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Tips The underestimated math of ecommerce upsells and conversion rate.

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This is an excerpt from our upcoming book, The Ultimate Guide to Growing Resort Ecommerce Revenue. Click here to download a preview→

How many times have you heard the words:

“Would you like fries with that?”

As simple and common as that phrase is, it’s easy to forget that this is an upsell. Humans like you and me are surrounded by upsells. Get your oil changed and you’ll be offered new brakes, air filters, or transmission fluid. Visit a restaurant and you’ll be asked if you’d like dessert. Buy a new lawn mower and don’t be surprised if you’re offered a warranty package.

We hear phrases like this for a very simple reason: they work. They work because they get people to buy more than they were originally planning to buy.

In other words, they generate more revenue from the same number of customers.

Success vs Failure

If we tie this back to our conversions around conversion rate and friction, however, the success of any of these upsells depends on one thing: the increase in revenue from upsells being greater than the decrease in revenue lost from the friction caused by adding this unnecessary step to the purchase process.

Let’s do some simple math to explore when this does, and doesn’t, make sense. In each case we’ll start with a scenario where, before making a change to our funnel, every month we’re seeing:

  • 10,000 booking engine visitors
  • 10% conversion rate (1,000 bookings)
  • $100 average booking size
  • a total $100,000 of revenue a month

Example #1 – Not Enough Revenue
Let’s say we make a change to our booking funnel that decreases conversion from 10% to 5% and increases average over size from $100 to $150. Crunch the numbers and we’ll find that our new monthly revenue is $750,000. In other words, the drop in revenue due to the decrease to our conversion rate is larger than the increase in revenue due to the increased booking size.

Example #2 – Breaking Even
What if the change we make increases the average order size to $200? Even if our conversion drops to 5%, we’ll still end up with our original monthly revenue of $100,000 because the conversion rate and booking size changes offset one another.

Example #3 – Plenty of Revenue
But what if that change your conversion rate only dips a tiny amount? Not even a full percent. What if that change only brings your conversion rate down to 9.9%? In this case, your average order size only has to increase by $1 to $101 (technically $101.01) in order to have your net revenue come out on top. If just 5% of people who see an upsell book something worth $50, you’ll increase revenue nearly $102,500.

More Than Just Upsells

So which of those scenarios best describes the actual math behind upsells? The answer…drumroll please…is Example #3.

Usually, it’s not even close.

Some online retailers have seen as many as 30-50% of shoppers take the upsells with virtually no change in conversion. In some cases, upsells can actually increase conversion because shoppers realize they are able to book something now that they would have had to drive across town (or virtually, by finding another website that sells this other thing) to buy.

This is an excerpt from our upcoming book, The Ultimate Guide to Growing Resort Ecommerce Revenue. Click here to download a preview→

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