(Note: I've prepared this material in the context of a very specific discussion about "cross-selling and upselling" on product pages in an ecommerce site - just not enough space in the discussion forum's 1000-character limit to fully explain. As such I need to provide some redundant detail from the conversation as well as broader detail so that it makes sense in the context of a blog, read by others who weren't party to the discussion - but it's essentially about determining the right places in a flow to cross-sell or upsell the shopper.)
Cross-Selling
The distinguishing characteristic to cross-selling is that the seller wants they buyer to purchase another item in addition to the item they are presently considering. The phrase "in addition to" is critical, in that the seller still wants them to purchase the original item.
The problem with cross-selling on a product detail page is that the shopper has not yet completed the action of selecting the original item. To consider other items at this time derails them from their task flow, and may end up distracting them to the point that they do not complete the original task (they leave the page to consider the suggested items and do not return to purchase the original), or suddenly feel overwhelmed by it (they get the sense the original item will be useless without the additional ones and decide the total cost is not appealing).
Cross-selling is appropriate to the shopping cart view, particularly in the moment after an item has been added. At that point, the buyers' momentum has run its course: they have added the intended item, and are now open to consider other items before completing the purchase. More importantly, their decision to purchase the original item and its precipitating actions have not been interrupted.
Specifically, cross-selling is not appropriate until a decision to purchase an item has been made. In that sense, I can see only two pages in a purchase flow where cross-selling should be done: the shopping-cart view (which encourages the shopper to add additional items before finalizing their purchase) and the order confirmation page (which encourages the shopper to return in future to purchase additional items).
There are also instances before and after the shopping task when cross-selling can be done: advertising can preload a "set" of items in the shopper's mind before he enters the store, and cross-selling on an invoice or shipment notice can bring them back to purchase other items. But when the shopper is in the process of evaluating options, cross-selling can only be disruptive.
Special Case: Bundling
The "cross-selling" done on Amazon's site has been cited as proof of cross-selling, but there is a subtle distinction to be made: all bundling is cross-selling, but not all cross-selling is bundling.
Bundling requires the purchase of items in a set - per the example of Amazon, the offer to "buy all three and save" requires you to purchase all three items to get the deal and (presently) provides no opportunity to purchase only two of the items without the third. The shopper who wants only two of the items must go through a longer process (add the present item, seek out the second item, add it to the cart separately, and forego the deal). Therein lies the problem - is that the task becomes daunting and the shopper may decide at any time to abandon the entire transaction.
The experience could be somewhat improved by creating flexibility in the bundling options - to enable the customer to choose either or both of the complementary items on the intended product page before adding to cart. This creates a bit more complication, but far less than having to add the items individually. But again, this would be cross-selling rather than bundling because the customer is able to opt into buying each item rather than having them bound together in a bundle.
Bundling makes perfect sense and is generally acceptable to buyers when the accompanying items are necessary to the use of the primary item - an in some instances failing to bundle disappoints consumers ("batteries not included" is a disappointment if it is discovered only after the customer has arrived home with the item and no batteries) and vendors will even merge the two into a single product (batteries are included in the package of the original item, rather than a separate package bundled to it).
Upselling
The distinguishing characteristic to upselling is that the seller wants the buyer to purchase another item instead of the item they are presently considering. The qualifier "instead of" is the essential difference between cross-selling and upselling, in that the seller no longer wants buyers to purchase the original item when they choose the alternative item presented.
Upselling is appropriate to product information pages because the shopper is evaluating a product as a possible solution to his needs, and may be open to suggestions that there may be a better alternative. While the seller's motive is generally to push the buyer in the direction of an item that is more profitable for them to sell, buyers can be amenable to this if they understand why they should prefer the alternate product and feel that the additional benefit they get is worth the additional cost.
Upselling is not appropriate on a "shopping cart" page, because at that point the shopper has made a decision to purchase a specific item. Even if he agrees that an alternate product would be better, he must now remove the original item from his cart as well as adding the replacement item. But worse than that, the upsell is an implicit suggestion that the shopper has made a bad decision - the product you just added to your cart is not really what you need - as a necessary step in suggesting a better one. Whereas an upsell on the product page helps the shopper to make an informed decision, the shopping cart is attempting to reverse a bad decision - and to suggest the decision they just made is bad will be either offensive to the shopper or at the very least undermine his confidence in the purchase and the level of service he is receiving from the seller.
It's also worth considering that an upsell can be initiated at other times during the shopping process - at any time when the shopper is considering products that might address their needs, they can be presented an option that might be better suited that the one(s) they might see before them. As such, it's appropriate to upsell on a list of products (a category menu or search results) as well as on the product information page, and other locations as well.
The only time it is inappropriate to upsell is after a specific decision has been made and acted upon - which would be the shopping cart and order confirmation pages ... the exact pages where cross-selling is most appropriate.
Consider the Shopper
In all, the decision to upsell or cross-sell must be made in consideration of the shopper's buying process (which can be significantly different to the seller's desired selling process) as well as the needs of the individual shopper.
That is to say that making an appropriate decision to cross-sell or up-sell must be based on the shopper's situation of the moment: whether they are considering which product to purchase, or the decision has already been made. Neglecting to consider the difference leads to serious problems that will cause the immediate attempt to fail.
Once that has been determined, making an effective decision of which products to offer must rely on an intelligent or, preferably, an informed decision as to the specific products that will be needed based on the need that the shopper is attempting to address.
The latter is very similar in both cross-selling and upselling, but the former is significant to the decision as to whether cross-selling or upselling is appropriate at all.
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