Using technology to ensure profitable cross-selling

Order Management

Cross-selling is tremendously popular with bigger retailers across every industry. A long-held truth in any customer-facing company is that it's easier to keep an existing customer than to bring a new one on board. So in that regard, rather than trying to reach new prospects, retailers view cross-selling and upselling existing ones to be a more profitable venture. These people already trust the retail brand in question, so why wouldn't they buy more from their favorite merchants?

The cross-selling strategy is most readily practiced by larger merchants that sell a variety of products and even have different brands. For instance, if one of a merchant's online stores sold bathroom supplies and amenities and another sold kitchen tools and accessories, it only makes sense to cross-sell. Someone with a bathroom likely has a kitchen as well, and by casting a broader net, merchants may be able to increase sales for both divisions. As every retailer knows, more sales frequently translates into more profit. 

Is there a time not to cross-sell?

However, cross-selling to everyone indiscriminately isn't always the best course of action. Denish Shah, an assistant professor of marketing, and V.Kumar, a marketing professor at Georgia State University, noted the drawbacks of such a strategy. In an analysis conducted by the two, they found that cross-selling can post amazing results, with one retailer successfully cross-selling a customer and generating an additional $297 from the individual over the next few years.

On the flipside, another individual targeted for cross-selling didn't take the bait. The company ended up spending $315 trying to convert this individual by sending them various catalogs and incentives over the same time period.

That isn't to say that cross-selling isn't a worthwhile strategy – quite the opposite. When Kumar and Shah analyzed a number of Fortune 1000 companies, they confirmed the average profit from customers who are cross-sold to is higher than those who aren't. However, those who aren't successfully sold (one in five customers) can account for 70 percent of a merchant's "customer loss," which the Harvard Business Review defines as "the shortfall when the cost of goods and marketing to a given customer exceeds the revenue realized."

Using data to cull good targets from bad ones

The fact that cross-selling can actually be tremendously unprofitable if not executed properly highlights the importance of retailers knowing their customers before they try to cross-sell them. Knowledge is everything, and data can help merchants make better cross-selling decisions. Analytics should be a cornerstone of all eCommerce operations. Merchants can collect data on almost anything nowadays – detailed product reports, customer trends and data, price fluctuations, etc. All of these metrics need to be considered when merchants decide to cross-sell products and item bundles.

Merchants should never just rely on their gut to decide which products to cross-sell and who to target. However, that's still a very common approach for retailers. In fact, Kumar and Shah found that 90 percent of the companies they surveyed ran cross-selling campaigns that helped improve average profit per customer. However, when asked why they cross-sold goods, they said they did it only because it had worked in the past.

Data can highlight various trends that merchants can then use to cross-sell customers. For example, they could look at people who are already buying kitchen and bathroom products and then cross-sell those specific items to prospective targets. The key is using eCommerce software to help collect that data and execute cross-sell campaigns.