Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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But for retailers to be able to select the best strategy, they must be able to measure results. Many times, what might seem like a slam-dunk cross-sell idea flops. “People think just because they implement cross-sells, it’s going to drive up average order value and sales, but that’s not necessarily the case,” Casey says.
That’s what Sierra Trading Post found when it began testing which minimum price levels worked best for cross-selling, Lange says. In the initial test, the levels were $10, $20 and $30. “We quickly abandoned it because $20 and $30 were doing much better than the $10 test,” he says.
Sierra then tested $20, $30 and $40 minimums and found that $20 and $30 levels worked while the $40 level was “outside our customers’ comfort level,” Lange says.
Offermatica’s program enables retailers to do A/B split tests or multi-variate tests on cross-sell and upsell strategies, for example, whether to make recommendations on the product page or the checkout page. Offermatica has found that inexpensive related items, such as socks or belt, work best on category pages, while more expensive coordinated items are more likely to sell on the checkout page.
A recent study from the E-Tailing Group Inc. found that 88% of retailers have cross-sells and upsells on the product page while 62% put recommended products on the shopping cart page.
Ecometry is enhancing its predictive response model to monitor the success of product recommendations and then modify its behavior to push the most frequently accepted recommendations to the top, Dean says. The software checks whether the recommendation was accepted or abandoned. It also tracks the profitability of upsells.
Ease of use
While the technology used in automated cross-sell and upsell programs is sophisticated, retailers usually find it easy to use. At Sierra Trading Post, the program can be modified by changing four or five lines of code per page, Lange says.
And Matthies says training a new retail staff member how to use the Ecometry program requires only about 1.5 hours. “You don’t need to be a technical genius to do it,” he says.
But while the idea of automated cross-selling or up-selling is appealing to retailers, many simply can’t afford the technology, says Lauren Freedman, president of the E-Tailing Group Inc. “It’s a resource issue,” she says.
Other retailers may be afraid to automate the process because they fear product selection won’t be as relevant, Freedman says.
There’s some basis for that concern. In execution, automated cross-selling can fall far short of expectations, and, in some cases, have disastrous results. Witness the experiences of Walmart.com and Amazon.com. At Wal-Mart, an automated system linked African-American themed DVDs with the DVD of “Planet of the Apes,” while Amazon’s automated system suggested books on adoption to customers seeking books about abortion. Both incidents generated a flurry of bad publicity for the retailers.
But those cases are rare and extreme. “That kind of problem crops up when you’re trying to associate contextual search to a product as opposed to a product-to-product affinity,” Dean of Ecometry says. “What we’re returning is a pure relationship that these things are purchased together.”
In theory, an automated system based on a product-to-product relationship could produce the “convenience store scenario where they say beer and diapers are purchased together frequently because husbands are sent out to get diapers and they pick up beer,” Dean says. “There really isn’t the risk that the engine is going to interpret search criteria and tie products to that. Your only risk is that your recommendations on occasion may seem odd.”
And such problems can be avoided if retailers are careful about the rules they write for the system, Freeman Evans says.
Where it makes sense
What’s more, some items simply don’t lend themselves to cross-selling or upselling. Although it’s easy to cross-sell CDs or DVDs, that’s not the case with apparel and footwear, says Freeman Evans.
“If you like Sting, you’re going to want all of his albums,” she says. “But if you’re into Kenneth Cole, it doesn’t necessarily mean you’re going to like his next collection. It’s very taste-oriented and it makes it more difficult to get the right product.”
Another factor that diminishes the effectiveness of automated cross-selling or upselling is that customers often don’t know what specific item they’re looking for when they get to a site, Freeman Evans says. “They might be looking for jeans, but which jeans?” she says. “If I don’t even know what jeans I’m going to buy, how am I going to decide on what top or shoes or belt I’m going to buy?”
Despite these difficulties, cross-selling and upselling are established practices in the offline retailing industry and retailers will surely find a way to do it online as well. “It’s second nature to us,” Matthies says. l
How to close those cross-sells and upsells
• Consistently position cross-sells and upsells on every product page
• Recommend an average of 3 items to complement each product
• Be sure related items are relevant to each product
• Try innovative category-centric bundling techniques enabled by Internet technology, such as shop by room/by outfit
• Present recommendations to catch customers’ attention, such as “Our experts suggest…” or “Others who have purchased this have also bought…”
• Use promotional offers to entice; for example, limited time discounts on related items
• Include services, such as extended warranties, as well as products
• Use the Internet’s flexibility to test offers, changing them frequently onsite and across channels