When casting around for ways to increase sales there are really only two options you can take: find new customers or sell more to the existing customers. Of these two the second, sell more to existing customers, is often the easiest and the one with the highest ROI. Today we’ll talk about why you should be focusing more efforts in this area and how you can improve your success rate.
You already know the customer
When heading out on the customer acquisition trail the first item of business is finding a likely looking customer so that you can start your sales pitch. This can often be the most difficult and expensive part of the whole process. Just think about it, the whole advertising industry is based on this one problem of finding a likely prospect. With cross-selling you already know your customer, and in many industries you know where they live, and some important data about them.
The customer already trusts you.
After finding a prospect, the first barrier in closing a sale is gaining the customer’s trust. Countless “try before you buy”, money back guarantee and trialling campaigns are built and run in order to overcome this single hurdle. However, when you cross-sell you’re already over this major issue: they’ve tried and they’ve buy’d so they (may) already trust you.
You know what they want and you’re sure they want it.
They’ve already purchased from you and just by looking back at the data you already know what they want, how often they want it, even what colour they like it in. Plus, you’re sure they want what you sell because they’ve already purchased something similar.
Yes, I know that this is a bit of a simplification but the basic approach is valid. When you cross-sell you already know that they have a need.
Cross-selling often drives increased retention rates
Many research studies, and our own experience at analysing our client’s data, have shown us that the more products a customer purchases from you the longer they will continue to purchase from you. If you manage to cross sell to your customers you get the added advantage of keeping them longer (all things being equal) and a double bonus to the bottom line.
How to be successful at cross-selling
Okay so you’re convinced, cross-selling is a good thing to do! So how do you do it well?
Make sure you have happy customers
Yes, it’s sad but true, you need to have happy customers for those customers to purchase again from you. It stands to reason that cross-selling will be easier if you’re customers are already loyal and you have provided them with products or services that are of value.
The lesson here is if you have dissatisfied customers the last thing you should do is try to cross-sell to them – it will just make matters worse. First fix your customer satisfaction issue then move onto cross-selling.
Right message at the right time
Many organisations have transactional data that can be used to identify the next logical product to discuss with the customer. Remember that you know more about the customer than other organisations. If you’re not using this information you’re making life harder than it needs to be.
However, make sure that you don’t become a product pusher to your customers. Too many times customers end up on the receiving end of a stream of direct mail that feels to them like non-thinking direct marketing campaigns. Yes, we know that the easiest thing to do is a data extract of your “best” customers and send them the latest product that you’re trying to sell. But, all that does is train them to ignore your messages and loses you sales in the long run.
A better approach is to look at the customer through a customer needs lens. The chart below is a very simple example of how bank might change its view of a customer from a mortgage, credit card, and deposit customer to a “house buyer” or “holiday goer”. By using this approach you are speaking to the customer in their own terms and are much more likely to cut through.
By the way this may require you to partially or completely re-organise some of the product silos that you have in your organisation but it will mean that you are much more successful long term.
Make sure it’s profitable
Sounds obvious, but it’s not always the case. For example, a bank might successfully cross-sell a money market account to an existing checking account holder, only to have the customer use her new account to hold surplus funds from her transaction account—thus increasing neither share of wallet nor profitability.
In fact, an analysis of customer holdings for 14 of the largest Australian financial institutions reveals no relationship between the average number of products they have per customer and their average share of wallet.
The message is clear – make sure what you’re doing is profitable.
Measure the correct drivers and KPIs
When you implement your cross-selling approach make sure that you measure the correct KPIs and business drivers. As a start: products per customer, accounts per customer, policies per customer all sound good but can be very misleading and drive the wrong staff behaviour. For instance we had one banking client who couldn’t work out why their profit was not going up. They had a great customer cross-sell program, staff were incentivised based on accounts per customer and that figure was increasing nicely. Everyone was happy except the CFO.
It wasn’t until we dug a bit deeper that we found lots of silent attrition, i.e, accounts that were open with just a few dollars in them. Some more investigation and we discovered that when customers wanted to change the type of account that they had, front line staff were encouraging them to keep the old account and open a new account. Great for the accounts per customer KPI, not so good for the company profit!
As part of cross-selling we really need to discuss product bundling but that is a big topic, and one I’ll address another day.