For Australian SMEs, the debate between upselling and cross-selling often centres on which tactic delivers a better return. While both are valuable sales strategies, we consistently find that upselling generally generates superior margins. This isn’t to say cross-selling is ineffective – it’s simply that the margin potential is typically higher with upselling.

Upselling involves encouraging customers to purchase a more expensive version of the product they’re already considering. Think of offering a ‘premium’ package with extra features, or a larger quantity at a slightly discounted rate. Because the customer already has purchase intent, the incremental cost to secure a higher-value sale is often lower than convincing them to buy something entirely new (as with cross-selling).

Here’s what we’ve observed with Australian businesses:

• Higher Average Order Value (AOV): Upselling directly increases AOV, and a higher AOV translates to improved revenue per customer. This is a key metric for sustainable growth.
• Stronger Perceived Value: Customers already interested in your core offering are more receptive to added value. They’re less likely to perceive a price increase as a barrier if they understand the benefits of the upgraded option.
• Reduced Customer Acquisition Cost (CAC): You’re selling more to existing customers, which is significantly cheaper than acquiring new ones. Focusing on upselling leverages your current marketing investment.
• Margin Protection: Premium versions often have higher margins than base models. Even a small percentage increase in customers opting for the premium version can significantly impact profitability.

Cross-selling – suggesting complementary products – is still important for enhancing the customer experience and increasing overall sales volume. However, the margins on these add-on items are usually lower. For example, selling a phone case with a new phone is valuable, but the case margin won’t match the phone’s.

To maximise your return, we recommend prioritising upselling opportunities. Analyse your customer journey to identify key moments where you can present relevant upgrades. A well-timed upsell, focused on delivering genuine value, is a powerful driver of margin improvement for Australian businesses. Consider A/B testing different upsell offers to refine your approach and optimise results.