Cross-Selling and Up-Selling

Cross-Selling

Cross-selling is the action or practice of selling an additional product or service to an existing 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 objective of cross-selling can be either to increase the income derived from the client or to protect the relationship with the client or clients. The approach to the process of cross-selling can be varied.

Cross-selling products and services to existing clients is one of the primary methods of generating new revenue for many businesses, including financial advisors. This is perhaps one of the easiest ways to grow their business, as they have already established a relationship with the client and are familiar with their needs and objectives.

However, advisors need to be careful when they use this strategy a money manager who cross-sells a mutual fund that invests in a different sector can be a good way for the client to diversify their portfolio. But an advisor who tries to sell a client a mortgage or other product that is outside the advisor’s scope of knowledge can lead to problems in many cases.

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 increase revenue.

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:

• 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.

Examples

• A Life Insurance company suggesting its customer sign up for car or health insurance.
• A wholesale mobile retailer suggesting a customer choose a network or carrier after one purchase a mobile.
• A television brand suggesting its customers go for a home theater of its brand.
• A laptop seller offering a customer a mouse, pen-drive, and/or accessories.
• A hospitality brand offering tours and experiences to guests after booking the accommodation

Up–Selling

Upselling is the practice of encouraging customers to purchase a comparable higher-end product than the one in question, while cross-selling invites customers to buy related or complementary items. Though often used interchangeably, both offer distinct benefits and can be effective in tandem. Upselling and cross-selling are mutually beneficial when done properly, providing maximum value to customers and increasing revenue without the recurring cost of many marketing channels.

Upselling often employs comparison charts to market higher-end products to customers. Showing visitors that other versions or models may better fulfill their needs can increase AOV and help users walk away more satisfied with their purchase. Companies that excel at upselling are effective at helping customers visualize the value they will get by ordering a higher-priced item.

Upselling is a sales technique where a seller invites the customer to purchase more expensive items, upgrades, or other add-ons to generate more revenue. While it usually involves marketing more profitable services or products,[1] it can be simply exposing the customer to other options that were perhaps not considered (A different technique is cross-selling in which a seller tries to sell something else). In practice, large businesses usually combine upselling and cross-selling to maximize revenue.

Examples

• Selling an extended service contract for an appliance
• Suggesting that a customer opt for higher specifications in a new computer
• Selling luxury options on a vehicle, such as leather upholstery
• Suggesting that a customer purchase a more extensive car wash package
• Asking the customer to choose a larger meal size at a fast-food restaurant

Cross-selling and upselling are similar in that they both focus on providing additional value to customers, instead of limiting them to already-encountered products. In both cases, the business objective is to increase order value inform customers about additional product options they may not already know about. The key to success in both is to truly understand what your customers value and then responding with products and corresponding features that truly meet those needs.

Techniques

Many companies teach their employees to upsell products and services and offer incentives and bonuses to the most successful personnel.

A common technique for successful upsellers is becoming aware of a customer’s background, budget and other budgets, allowing the upsellers to understand better what that particular purchaser values, or may come to value.

Another way of upselling is by creating fear over the durability of the purchase, particularly effective on expensive items such as electronics, where an extended warranty can offer peace of mind.