Cross Selling

Cross-selling is a marketing term for the practice of suggesting related products or services to a customer who is considering buying something. If you're buying a book on Amazon.com, for example, you may be shown a list of books similar to the one you've chosen or books purchased by other customers that bought the same book you did. A search on a company's Web site for bed linens might also bring up listings of matching draperies. Often, cross-selling involves offering the customer items that complement the original purchase in some manner. The idea behind cross-selling is to capture a larger share of the consumer market by meeting more of the needs and wants of each individual customer.

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. The strategy is designed to widen the customer's reliance on the company and decrease the likelihood of the customer switching to a competitor.

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. Most large businesses usually combine cross-selling and up-selling techniques to enhance the value that the client or clients gets from the organization.

The idea of cross-selling translates well into just about any business situation. In the fast food industry, customers are often invited to try new products or established complementary items. For example, when an individual orders a hamburger at a local fast food restaurant, the server will often ask the customer if he or she would like a side item to go with the hamburger.  By employing this simple approach, the server may entice the customer into making another purchase above and beyond the one originally intended.

It is also possible to engage in cross-selling with services as well as products. The telecommunications industry is a prime example of this type of sales activity. When establishing local telephone service, the new subscriber is often invited to enjoy other telecommunications options offered by the service provider. These may include long distance packages, cell phone services, or high-speed Internet services. While different from local phone services, the ability to provide this broader range of telecommunication options makes it possible for the customer to address several related wants or needs through a single vendor.

Cross-selling can be mutually beneficial to customers and vendors. For the customer, it includes the efficiency and leverage that result from using a single supplier for multiple products. For instance, purchasing products or a service from the same vendor makes it easier for the customer. It will save the customer a lot of time and aggravation of shopping at different stores or going to different agencies. Benefits to clients also include a reduction in paperwork, ease of communication and less time spent dealing with multiple companies. Shopping at the same store or seeking services from the agency also saves money for the customer. Vendors and agencies are most likely to offer discounts to their loyal customers.

Vendors also benefit from cross-selling as well. 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. Cross-selling also makes vendors less vulnerable to cyclical slowdowns. For instance, if you sell property and casualty insurance, you’ve probably noticed that the industry is fairly cyclical. Your agency probably makes more sales in the busy season, and experiences a slowdown at certain other times of year. You can eliminate or reduce that slowdown by selling life and health insurance as well–increasing the amount you make steadily over the course of the year.

While cross-selling is often a highly desirable activity for both the seller and the buyer, it does not come without some degree of risk. In the event that one of the additional goods or services does not live up to the consumer’s expectations, the negative experience could change the perception of the customer in regard to the other purchased products. As a result, the customer may choose to sever relations with the vendor, taking all of his or her business to a new provider.