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 Show Date: 1/28/2008
 Segment 1 Ė Building Complete Product Lines Ė Dr. Ralph Wilson

Chris: Thanks for joining us today. Iím Chris Malta.

Colette: And Iím Colette Marshall. Iím sitting in for Rob today.

Chris: Many online sellers think of product sourcing in terms of finding a product to sell rather than building a complete product line, but your customers are usually interested in other related products as well, and by sourcing them you can greatly improve your customer sales and satisfaction. Today weíre talking to popular eBiz author, Dr. Ralph Wilson, who has been quoted by everyone from ABC online to the Wall Street Journal about using cross-sellers and up-sellers to move your businessís bottom line.


Chris: Dr. Wilson, welcome to the show.

Dr. Wilson: Hello.

Chris: Great to have you here, itís been a long time since weíve talked.

Dr. Wilson: Yes, thank you.

Chris: So how do define cross-selling and up-selling?

Dr. Wilson: Well, cross-selling is where youíre selling one product they might be looking at, but youíre also giving information about similar products as well as accessories to the product. So if youíre selling revolvers, you sell silver bullets.

Chris: Right.

Dr. Wilson: If youíre selling silver bullets, youíre also selling an ammunition belt.

Chris: Right.

Dr. Wilson: So the idea is that theyíre there for one visit, but instead of just buying one item they might buy two. They might buy an accessory or something with it. So thatís cross-selling. Up-selling is where they come looking for one product, but end up buying something thatís somewhat more expensive. So they come looking at good and buy better or best.

Chris: You know, we use an example that relates to up-selling all the time where you use a loss leader, for example, something that you donít actually make a lot of profit on, or even lose profit on. Say, for example, a cheap 2-slice toaster, and then you put it right next to the big 4-slice bagel master, right.

Dr. Wilson: Yeah.

Chris: And thatís a form of up-selling, correct?

Dr. Wilson: Oh, yeah.

Colette: How do cross-selling and up-selling affect conversion rates Dr. Wilson?

Dr. Wilson: Well, if someone comes to your store looking for a particular product, maybe theyíve come in through pay per click advertising or maybe theyíve come through some search engine thing has brought them to your site looking for a product, theyíll take a look at the product and say, is that what I want, yes or no? But if you offer not only that product, but two or three that are similar to it, now they have a choice, and the chances of them buying are a whole lot better than if you just had one product. I think the real masters at this are Amazon.

Chris: Yes.

Colette: I was about to say that myself.

Dr. Wilson: I mean, they keep track of what youíve looked at in the past and what you purchased. And the next time you come you may be looking for something entirely different, but theyíre going to be showing you different things. And when you look at their conversion rates, last time I looked, I havenít looked this year, last time I looked they were at 14% conversion rate.

Chris: Oh, thatís huge.

Dr. Wilson: Now, that doesnít come just from cross-selling, it comes from people having confidence in them as a retailer.

Chris: Right.

Dr. Wilson: But when someone comes to their store, the chances are 14% that theyíre going to walk out having bought something, and it often isnít the kind of thing they came in to buy.

Colette: Like you said, sometimes people arenít exactly sure what theyíre wanting to buy, so if you put it up in front of them you just give them choices, and more likely theyíll buy instead of going somewhere else.

Dr. Wilson: And it may be that when they come in the door, as you say, theyíre not sure of what they want, but in the process of looking at the three or four choices that you give them, now they say, okay, I think this is what I want, and why. Otherwise, they might be doing that shopping through several stores or several pay per click ads, theyíre making their decision on what they want to buy. Now theyíre doing it in your store.

Chris: Now, we find that a lot of people who start an eBiz online donít do this at the beginning, right? For example, we find a lot of people who get married to a single product they want to sell and thatís all they want to sell. They donít want to hear about anything else, but thereís so much opportunity here.

Dr. Wilson: Yeah. Well, thatís how people get started. They get excited about selling some particular thing, but thatís not how they end up succeeding as an online retailer.

Chris: Yes.

Dr. Wilson: They have to grow and mature. And we probably have some listeners now that have one or two products that are doing okay, but the next step now is to broaden what theyíre offering within a narrow niche.

Chris: Right. Letís talk about placement, Ralph, what is the recommended placement of cross-sell and up-sell promotions?

Dr. Wilson: Well, there are several things to do. One is you always ought to have on the homepage of your store various new products or high markup products, something thatís going to attract attention, and rotate those. The ones that you show that are popular are likely to sell quite well. So they may have come to your store looking for something else, but they see that on your front page and click into it and start looking at it. So your homepage of your site is one place. A second place that youíll want to put cross-sell kinds of items is on the product page with the item that they may be looking at. So letís say Iím looking at a down vest to keep me warm in the winter, on the right side at Landís End it will show several other down vests or vests of that type that are alternatives. So on your product page is a great place to show the accessories or the similar kinds of items.

