The Cross Selling Concept


Cross selling is a widely-used term in every arena of an economy today. The meaning and scope of the concept is extensive and it includes a wide range of applications, techniques and reach. Aptly defined by the Oxford English Dictionary as “The action or practice of selling among or between established clients, markets, traders, etc.” or “That of selling an additional product or service to an existing customer”; the business practices used a further modified definition that includes the industry/sector in which the business operates, the size of the business and their financial motivations.

Cross selling is initiated by an industry/ organisation for many reasons, most common ones being to increase the income derived from a single customer and to nurture long-term relationships with the client. However, these benefits come with certain risks, like disruption of prevailing relationship with the customer. Hence, cross selling is done in the presumption that it enhances the value a customer gets from a product/ organisation. Cross selling techniques are extensively used by the financial services sector today, particularly in India. For instance, it was announced in June 2008 that Reliance Finance inaugurated cross-selling techniques for increasing their financial reserves business. The ADAG-promoted institution followed models adopted by global giants like General Electric to use its database of customers, employees and shareholders to cross-sell their financial products through the new- found subsidiary of Reliance Capital, Reliance Capital Services (Reliance Capital official website). Similar plans were announced by Shriram Capital Ltd recently, in January 2010 (Financial Express, Jan 8, 2010 report). Even in industries other than financial services, the phenomenon is gaining world-wide acceptance. In the IT/ITES sector, Infosys has become one of the most prominent companies to initiate cross-selling with an overseas alliance (Economic times, 20th October 2009 report). The second largest software exporter in India formed a services arm worth $300 million christened Infosys Finance in association with Finacle, the banking solutions company to provide its services to Finacle’s customers.

The need for Cross Selling

Cross selling, as explained above is a strategy to provide clients the opportunity to purchase additional items. Often, seller offers the customer the items that compliment the product that the customer has purchased. The idea is to hold a larger share of the consumer market by filling the needs and wants of each individual customer.

In today’s hyper competitive era, the companies are investing more than half of their time and money on reaching, acquiring and retaining the customers. Customer-relationship has become the buzzword and the ones with clear focus on customers, enjoy a better position in competition. Yet, companies follow careful and precise processes to gradually and consistently grow to understand the customer, to fulfill the customer expectations. This is achieved through reading and understanding your customer’s needs and that is done regularly and consistently over the lifetime of your customer.

It is all about reading and understanding the customer needs (in an explicit and implicit way). Customer satisfaction is the basic point for building a consumer centric organization. Everything revolves around this. This is the basic material. This is a process that needs conversion to provide a product to the customer and in turn gain the trust of the customer. Over the time, many organizations had successfully completed the conversion process and gained higher profit and they are continuously doing that, most organizations miserably failed in their efforts. There involves a set of process to create a customer satisfying finished products. This include use of machine, process, technology, experiments and people to obtain the final outcome – just like a manufacturing process in a factory. The mechanism here is information technology, process – the customized steps and benchmarks, people – trained employees efficient enough to carry out the conversion process, and experiment-to provide new proposal to the customer adding to the customer satisfaction.

Cross selling techniques play a significant role in increasing margins. By selling additional products and services, a company can effectively increase its outputs and revenues, but only if the products are of use to the customer. They should be able to create additional value to the customer, i.e. worthiness as compared to another product. For instance, return on investments (ROI) is viewed by customers as the tangible return delivered by the benefits of the products and services; hence, higher the pay back, the greater the value of the product to the customers. This prompts them to avail the product offering.

Cross selling, as a concept, is best exploited when techniques are developed to implement it. Some companies prefer to use the existing customer and employee database to buy their products rather than seeking out new leads. Such companies observe the buying behavior of their existing clientele closely, and then use complementary product offering with their range. For example if a customer has bought a product that performs part of a job there is a strong chance they will have requirement for products that perform in the other areas of the job. For cross-selling to be successful, companies today are realizing that incentives should be offered to every interactive employee in the team, rather than just the sales force of the organisation. Customer service is as dominating a field as any other, and involves the highest rate of customer interaction; hence it is in the best interests of the firm to offer attractive incentives to them to track progress.

Organisations are making use of different selling techniques, common ones being:

  • Recommending the right product to the customer. For example, suggesting to buy a memory card when the customer buys a digital camera.
  • Recommend additional products at the right time, for instance, only after they have finished searching for the primary product
  • Offering attractive discounts to make them appealing to the customer. For example, introducing the products with a new item that is more expensive but more useful.
  • Refraining from coercing the customer to purchase the products/service.

Organisations are also making use of trained personnel and sales force to cross-sell the products. Cross Selling in Revenue management and Financial Management

Source by Abhinash Jena

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