What is Cross-Selling? Advantages and Disadvantages

When a company or salesperson sells a customer a complementary or similar product to what the customer is already purchasing, this is referred to as cross-selling.

 

Cross-selling is regarded as one of the most effective forms of marketing because it allows businesses to increase revenue without having to convert new customers. Cross-selling can also help the company save money on other marketing channels.

 

 

What is Cross-Selling?

 

Customers are encouraged to purchase related or complementary items through cross-selling. Though the terms are frequently used interchangeably, they each have distinct advantages and can be effective when used in tandem. 

 

When done correctly, upselling and cross-selling are mutually beneficial, providing maximum value to customers while increasing revenue without the recurring costs of many marketing channels.

 

Cross-selling identifies products that meet additional, complementary needs that the original item does not. A comb, for example, could be cross-sold to a customer who is purchasing a blow dryer. Cross-selling frequently directs users to products they would have purchased anyway; by displaying them at the right time, a store ensures they make the sale.

 

Cross-selling is common in all types of businesses, including banks and insurance agencies. Credit cards are frequently cross-sold to people who open a savings account, and life insurance is frequently recommended to customers who purchase car insurance.

 

Cross-selling is frequently used in e-commerce on product pages, during the checkout process, and in lifecycle campaigns. It is a highly effective tactic for generating repeat purchases and demonstrating to customers the breadth of a catalog. 

 

Cross-selling can introduce users to products they were unaware you offered, increasing their trust in you as the best retailer to meet a specific need.

 

How does Cross-Selling Work?

 

Cross-selling works by recommending products or services that complement the product or service the customer is already planning to purchase. The method varies depending on the shopping experience.

 

In-store: In a physical store, this is often accomplished by showing the customer products or services that would complement their current planned purchase and explaining how the additional products or services would improve their purchase. A fast-food salesperson may offer a customer fries or another side to go with their sandwich.

 

Online: Cross-selling in online retail entails determining which products and services best compliment a specific purchase and creating offers that appear at appropriate times. When a customer goes to check out, a company may suggest three additional products that pair well with the product currently in the customer's shopping cart. 

 

Cross-selling online often takes more time on the part of the company because they must create a cross-sell option for each or most of the products or services offered. 

 

Also Read | Online Vs Offline Shopping

 

Advantages and Disadvantages of Cross-Selling to a Customer

 

Below are some of the advantages of cross-selling :

 

1. Improves Earnings

 

Of course, a customer who purchases multiple products or services will contribute more to your earnings than a customer who purchases only one product. However, there are other, more subtle ways that cross-selling can boost your earnings. 

 

If cross-selling improves customer satisfaction, you will save money by devoting less time and resources to customer acquisition.

 

2. Assists Customers in Feeling Understood

 

The most effective cross-selling makes customers feel understood. Assume you work in retail and show a customer a great pair of shoes to go with their new jeans. If you hit the mark, they'll form a stronger bond with you and your brand, believing that you truly understand their personality and connect on a deeper level.

 

3. Increased Convenience

 

Convenience is important to today's consumers. Nobody wants to drive from store to store looking for every product they need. Even moving from one website to another can be difficult. 

 

As a result, when you cross-sell them a product they adore, your customers will be delighted to return time and time again. Strive to become a one-stop-shop, and you'll have an easier time competing.

 

4. Increases Loyalty

 

Customers who have a stronger connection to your brand are more likely to stay with you in the long run. In fact, these customers may become brand ambassadors, spreading the word about your company to friends and family. 

 

When you offer a variety of products that your customers enjoy, they will become loyal to your brand, saving you money by lowering churn rates.

 

5. Customers are Moved through the Buying Process

 

Customers, as any experienced salesperson knows, have a habit of deferring purchasing decisions for extended periods of time. They may debate whether or not they require an item, shop around for the best price, or wait for a great sale. 

 

Cross-selling, on the other hand, can provide customers with the extra push they need to complete the purchasing journey, increasing their motivation to get everything they need in one place.

 

Also Read | Purchasing Power Parity (PPP)

 

We’ve talked about some of the disadvantages of Cross-selling below :

 

1. Cross-selling can be annoying for customers and ineffective at generating sales when it fails. This is almost always due to a lack of proper planning or data. And, strangely, even when it works, cross-selling is not always a good idea.

 

2. According to a 2012 Harvard Business Review study, certain types of problem customers can make cross-selling a profit-losing strategy.

 

3. It is critical to analyze customer data and metrics related to your cross-selling marketing campaigns to determine which efforts produce cross-sales without reducing overall profitability and which customers should be avoided or approached differently, such as upselling.

 

4. In general, if you don't have a well-thought-out strategy in place, cross-selling too many options to too many customers can be a losing proposition.

 

 

What is Upselling?

 

The process of encouraging customers to upgrade or include add-ons to the product or service they are purchasing is known as upselling. The promoted product or service is usually a more expensive item or add-on that can increase the overall order value.

