The Online CMO by Philip Hallenborg

At some point in the development of your site, demands on up-sell and cross-sell initiatives will become stronger and stronger. Maturity in most markets means that price competition focuses on the base products or services (that are comparable substitutes) not on the wide number of accessories, options, extras or services that are offered at and after point of sale. As we all know, focus on price on the base means very low margins on low end line of businesses and a necessity to make the margins elsewhere.

This is where the challenge starts. I have previously written about the pareto type distribution of up-sells on an option with say five choices. Two options will be chosen by the bulk of customers, one of the choices often being the default itself. Include three options and you cover at least 80% of the customers. With five options you are starting to balance between addressing the long tail of demand (special needs and choices) and the extra cost involved in people simply getting tired of choices (and abandoning the process) and the cost of administration and complexities when adding options.

Ultimately the question to be asked is whether or not the customers’ willingness-to-pay increases not with the add-ons but with the option to add them. If the combination of products and packages on your site are not viewed as a clear differentiation vs. your competition, my guess is that someone else will focus on the basic products and the most common up sells. In doing so they will shave off a good chunk of opex that you continue to carry, but they still manage to address the market with the same margin%. Worst case your competitors will also benefit from a more sensible number of clicks from consideration to purchase and see a higher convergence of leads to orders.

Unless your customer is an danced super user that sees options as a unique differentiator and must have, limit your options and invest the time and cost elsewhere.