Cross-selling
Encyclopedia
Cross-selling is the action or practice of selling among or between established clients, markets, traders, etc. or the action or practice of selling an additional product or service to an existing customer. This article deals exclusively with the latter meaning. In practice, businesses define cross-selling in many different ways. Elements that might influence the definition might include the size of the business, the industry sector it operates within and the financial motivations of those required to define the term.
The objectives of cross-selling can be either to increase the income derived from the client or clients or to protect the relationship with the client or clients. The approach to the process of cross-selling can be varied.
Unlike the acquiring of new business, cross-selling involves an element of risk that existing relationships with the client could be disrupted. For that reason, it is important to ensure that the additional product or service being sold to the client or clients enhances the value the client or clients get from the organization.
In practice, large businesses usually combine cross-selling and up-selling
techniques to enhance the value that the client or clients gets from the organization (and vice versa).
, like consulting
needed to make and integrate an acquisition, the use of one firm reduces the fingerpointing that is common when a problem occurs in an area that straddles two or more services; if only one firm is responsible, fingerpointing is eliminated.
For the vendor, the benefits are also substantial. The most obvious example is an increase in revenue. There are also efficiency benefits in servicing one account rather than several. Most importantly, vendors that sell more services to a client are less likely to be displaced by a competitor. The more a client buys from a vendor, the higher the switching cost.
Though there are some ethical issues with most cross-selling, in some cases they can be huge. Arthur Andersen
's dealings with Enron
provide a highly visible example. It is commonly felt that the firm's objectivity, being an auditor, was compromised by selling internal audit services and massive amounts of consulting work to the account.
Though most companies want more cross-selling, there can be substantial barriers:
Broadly speaking, cross-selling takes three forms. First, while servicing an account, the product or service provider may hear of an additional need, unrelated to the first, that the client has and offer to meet it. Thus, for example, in conducting an audit, an accountant is likely to learn about a range of needs for tax services, for valuation services and others. To the degree that regulations allow, the accounts may be able to sell services that meet these needs. This kind of cross-selling helped major accounting firms to expand their businesses considerably. Because of the potential for abuse, this kind of selling by auditors has been greatly curtailed under the Sarbanes-Oxley Act
.
Selling add-on services is another form of cross-selling. That happens when a supplier shows a customer that it can enhance the value of its service by buying another from a different part of the supplier's company. When one buys an appliance, the salesperson will offer to sell insurance beyond the terms of the warranty. Though common, that kind of cross-selling can leave a customer feeling poorly used. The customer might ask the appliance salesperson why he needs insurance on a brand new refrigerator, "Is it really likely to break in just nine months?"
The third kind of cross-selling can be called selling a solution. In this case, the customer buying air conditioners is sold a package of both the air conditioners and installation services. The customer can be considered buying relief from the heat, unlike just air conditioners.
The objectives of cross-selling can be either to increase the income derived from the client or clients or to protect the relationship with the client or clients. The approach to the process of cross-selling can be varied.
Unlike the acquiring of new business, cross-selling involves an element of risk that existing relationships with the client could be disrupted. For that reason, it is important to ensure that the additional product or service being sold to the client or clients enhances the value the client or clients get from the organization.
In practice, large businesses usually combine cross-selling and up-selling
Up-selling
Upselling is a sales technique whereby a seller induces the customer to purchase more expensive items, upgrades, or other add-ons in an attempt to make a more profitable sale. Upselling usually involves marketing more profitable services or products but can also be simply exposing the customer to...
techniques to enhance the value that the client or clients gets from the organization (and vice versa).
Cross-selling of professional services
Benefits that can accrue to the customer include the efficiency and leverage that result from using a single supplier for multiple products. When buying complex professional servicesProfessional services
Professional services is an industry of infrequent, technical, or unique functions performed by independent contractors or by consultants whose occupation is the rendering of such services....
, like consulting
Consultant
A consultant is a professional who provides professional or expert advice in a particular area such as management, accountancy, the environment, entertainment, technology, law , human resources, marketing, emergency management, food production, medicine, finance, life management, economics, public...
needed to make and integrate an acquisition, the use of one firm reduces the fingerpointing that is common when a problem occurs in an area that straddles two or more services; if only one firm is responsible, fingerpointing is eliminated.
For the vendor, the benefits are also substantial. The most obvious example is an increase in revenue. There are also efficiency benefits in servicing one account rather than several. Most importantly, vendors that sell more services to a client are less likely to be displaced by a competitor. The more a client buys from a vendor, the higher the switching cost.
Though there are some ethical issues with most cross-selling, in some cases they can be huge. Arthur Andersen
Arthur Andersen
Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations...
's dealings with Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
provide a highly visible example. It is commonly felt that the firm's objectivity, being an auditor, was compromised by selling internal audit services and massive amounts of consulting work to the account.
