E-commerce requires meaningful product relationships: here are the four most important ones

Research has shown that one of the (rather few) things that gives us humans happiness and better health is meaningful relationships. The amusing part is that what applies to human relationships also applies to product relationships in e-commerce. Meaningful relationships may not make you happy, but they give you more sales through higher customer satisfaction, average order value and conversion rate. 

In the old shop-based society, documented relationships between products were less important, because the shop floor space was too limited to display all products that gave added value when purchased together. It was also the shop staff who had the relationships in their heads and therefore tipped you off that it could be good to buy an HDMI cable at the same time as you bought a DVD player. Or that there was a slightly better computer at a slightly higher price than the one you had almost settled on. The relationships simply sat in the heads of the staff, and the employees who had a grip on the relationships were the ones who managed to drive additional sales.

In an e-commerce world, we cannot rely on that relationship knowledge sitting in people's heads. It has to be documented and, in a structured way, introduced into your PIM system and your e-commerce platform so the information becomes available to the consumer.

But just as in your family and circle of friends, relationships between products are complex and very varied. The relationships cannot be defined and summarised in one type of relationship. You probably do not have the same kind of relationship with your mother-in-law as you have with your old childhood friend. And just as it would be a disaster if you tried to handle your personal relationships in one and the same way, it will not go well if you handle product relationships according to one single template.

OK. Enough analogies to personal relationships now. Let us look at which product relationships are worth having a grip on as an e-commerce operator. Note that the need for product relationships can vary considerably between different types of business. Below I go through the most common ones, and I use product examples from Volvo Cars and Apple to illustrate the relationships.

Up-sell relationship

One of the more common types of relationship that many e-commerce operators actually bother to document is the relationship from a product to a "slightly better" alternative. This drives sales and hopefully also margin. It is important that the relationship goes to a product substitute that sits reasonably close to the original product if the retailer is going to succeed in "nudging" the consumer to pay a little more. It is quality and function that make the relationship relevant. So also make sure that differences in quality and function are clear in your product descriptions to justify a higher price.

Example:

• Volvo V60 vs Volvo V90: Two estate cars with the same type of function, but the latter is a bit more premium and has more features, which is also reflected in the price.

• iPhone 13 vs iPhone 13 Pro:

Down-sell relationship

All too often we as retailers are focused on additional sales in the form of going one step up the price/quality scale. We focus only on our own assortment, as if the consumer were not evaluating other retailers' products and brands. 

By having documented and exposing relationships that go the other way , we can reach consumers who otherwise would not have completed a purchase with you at all because of the price, but with the competitor with a different product or brand.

It is often reluctant for retailers to create these kinds of relationships because it contradicts the basic principle of "up-selling and cross-selling". But if the alternative is not selling anything at all, most people see the point of this kind of relationship. 

Often a down-sell relationship is just an inverted up-sell relationship, but not always.

Example:

• A Volvo V60 Recharge (plug-in hybrid) vs Volvo V60 (petrol):

• An iPhone 13 vs iPhone 13 Mini:

Substitute relationship

Now I have illustrated two types of relationships where the products differ on the price/quality scale. Either because the consumer can consider higher quality and more features, or because the price may disqualify your original product that the consumer was looking at. 

There are two situations where you want to have relationships to very equivalent products to get a transaction. Where it is not quality or price that makes the difference:

• A product has been discontinued

• A product is out of stock or is a special order item with long delivery time.

Instead of losing the sale from a purchase-eager customer to another retailer, you can make sure to expose pure substitute products. It may be a product in a different colour that is in stock, or at least a clearly comparable product. "Substitute at the same price level" is the mantra here.

Pure product substitutes (colour, size etc.) are often handled in a variant manager in the e-commerce operation if a variant is out of stock. Replacement for a discontinued product, on the other hand, needs to be solved with another tactic: a redirect or an information text on the discontinued product page with a clear reference and link to the closest replacement product. Whatever it is, you need to make sure the relationships are in place.

Example:

• V60 vs V60 stock car:

• iPhone 10 vs iPhone 11:

  Less good relationship handling on Apple.com…

Cross-sell relationship

When products complement each other and give a total greater customer value when purchased together, we are talking about cross-sell. Typically it is products from different categories that give complementary value (for example a candlestick to a candle), or they are entirely necessary for the base product to work (for example batteries for a torch). 

By having a grip on cross-sell relationships, you have the possibility to drive your average order value and thereby increase your profitability as an e-commerce operator. 

Example:

• iPhone + wireless headphones:

• Volvo + roof box:

There are two different strategies for finding and presenting complementary cross-sell products. These can also be combined:

• Manual creation of cross-sell relationships: With this strategy you need both fairly deep knowledge of the products and of consumers' buying behaviour. You need to be able to predict which products sensibly complement the original. This is a typical job for a "Digital Merchandiser". And do not forget that the product portfolio changes over time, so it is a big job in quality-assuring the relationships, especially if you have a large assortment.

• Use a relevance tool: A relevance tool (like for example Apptus eSales or Rich Relevance) can find patterns in how consumers act and buy. Example: when people buy a drill, they also often buy a bit and drill set. These patterns and their data can then be used in your e-commerce so they automagically present complementary products on, for example, a product page. Our experience is that this automatic relationship handling beats the manual one hands down, given that you have behaviour data in place. It is typical that you as an e-commerce operator are sometimes surprised by which products are often sold together, but the average order value with an automatic relevance system speaks its clear language. 

There are also some special cases of cross-sell relationships worth mentioning, precisely because they do not lend themselves so well to automatic handling. If you have these kinds of relationships, there can be value in driving it manually, or combining the manual strategy with a relevance tool.

• Mandatory accessory relationship: As the example with batteries for a torch shows, you cannot get any value at all from certain products without certain accessories. A TV needs an HDMI cable, a sofa frame needs a matching upholstery and so on. If you do not sell products as combinations or bundles already, you should make sure you have the relationships in place and at least recommend the accessory. Otherwise the result can be a sour customer.

• Consumables and spare parts relationship: If you sell spare parts and/or consumables that are product-specific, you should handle these relationships with care (that is, manually). The customer will hardly be happy if they receive the wrong type of ink cartridge for their printer, or the wrong cutlery basket for the dishwasher as replacement for the one that just broke. If you have your product and parts structure set up correctly in your PIM, this should not be a problem though.

So, by not having a grip on your meaningful product relationships, you as an e-commerce operator leave money on the table. Sometimes a lot of money, at that. How you then choose to expose these relationships is entirely up to you and your e-commerce operation: proposals on a product page, through bundles, buying guides or redirects for a discontinued product and so on.