Every retailer wants to increase their revenue, but it’s not just a case of bringing in new shoppers. While more shoppers will translate to greater purchase volume, the really important metric to consider is overall purchase value. How much, and how often, are these consumers spending with you?
Some shoppers may only purchase from your brand one time, or may only buy from you during major sale events. These shoppers are still important and deserve a great customer experience, but they’re unlikely to have a high customer lifetime value (CLTV). And as a retailer, CLTV should stay top of mind. By maximizing the CLTV of your most loyal shoppers, you can significantly increase your revenue without needing to spend on customer acquisition costs (CAC).
Read more: Turning customer churn into loyalty
Once you’ve identified shoppers with the most promising CLTV, the next step is to consider what would make them spend more with you. This is where upselling can be a hugely valuable technique.
Definitions to remember
Retailers can calculate their average CLTV by simply dividing their monthly revenue by their churn rate. This calculation can be helpful in understanding how your business is doing in the big picture. However, this figure gets really interesting when you start to look at the CLTVs of individual shopper segments. What you want to understand is what your highest spending shoppers have in common. By identifying these common threads, you can learn more about these valuable consumers and start to tailor their experience for maximum enjoyment—and maximum conversion.
One key way to personalize this experience is through dedicated upselling strategies. Similar to another popular retail approach, cross-selling, upselling is when a brand is able to get a shopper to buy a more high-end version of their original product choice. It also refers to when retailers sell related accessories or add-ons after a shopper has added an item to their shopping cart or made an initial purchase. The shopper gets the best products they need, and the retailer makes additional sales. Win-win.
Simply suggesting that a shopper spend more money than they intended to is unlikely to go down well. Instead, retailers need to be strategic about how they approach their shoppers and what items they suggest to them.
Frequently, upselling takes place at the checkout or immediately afterwards, through a follow-up email or SMS communication. This can be a smart strategy, as the shopper is already in a buying mood and has already committed to spending money—at this stage, spending a bit more on the right thing is less of a leap. If an upsell attempt occurs before the transaction is completed, this also ensures they don’t need to fill out their purchasing information more than once.
It’s also critical that you only suggest items that make sense for that particular shopper. If their basket includes items from a single line, perhaps they would be tempted by other, similar products from that collection? If they are focused on a particular category of goods, complementary items are likely to be a good fit. Finally, if they’ve made a big purchase on something special, why not suggest that they complete the experience by getting the right accessories to go with it?
Converting returns into revenue
The other key moment to upsell is actually during the returns process. It may seem like a strange time to ask a shopper to spend more with your company—after all, they just decided they didn’t want to keep their first item. But this is actually a common error in retail—and a missed opportunity.
Shoppers are actually much more tolerant of returns than we might expect. A survey by Doddle found that a positive returns experience would encourage 84% of consumers to shop from that brand again (and increase their CLTV). When it comes to that experience, shoppers spoke about the importance of free shipping (60%) and quick refunds (40%). With an upsell at the point of return, the need for a refund is eliminated altogether, which is one less thing for the shopper to worry about.
While an exchange is simple and effective, an upsell can help the shopper feel like they’ve “won” by getting a superior product, while the retailer gets the extra revenue value. This promotes shopper loyalty and overall higher CLTV. In some cases, you might want to offer “bonus credit” if the shopper makes that extra purchase right then, as an extra incentive. Even just $10 in additional credit can help make the shopper feel valued and more convinced to spring for the higher-end item.
Capitalizing on returns is not just a pipe dream. Many brands who use Loop can attest to how meaningful upsells can be for the bottom line. When luxury travel and luggage company Monos introduced the Loop returns management system and enabled the Instant Exchange and Shop Now features, they saw an additional 23% in retained revenue and an average $21 upsell revenue per return. They were also able to use this data on returns to better inform their business decisions and meet their sustainability goals.
For sportswear company LSKD, the ability to offer Loop’s Bonus Credit and Shop Now functionality enabled them to tap into their most loyal shopper base and minimize their revenue loss. Not only did 37% of shoppers choose to use the Instant Exchange function, but the company was able to retain an additional 53% of return revenue. It’s great proof that your loyal shoppers want to purchase from you—sometimes they just need you to make the experience as easy as possible. This success no doubt contributed to Monos’s annual revenue of $50 million.
Every shopper that interacts with your brand deserves a great shopping experience, and this is what will keep them coming back time and time again. Increasing customer loyalty will boost your CLTV and your bottom line, so make sure to take advantage of every interaction to make them feel appreciated and seen. Remember what they like to buy from you and use that knowledge to prompt add-on sales or upgrades, whether at the checkout or at the returns stage. It’s these little details that will keep your shoppers happy and ensure that their purchase values keep growing.
Learn how Loop can help you build a profitable business through exchanges and upsells. Check out a demo.