There is a practical and effective application of generative AI that you can implement today. Something that could increase your revenue up to 30%. A scenario where genAI is specifically well-suited to transform your business in a way that your conventional technologies cannot: cross-selling and upselling.
Cross-selling is recommending related or complementary products to what the customer is already considering or has added to their cart. Upselling is encouraging customers to upgrade to a higher-priced or premium version of the product they are interested in, or add-ons that expand the product’s features or capabilities.
Conventional technologies and techniques often require manual, labor-intensive efforts to define connections between related products and features. This effort is a continuous process, as product features change, products are retired, and new products are introduced. The effort compounds as the number of SKUs your business has increases, and the possible combinations grow exponentially. GenAI can automate this process, identify relationships between products which may not be immediately obvious, and be more responsive to emerging trends and consumer demands.
Why You Should Care
Cross-selling and upselling can have a profound effect on your e-commerce revenue and growth. In fact, you could increase your revenue by up to 30%, doubling the average e-commerce revenue CAGR. You don’t have to take our word for it. According to industry experts, cross-selling and upselling can result in:
- 10-30% increased revenue (Accenture)
- 10-30% increased customer lifetime value (Harvard Business Review)
- 75% increased customer retention (Gartner)
- 68% more cost-effective than acquiring new customers (Invesp)
The impact can be even more dramatic when these cross-sell and upsell techniques use personalized product recommendations:
- 49% of customers make additional purchases (EDUme)
- 150% increased conversion rate (Forrester and Gartner)
- 300% increased revenue (Forrester and Gartner)
If you augment your personalized recommendations using deep customer behavioral insights, conversion rates can jump to a 300% increase (Visenze). Creating hyper-personalized recommendations and leveraging deep customer shopping insights is precisely where genAI excels.
More Effective Cross-Selling and Upselling
GenAI can dramatically change the effectiveness of cross-selling and upselling. It does this in several ways:
- increased relevance
- leveraging business intelligence
- iterative improvement
Increased Relevance
Why offer someone with oily hair a shampoo that is going to worsen their condition? Why send a marketing email for an alcohol-based skin toner, when everything in that customer’s shopping history should tell you they never, ever buy products like that? Forcing your customer to scroll through thousands of hues, or try to decipher cleverly-named colors like “passion” or “electric,” for products that absolutely do not fit their skin tone or seasonal color palette can be extremely frustrating.
Imagine instead a shop where your customer has a dynamically generated, “just for you” landing page that automatically suggests products that are a perfect fit based on their past shopping history. GenAI does this by:
- Customer Segmentation and Personalization. Analyze customer data, including purchase history, preferences, and behavior, to create personalized product suggestions.
- Recommendation Engines. Contextually relevant browsing and search experiences return results based on the customer’s browsing history, previous purchases, and real-time market trends.
- Occasion-Based Bundles. During festive seasons or special events, e-commerce platforms can use AI to suggest bundles that include complementary products for a complete and satisfying shopping experience.
- Seasonal and Limited Edition Bundles. Predict and analyze seasonal trends to create bundles that are relevant to specific times of the year. Create limited edition bundles, fostering a sense of exclusivity and urgency among customers.
- Expert Advice. Provide informative content that highlights the benefits and advantages of higher-tier products, helping customers make informed decisions.
Leveraging Business Intelligence
Customers who buy bronzer, eyeliner, lip liner, mascara, and nail polish often buy brushes. Why not increase brush sales by reminding them? You may have customers who visit to buy makeup. You may have customers who visit to buy skincare products. Why would you miss an opportunity to encourage them to do both at the same time? Suggest vitamin C serum to shoppers buying illuminating foundation. Help your customers get that perfect brow arch by suggesting a filler gel with their brow pencil. Refresh tired-looking eyes by suggesting an eye cream when they’re shopping for a concealer.
GenAI can create more appealing cross-sell and upsell strategies through:
- Dynamic Pricing Optimization. Dynamically optimize pricing based on various factors, such as demand, inventory levels, and customer behavior, to encourage customers to purchase the bundled products rather than individual items.
- Inventory Management. Predict demand for individual products, ensuring you hold only the right quantities of each item to create bundles without overstocking or running out of stock. Clear stale inventory and drive more efficient turnover by converting aging or less popular products when bundled effectively with more popular or in-demand products.
Iterative Improvement
Not sure if a moisturizer + cc cream bundle is going to sell better than a moisturizer + bb cream bundle? Will this brand sell better with that brand? Or this other one? With genAI, you can dynamically offer both to different customers, then measure the results. Next time, you can lean into the better selling duo. Do your customers overwhelmingly purchase one lip treatment and lipstick combo over another? Then suggest that combination more. Are pops of pink or latte makeup dominating the red carpet or the latest social media #GRWM posts? Dynamically create and suggest cross-sell and upsell bundles that hop on the trend.
GenAI does this by:
- A/B Testing for Bundle Optimization. Identify the most effective combinations and refine bundling strategies over time, optimizing for higher conversion rates and customer satisfaction.
- Adapting to Customer Feedback. Analyze customer feedback and reviews on bundled products to make data-driven improvements to existing bundles or creating new ones that better align with customer expectations.
- Market Trend Analysis. Continuously analyze market trends, customer reviews, and social media sentiments to identify emerging patterns to create product bundles that align with current trends, ensuring that offerings remain relevant and appealing to consumers.
Parting Thoughts
Generative AI will play a pivotal role in optimizing product bundling to deliver cross-sell and upsell strategies in e-commerce. By harnessing the power of artificial intelligence, businesses can create more personalized, relevant, and appealing bundles, ultimately enhancing the overall customer experience and driving increased sales and customer loyalty. Manage inventory and pricing strategies more effectively, and in real-time based on shifting customer behaviors.