Though most companies want more cross-selling, there can be substantial barriers:
- A customer policy requiring the use of multiple vendors.
- Different purchasing points within an account, which reduce the ability to treat the customer like a single account.
- The fear of the incumbent business unit that its colleagues would botch their work at the client, resulting with the loss of the account for all units of the firm.
Broadly speaking, cross-selling takes three forms. First, while servicing an account, the product or service provider may hear of an additional need, unrelated to the first, that the client has and offer to meet it. Thus, for example, in conducting an audit, an accountant is likely to learn about a range of needs for tax services, for valuation services and others. To the degree that regulations allow, the accounts may be able to sell services that meet these needs. This kind of cross-selling helped major accounting firms to expand their businesses considerably. Because of the potential for abuse, this kind of selling by auditors has been greatly curtailed under the Sarbanes-Oxley Act
Sarbanes-Oxley Act
The Sarbanes–Oxley Act of 2002 , also known as the 'Public Company Accounting Reform and Investor Protection Act' and 'Corporate and Auditing Accountability and Responsibility Act' and commonly called Sarbanes–Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, which...
.
Selling add-on services is another form of cross-selling. That happens when a supplier shows a customer that it can enhance the value of its service by buying another from a different part of the supplier's company. When one buys an appliance, the salesperson will offer to sell insurance beyond the terms of the warranty. Though common, that kind of cross-selling can leave a customer feeling poorly used. The customer might ask the appliance salesperson why he needs insurance on a brand new refrigerator, "Is it really likely to break in just nine months?"
The third kind of cross-selling can be called selling a solution. In this case, the customer buying air conditioners is sold a package of both the air conditioners and installation services. The customer can be considered buying relief from the heat, unlike just air conditioners.
Examples
- A Life Insurance company suggesting its customer sign up for car or health insurance.
- An wholesale mobile retailer suggesting a customer choose a network or carrier after one purchases a mobile.
- A television brand suggesting its customers go for a [home theater] of its or another's brand.
- A laptop seller offering a customer a mouse, pen-drive, and or accessories.
See also
- AIDAAIDA (marketing)AIDA is an acronym used in marketing that describes a common list of events that may be undergone when a person is selling a product or service. The term and approach are attributed to American advertising and sales pioneer, E. St. Elmo Lewis. In 1898 Lewis created his AIDA funnel model on...
- Bait and switchBait and switchBait-and-switch is a form of fraud, most commonly used in retail sales but also applicable to other contexts. First, customers are "baited" by advertising for a product or service at a low price; second, the customers discover that the advertised good is not available and are "switched" to a...
- Choice architectureChoice architectureChoice architecture describes the way in which decisions are influenced by how the choices are presented , and is a term used by Cass Sunstein and economist Richard Thaler in the 2008 book Nudge: Improving Decisions about Health, Wealth, and Happiness...
- Contract of saleContract of saleA contract of sale is a legal contract an exchange of goods, services or property to be exchanged from seller to buyer for an agreed upon value in money paid or the promise to pay same...
- List of marketing topics
- MarketingMarketingMarketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
- Permission marketingPermission marketingPermission marketing is a term popularized by Seth Godin used in marketing in general and e-marketing specifically. The undesirable opposite of permission marketing is interruption marketing. Marketers obtain permission before advancing to the next step in the purchasing process. For example, they...
- Predictive analyticsPredictive analyticsPredictive analytics encompasses a variety of statistical techniques from modeling, machine learning, data mining and game theory that analyze current and historical facts to make predictions about future events....
- PromotionPromotion (marketing)Promotion is one of the four elements of marketing mix . It is the communication link between sellers and buyers for the purpose of influencing, informing, or persuading a potential buyer's purchasing decision....
- SalesSalesA sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
- Selling techniqueSelling techniqueSelling technique is the body of methods used in the profession of sales, also often called personal selling.Techniques in use in selling interviews vary from the highly customer centric consultative selling to the heavily pressured "hard close"....
- Up-sellingUp-sellingUpselling is a sales technique whereby a seller induces the customer to purchase more expensive items, upgrades, or other add-ons in an attempt to make a more profitable sale. Upselling usually involves marketing more profitable services or products but can also be simply exposing the customer to...
- Value added sellingValue added sellingValue added selling is one of several sales techniques that relies on building on the inherent value of a product or service. By its nature the value add technique is a more flexible and customized selling approach that requires input from a defined range of average customers...
- SafeCatchSafeCatchSafeCatch is a counter-criminal strategy invented by the FBI, to be adopted by bank tellers in the event of a robbery. The method focuses attention in the guise of good customer service and allows bank tellers to rattle robbers, who generally try to remain anonymous and may not be expecting an...
- Seattle concept that uses cross-selling