusAmerica.

BonusAmerica’s customers have responded strongly to the offers, with 46% of customers who make a purchase at BonusAmerica.com engaging in the live chat cross-sell sessions and 51% at sister site NationalRewardCenter.com, says Amy Shoaff, media director of BonusAmerica.com. BonusAmerica had tried to do cross-selling itself, but found the process too cumbersome, she says. “It’s fabulous,” Shoaff says. “We sell an extra 19% with no overhead on our side.”

InQ characterizes its approach as a soft-sell. The customer doesn’t have to engage in the chat and can bail out at any time. Further, inQ reps do not ask for credit card or mailing information from the customer; it obtains that from BonusAmerica if the customer buys. Reps are allowed only one rebuttal per turn-down, says Steve Nober, president of inQ. Surprisingly, 30% of sales take place after the one rebuttal. “That’s the power of live interaction,” he says.