Cross-selling is an old and valuable technique used by salespeople to increase order size and to transform single-product buyers into multi-product ones. Mort recently, cross-selling has evolved into a strategy for customer relationship management.
Cross-selling is one of the most useful tools in a salesperson’s toolbox when it comes to increasing sales volume per customer.
Within the context of customer relationship management, cross-selling has become a valuable strategy for customer development, for several reasons:
(a) There is a belief that it costs five times less to serve an existing customer than to acquire a new one.
(b) Response rates from cross-selling efforts are 2 to 5 times greater than cold sales.
(c) Cross-selling leads to a broader scope for the customer relationship, increasing not only share of wallet but also the firm’s “share of mind” with the customer.
(d) By broadening the scope of the relationship, cross-selling increases the actual and psychological costs of switching, improving retention.
(e) As the customer buys more products and services from the firm and broadens the scope of the relationship, the firm learns more about the customer’s needs and preferences, improving its ability to target marketing efforts and to cross-sell.
BENEFITS OF CROSS SELLING:
It costs five times less to serve an existing customer than to acquire a new one.
Response rates from cross-selling efforts are 2 to 5 times greater than normal sales.
By broadening the scope of the relationship, cross. selling increases the actual and psychological costs of switching, improving retention.
As the customer buys more products and services from the firm and broadens the scope of the relationship, the firm learns more about the customer’s needs and preferences, improving its ability to target marketing efforts and to cross-sell. This information advantage, added with the higher costs of switching, produces a virtual local monopoly for the firm, which is then better able to compete for its customers than other firms that do not have an established relationship or access to the same information about their needs and preferences.
Costs are lower, as the contact is initiated by the customer, and there is no waste in reaching the customer however his mind-set is already centered on the firm and its services.
Customer problem will be solved to his satisfaction, the customer is more receptive to the cross-selling suggestion, particularly when this suggestion meets his needs. For example, if the customer called because of an overdraft on her account, and the overdraft is explained and resolved, she will be more open to considering enrolment into an overdraft-protection plan.
PITFALLS OF CROSS SELLING:
Excessive cross-selling may irritate customers and cause switching. It is termed as “over-touching” the customer. Intuitively, if a customer is turned off by an inappropriate cross-sell attempt, that customer would likely have a negative feeling against another sales pitch, and would probably not accept it. If the annoyance continues, he/she may avoid contacting the company and even switch.
At the extreme, the customer becomes annoyed, and the cross-selling strategy produces the opposite of its ultimate goals, leading to customer attrition.
Several times cross-selling is done at the cost of profitability, mostly in case of financial services where many services are offered under one roof to the customer but it may not add up to the profit margin of the firm.
EXAMPLES OF CROSS SELLING:
At Citicorp, call center operators ask credit card customers if they are interested in auto insurance; those who answer positively are transferred to a Travelers auto insurance call center
State Bank of India has been using the technique of cross-selling for the last several years. Through cross-selling, it has been offering a banquet of the best financial and insurance solution in addition to its vast array of anking products. The Bank as a corporate agent offers mainly life insurance products of SBI Life Insurance Company, general insurance products of SBI General Insurance Company, mutual fund products of SBI Mutual Funds and Credit Cards of SBI Cards
Syndicate bank now caters to the needs of its customers by offering various ICICI prudential Mutual Fund schemes and help in strengthening the existing relationship with the Bank’s clientele base and provide an opportunity to cross – sell.