 

Upselling, like cross-selling, typically occurs at a point in the buyer's journey when they have added something to their cart or begun the checkout process and are more receptive to final sales efforts. 

 

Because the customer has most likely already researched the product, they may have considered the upgrade or add-on, increasing the likelihood that they will make the switch at the last minute.

 

Consider the previous example of a smartphone sale. When a customer starts the purchasing process, the company can offer an upgrade to a model with more memory, a larger screen, a faster processor, and so on. They can also provide warranties or purchase protection, which are low-cost protections for the customer but extremely profitable for the company.

 

Also Read | Customer Marketing

 

 

Cross-Selling vs Upselling

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Cross-selling vs Up-selling

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Cross-selling and upselling are two distinct practices that entail approaching existing customers and persuading them to buy additional products or services. In the case of upselling, your goal is to persuade the customer to purchase a more expensive, more advanced product than they had planned by emphasizing its additional benefits.

 

A cable television provider selling a premium plan with a larger selection of channels to a current subscriber of a basic package is an example of upselling. Upselling can also mean approaching a customer at the point of sale for one product and offering a more advanced alternative.

 

The distinction between these techniques is also based on the customer's intent. When a customer is cross-sold additional items, they have no intention of purchasing them previously. Following the suggestion, the customer may think about adding those items because they match the primary order.

 

Companies must effectively use their existing and potential customer base to increase sales by offering appropriate additional products to the right customers in both upselling and cross-selling. Cross-selling, on the other hand, never involves persuading customers to replace their current options with more expensive ones.

 

Examples of Upselling and Cross-Selling

 

Upselling and cross-selling are employed in a wide range of businesses and industries. Here are three e-commerce platforms that have used these sales strategies:

 

1. Sleep Outfitters sells bed bases in conjunction with Mattresses

 

Sleep Outfitters is a well-known mattress store. When a customer buys a mattress, the website immediately offers a cross-sell by offering a bed base or foundation during the checkout process. They can even recommend the correct size because they know what size bed the customer is looking for.

 

2. Graham and Green sell home accessories alongside furniture

 

Graham and Green is a home lifestyle merchandiser based in the United Kingdom. When a customer buys large furniture from them and begins to check out, the website displays a cross-sell and suggests small interior accessories such as candles or lamps that complement the larger furniture the customer is buying.

 

3. Upsells warranties and protection plans in conjunction with computers

 

HP is a global leader in the production of personal computers. When a customer begins to purchase a computer from them, the website displays upsells in the form of various warranty and protection plans. They even have visual indicators to encourage customers to purchase more comprehensive plans.

 

 

3 Effective Cross-Selling Strategies

 

Whatever services you provide, the key to success is in your approach. Cross-selling requires a certain amount of skill and flair to pull off correctly. Your approach must be subtle; otherwise, the customer will be turned off. Here are a few pointers to help you improve the effectiveness of your cross-selling strategy:

 

1. Make use of Drip Emails

 

Rather than attempting to make an additional sale at the beginning of a new relationship, it may be best to wait a few days or weeks before selling a client on any other service. Instead of manually reaching out via email, set up a drip campaign to automatically follow up.

 

Consider a client who purchases one of your firm's web design packages. You could add them to a drip campaign that introduces them to the importance of copywriting in one email, results that some of your clients have gotten from your copywriting services in another, and then send them an offer in the third email.

 

Rather than trying to sell a client on an additional service right away, this approach subtly incorporates cross-selling as part of your drip email process. 

 

You can explain the benefits without coming across as pushy by sending a series of emails first. You can save time and identify the most effective emails by automating this process with a drip campaign (by looking at open, click, and reply rates).

 

2. Wait until you have a "win" to Offer

 

Another strategy is to spend some time working on a client's project. Clients will be more willing to invest in your additional services if you can demonstrate measurable results.

 

During this time, you will also be able to build a stronger relationship with them and create a more personalized plan for them. That's because you'll have firsthand knowledge of the client's marketing methods prior to hiring your firm, as well as what works and what doesn't.

 

3. Align services with the needs of the Client

 

Just because you provide web design services, for example, does not mean your client requires a completely new website. As a result, you must consider a client's objectives and how your additional services relate to them. If increased traffic is their goal, you could offer PPC advertising, SEO, or content marketing. 

 

Web design may still play a role in these services (e.g., designing post-click landing pages, publishing blog posts, etc.), but you should incorporate them into your overall offering and demonstrate how each service will help the client meet their objectives. 

 

This way, you're providing value rather than trying to sell the client something they don't need in order to make a profit.

 

Lastly, The importance of recurring revenue in agency growth cannot be overstated. Without consistent cash flow, it can be difficult to forecast cash flow and make the necessary investments to grow your business. Finding new customers, on the other hand, is a time-consuming and costly process.

 

That is why it is critical to capitalize on the sales you do make and to continue selling to existing customers. Cross-selling is one of the most effective ways to accomplish this. You can get the most out of your cross-selling strategy by being subtle, creating a positive experience, and timing the sale.