Upsells and cross-sells are important parts of retailing online, yet most online retailers employing manual processing for upsell and cross-sell recommendations obtain only a fraction of the benefits of those time-tested merchandising tactics, Nick Besbeas, chief strategy officer of analytics company digiMine Inc., told attendees at the Annual Catalog Conference this week.
Speaking at the session “Advanced Analytics to Increase Upsell Sales Online and Offline,” Besbeas cited the case of an unnamed apparel retailer who employed digiMine’s analytics product to create upsell and cross-sell promotions to customers. This $1 billion-plus retailer received 25% of revenue from online sales. Its objective was to increase the average order, conversion rate and units per order. It created three groups of customers to test approaches: one group received no recommendations, the second received recommendations generated by the company’s merchandising group and the third received recommendations generated by a digiMine analytics product.
The merchant-created upsells and cross-sells generated 1.5% more sales than the group that received no recommendations while the analytics-created upsells and cross-sells generated 5% more. “It’s a monumental task for merchandisers to go through every product every season, so they tend to do the top products and leave all the rest,” Bresbeas said. “We give them more products.”
Bresbeas notes that a retailer with $200 million in web sales who obtains a threefold lift in upsells and cross-sells from 1.5% to 5% would generate about $7 million in incremental sales, of which $2 million would fall to the bottom line.
DigiMine offers a hosted solution that infers relationships among products, incorporates merchandising and marketing recommendations and business objectives then uses the additional information to create further relationships.
Besbeas also cautioned retailers, however, to make sure their upsell and cross-sell techniques meet their business objectives. When crafting upsell and cross-sell programs, retailers should determine whether the goal is to boost online sales, increase the average order size, increase the browse-to-buy ratio, grow units per order, increase revenue per customer, promote the sale of high-margin items, or some combination of those, Besbeas said. Further, retailers must take into account how the upsell and cross-sell activities match their image.
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