Tag: increase sales with cross selling

What is cross-selling and how does it increase sales?

A McKinsey study pointed out that companies implementing cross-selling strategies have seen an increase in revenue of up to 30%. So what is cross-selling?  Imagine you run a software company that provides CRM tools. One of your clients, a mid-sized business, uses your CRM software to manage their sales pipeline. During a routine check-in, your account manager learns that this client struggles with project management and team collaboration. Seeing an opportunity, the account manager suggests an add-on project management tool that your company offers. Since the client is already satisfied with the CRM software, they are likely to consider this additional product. This can lead to increased sales and enhance the client’s overall experience. This scenario illustrates cross-selling, a technique where a seller encourages a customer to purchase complementary or related products. Properly executed cross-selling can raise product portfolio sales by 10%.  In this blog, let’s explore what is cross-selling, the difference between upselling and cross-selling, and also common cross-selling strategies that are implemented.  What is cross-selling? Cross-selling is a sales technique implemented by key account managers, where a seller encourages a customer to purchase additional, complementary, or related products or services to the one they are already buying or considering.  The goal of cross-selling is to maximize the value of each customer transaction by fulfilling more of the customer’s needs with a broader range of offerings from the same seller. This strategy not only boosts sales but also enhances customer satisfaction by providing a more comprehensive solution to their needs. Difference between upselling and cross-selling It’s essential to distinguish between cross-selling and upselling, as they are often confused but serve different purposes.  Cross-selling involves offering complementary products to the one a customer is already purchasing. For example, suggesting a project management tool to a CRM software user, as in the scenario above. Upselling, on the other hand, is about encouraging the customer to purchase a more expensive version or an upgrade of the product they are considering or already own. For instance, if the same CRM software company offers a basic, professional, and enterprise version of their product, upselling would involve persuading a customer to move from the basic to the professional version. Cross-selling is also one of the easiest tactics to increase revenue. It can cost businesses 5 times more to get a new customer than to retain an existing one, making cross-selling important for customer retention. Both strategies aim to increase revenue, but cross-selling focuses on broadening the product portfolio a customer uses while upselling aims to enhance the value of a single product.  Guide: Cross-selling and Upselling Explained Advantages of cross-selling  1. Increased Revenue Cross-selling can significantly boost a company’s revenue by encouraging customers to purchase additional products or services.  2. Higher Customer Lifetime Value When customers buy more products or services from the same company, their lifetime value increases. Cross-selling keeps customers engaged with the brand and encourages repeated transactions over time. 3. Efficient Use of Customer Data Cross-selling strategies leverage customer data to make personalized recommendations. This efficient use of data not only boosts sales but also ensures that customers receive relevant and useful suggestions. 4. Market Penetration Cross-selling allows companies to introduce new products to existing customers, thereby increasing the market penetration of their product portfolio. This strategy can be particularly useful for new product launches. Disadvantages of Cross-selling A Harvard Business Review study discovered that some customer profiles aren’t suited for cross-selling as they tend to use loop-holes and result in net loss for the company.  “Cross-selling is profitable in the aggregate. But one in five cross-buying customers is unprofitable—and together this group accounts for 70% of a company’s “customer loss.” – The Dark Side of Cross-selling, HBR Before undertaking cross-selling decisions, firms need to look at their data set and formulate the customers they’ll be targeting in their marketing campaigns, that will make this favorable.  “If the cross-sell products/services bring additional value and enrich the customer outcomes, then it is less ‘selling’ and more ‘solving.’ The focus should be on what the customer benefits from, not what the salesperson needs to sell.”  – Natalie Hogg, Method Q  Some other common pitfalls include,  1. Over-communicating and Spamming  33% of consumers said they wouldn’t return to businesses that didn’t send relevant follow-ups. If not done correctly, cross-selling can annoy customers. Persistent or irrelevant cross-selling attempts can lead to customer dissatisfaction and might even result in losing customers. 2. Increased Sales Cycle Complexity Introducing additional products or services during the sales process can complicate and lengthen the sales cycle.  A Mckinsey study noted that accounts where the reps had to cross-sell to unfamiliar people/products took about 18 months longer to achieve results.  Sales representatives need to be well-trained to handle these complexities effectively. 3. Risk of Overextension There’s a risk that companies might overextend their product offerings, leading to inventory issues and operational inefficiencies. Offering too many products can also dilute the company’s brand focus. Common Cross-selling Strategies and Examples  1. Personalized Recommendations Personalized recommendations leverage customer data to suggest products that are relevant to the customer’s specific needs and past behavior. Personalized recommendations are one of the most effective cross-selling techniques, with a 35% increase in sales when recommendations are based on customer data.  This approach requires a good understanding of the customer’s business and challenges. Amazon is a prime example of personalized cross-selling. When a customer views a product, Amazon shows a “Frequently Bought Together” section, suggesting complementary items.  For B2B companies, this can translate into using CRM data to understand what additional tools or services might benefit a particular client. Use customer data to create personalized product recommendations. This can involve using CRM systems to track purchase history, customer feedback, and industry trends.  By understanding your customers’ needs and behaviors, you can offer relevant products that add value to their business. 2. Bundling Products Bundling involves offering a set of products together at a discounted rate, which can be more appealing than purchasing each item separately. Businesses implementing bundling strategies