Colette: And bundling would be another thing that you could put right there in your site, thatís another form of up-sell.

Dr. Wilson: Exactly.

Colette: And itís very popular lately.

Dr. Wilson: Exactly. The third place is on your checkout pages. So they put something in their shopping cart and you show them an accessory to it. Or perhaps you show them something even better, or something, as you mentioned, bundled. So on the front page, on the product page, on the checkout page. Another place that some of the larger companies particularly are doing this, is they have their pay per click ads come into a sectional page that will show a number of items in a section. So thatís a form of cross-sell right there.

Chris: Right. Now, when you talk about accessories, Ralph, thatís one thing we recommend. We see so many people who start out in this business and want to start on electronics, thatís always the thing. They always want to sell the Wiiís and the Nintendoís and the cell phones and all these kinds of things, where the real money in those markets is often made in the accessories, isnít it?

Dr. Wilson: Yeah. Iíve always thought about HP sells these printers for really low prices.

Chris: Oh yeah.

Dr. Wilson: But have you ever tried to go and buy ink (laughter).

Colette: (Laughter)

Chris: Yeah, and cables?

Dr. Wilson: Itís locked in.

Chris: Itís ink and cables, thatís where they make their money. Iíve actually talked to people, you know, at some of the big box stores about that. The printers themselves, theyíre getting some manufacturerís rebates and so forth, because theyíre buying so many at a time, but theyíre selling the printers for just about a break-even, sometimes even less. But they know theyíve got you for that ink and they know theyíve got you for a $30 cable.

Dr. Wilson: Yeah.

Chris: So yeah, we tell so many people that, look, if you want to sell electronics itís a tough market, but where you really can make some money is in the accessories and I think thatís true for just about any kind of product.

Dr. Wilson: Yep, I think youíre right.

Chris: So, Colette mentioned bundling as a form of up-sell, and bundling, of course, has been going on for a long time. Why would you say itís so popular?

Dr. Wilson: Well, when you think about it, if you sell one product with, say, a 30% margin or 40% margin, you make 40% of $10.

Chris: Right.

Dr. Wilson: But if you sell two products bundled together your margin might not be quite as high, but now youíre making 35% of $30.

Chris: Yes.

Dr. Wilson: And so bundling makes a huge amount of sense. Amazon does this with their books. Iím a big book fan, so I go and look at a book and right below the description of the book it will say, you can buy this book and this book together for only such-and-such.

Chris: I was just there last night doing the same thing (laughter).

Colette:/Dr. Wilson: (Laughter)

Chris: I was looking for a book and I saw three other books, yeah.

Dr. Wilson: The deal that they offer is really not all that good, as far as extra savings.

Chris: Right.

Dr. Wilson: But they must be successful at it or they wouldnít keep doing it.

Chris: Oh yeah.

Dr. Wilson: So itís going to be a money-maker for them. Just the idea of buying this with this, just suggesting that to the customer, really puts the thought in their mind. And enough people buy that, theyíve made a little bit of extra money right there.

Chris: Right, and thatís where your bundling is actually a form of associating other products with the original product.

Dr. Wilson: Exactly.

Chris: Now, in some cases you can also bundle products together from the beginning.

Dr. Wilson: Right.

Chris: You know baskets, or just an assortment of just products that fit together.

Dr. Wilson: Mm-Hmm.

Chris: And when you do that, then you eliminate peopleís ability to cross compare pricing, right?

Dr. Wilson: Yeah.

Chris: So if youíve got one popular item, but you bundle it together with two other accessories that go with it and you set one price on the whole thing, then people canít go cross check the pricing on the original item on other sites, right?

Dr. Wilson: Right. Some companies, I think, the larger companies do this by getting a special model number from the manufacturer thatís a little bit different than anybody else so you canít do price comparisons quite as easy on it.

Chris: Oh.

Colette: You know, the other thing it gives you is a unique product thatís on your site. When you create your own gift basket and bundle that together itís something unique that buyers may not find anywhere else.

Chris: It is time for a quick break. Subscribe to our free product sourcing newsletter at ProductSourcingNews.com to stay up to date with the latest product sourcing news, check for upcoming tradeshows in your area, and find spotlighted suppliers you can use in your ebusiness. Weíll continue learning more with Dr. Ralph Wilson when we return. Iím Chris Malta.

Colette: And Iím Colette Marshall.

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