We all know what upselling is. Or at least we think we do. Often times, what companies or individuals refer to as upselling is actually more classifiable as cross-selling. In this blog post, we dig deeper and explain the real difference between the two with clear examples and tips on how to use both techniques for additional revenue.
The term “upselling”, although always highly valued, has become even more of a buzzword for hotels in today’s highly digitalized world. An increase in use of mobile devices, new communication channels and the importance of convenience has seen upselling trending upwards more and more. We all know what upselling is, right? Selling additional or complementary products, like a massage treatment or a city tour, on top of the original purchase. Actually, that’s the definition of cross-selling. The word upselling often gets thrown around and is, incorrectly, used instead of cross-selling. Let’s discuss the difference between the two.
We just presented you the short and sweet definition of cross-selling. Upselling, on the other hand, relates only to the existing product or service purchased (not the purchase of an additional product or service). In exact words, upselling is getting the customer to spend more on an existing purchase. Let’s show you a couple of examples.
Two real-life Examples
You’ve booked a room at a hotel for €150. Two days before your stay, you receive an email where you are offered to upgrade your standard room to a hotel suite for an additional €50. This would be upselling. You’re offered an upgrade to your existing purchase. Let’s look at another example.
Your stay at a hotel is coming up in two days and you receive an email from the hotel offering a breakfast for 50% off, welcome champagne for €15 or a crossfit class on Saturday morning. This would be cross-selling. You’re not offered an upgrade, or an upsell, but instead an offer for new, additional or complimentary products or services. Now why is it so important to know the difference?
The importance of both for Maximizing Revenue
Often times, the term cross-selling is ignored and we speak only about upselling. Offering a room upgrade to an existing purchase can be benefitial for both parties. Hotels often turn to upselling to maximise the profit for a booking, as it almost always refers to the hotel room. Here, through an automated yet personalised email, hotels can improve the profit margins from 20% to 40% by offering a deluxe room, for example. Great! Extra revenue, a chance to fill the deluxe rooms, happier guests. But why stop there?
Cross-selling allows hotels to earn revenue beyond the existing purchase. The guest wasn’t interested in a room upgrade? No problem. He or she happens to be interested in an intercontinental breakfast! Or better yet, the guests want a three-course dinner on Friday evening. The possibilities through cross-selling are endless and deservedly have earned the attention of hotels at an increasing rate.
The art of Upselling
First of all, as a hotel, you have to put yourself in the customer’s shoes. As a guest, what would make you want to jump on an offer and upgrade to a superior room? The answer from an Economics perspective is that the opportunity cost of choosing the more expensive room is lower than for the standard room. In other words, the value for money is better, the additional spend is worth the extra pleasure rather than saving the money and having lesser pleasure. Sometimes paying the €50 extra can be worth it for the additional comfort, space, room service and other perks. It should be noted that an upsell can sometimes take place before the purchase is even completed, for example in the checkout, by offering the deluxe room right before the payment section. It's more common though that this occurs a few days before the guest's upcoming stay.
A shorter answer as to what makes the mind of the guests tick and creates a decision to make is scarcity. Promoting the service as exclusive and limited (“only two rooms left!”) makes the offer more attractive to the guest. We are often attracted to things that are exclusive and only available in smaller amounts as we often draw the conclusion that the product/service must be of higher quality. Additionally, using incremental pricing (“only €20 more!”) is a compelling argument. The guest may think “If I’ve already spent €149 on a room, why not spend the extra €20 for an upgrade?”. Communicating value is the key to upselling effectively.
The art of Cross-Selling
Although similar, cross-selling is a bit different as it doesn’t necessarily revolve around an existing purchase but focuses on new products and services. Research shows that only a small amount of guests actually complete additional purchases.In order to avoid scaring the guests away, wait with any cross-selling offers until their hotel is already booked. Ideally, target the guests in the "pre-trip buzz" phase when the guests are getting excited about their stay and are most likely to complete additional purchases.
Cross-selling is often a bit more about impulse purchases or purchasing a product of lesser value. An example would be if you're purchasing a luxury product (a new phone) and then purchasing an additional accessory (phone case, headphones). As a consumer, if you've already spent a larger amount, any additional purchases can seem valuable. Cross-selling for hotels is very similar. It’s a great opportunity for hotels to offer services that the guests may not know about, services that can actually improve their overall stay and satisfaction. Hotels can even ask the guests directly if there is anything they are looking for and allow the guests to tailor their stay to their needs.
Become an Expert and Maximize Revenue today
You now know the difference between upselling and cross-selling, let’s make that extra revenue! There are many tools and platforms out there that helps with upselling, or you could do it manually. But why spend countless hours when you can easily automise it? Loopon allows you to both upsell and cross-sell without even lifting a finger. Once you’ve set-up your offers, watch the magic happen and the revenue figures grow. You can even customise the targeting of your campaigns and do smart customer segmentation to ensure that only certain guests receive certain offers.
Both upselling and cross-selling are becoming increasingly important as additional revenue streams. Get in the game today and set-up your own pre-stay emails.