You’re in a coffee shop. You order a latte. More often than not, the barista will say something along the lines of, “Would you like a croissant with that?”
Whether the customers are individuals or other businesses, you’ll notice cross-selling everywhere you turn because it’s a great way to increase sales and clear inventory. But just as importantly, it’s a recipe for satisfied customers and an excellent way to build stronger relationships with them.
In this guide, we’ll break down this sales tactic, exploring its benefits and drawbacks. And then, we’ll walk you through the proven steps to implementing a cross-selling campaign.
What is cross-selling?
Cross-selling is a tactic that refers to offering customers an additional product or service that complements the one they initially purchased.
All sorts of merchants incorporate cross-selling into their sales campaigns. For instance, a software vendor can suggest a complementary tool or plug-in to its premium version for users as part of its account-based marketing or ABM campaign.
How does it work? How you apply cross-selling varies depending on the situation, but here’s the typical sales process:
- You analyze your product range to identify products that complement each other.
- A customer buys a product.
- You recognize the potential need and recommend a complementary product or service that works with the primary product.
- The customer buys the additional product (or not).
Of course, it doesn’t have to end there. Even if the customer declines a cross-selling suggestion, a rep can always follow up with a sales pitch later on.
Free to use image sourced from pexels
The pros of cross-selling
Now that you have the complete picture, you know that everyone is doing it across all kinds of industries.
You can see cross-selling in action in a mom-and-pop corner store as well as in ecommerce businesses. But why? Let’s explore the primary benefits of cross-selling.
1. Higher revenue per customer
The most apparent advantage of cross-selling is that it brings in more sales — and more revenue. It’s pretty effective because you’re selling to existing customers, which is significantly easier than getting new ones.
What’s more, cross-selling is an easy way to bump up the average amount a customer spends on an order or your average order value. The AOV grows when your customers stack up more products or services along with their primary purchase.
2. Increased customer lifetime value (CLV)
Let’s say that your customer data shows your typical customer will spend $1000 across 10 orders throughout their journey with your business. That means they have a CLV of $1000.
Now, imagine if you could increase their average order value by 20% through effective cross-selling and customers continue to make purchases at the same rate. You would have boosted the CLV to $1200 for the average customer.
This strategy also drives expansion MRR (monthly recurring revenue), as you’re increasing recurring revenue from existing customers by offering complementary services or upgrades over time.
Take a moment to consider how this can significantly impact your overall profitability.
3. Makes products more visible
Cross-selling allows you to introduce new products to customers who would have likely never considered buying them otherwise. That way, you get to sell those products at a faster rate.
For instance, if you market cloud phone systems, some customers may never realize they could also get a custom phone number unless you suggest it.
Cross-selling not only allows you to increase awareness, but you also get to promote that offering and make sales of the complementary items.
4. Better customer experience
Cross-selling benefits are not just about your bottom line. When done right, you would also be significantly enhancing the customer experience.
What does that mean? Simply put, cross-selling can create a satisfying experience for your buyers. A customer who bought a new laptop may appreciate a suggestion for a compatible mouse or protective case. Why? Because it shows that you’re thinking of their overall needs and providing a complete solution.
It’s good customer service. And that’s great, considering a whopping 94% of customers are more likely to buy extra products in the future if they’re pleased with the experience now. In other words, cross-selling begets satisfied customers, which, in turn, cycles back to the revenue generation benefits of cross-selling.
It’s a win-win.
The cons of cross-selling
In an ideal world, a customer will pull out their credit card as soon as a rep identifies cross-sell opportunities and suggests a good complementary product or service to accompany their initial purchase.
In reality, it’s not always smooth sailing with cross-selling.
For one, there’s a chance that the customer feels pressured and annoyed. Take a buyer who just spent a lot of money at an electronics retailer. Trying to push an additional purchase on them (especially one they’re not familiar with) may make them feel overwhelmed, regardless of the sales rep’s good intentions or how beneficial the product would be.
What’s more, a sales pitch for a product that’s not relevant to the buyer’s needs can be considered a nuisance or scam. There’s very little chance of turning buyers who think that into loyal customers.
But you can mitigate these issues. Approach cross-selling with care, making sure that recommendations are relevant and valuable. Also, present them in a way that doesn’t feel intrusive. Watch out for reactions and body language, and be prepared to ease off the throttle when you notice signs of discomfort or resistance.
You can always pitch the product some other time.
5 Steps to cross-selling success
Granted, it looks like a tactic you can apply randomly. However, approaching cross-selling strategically is the best way to reap its bountiful rewards. Here’s how to go about that in five steps:
1. Understand your customers’ needs
On the surface, cross-selling high-end speakers to a company buying a teleconference solution seems like a good idea. In reality, it’s not so much the case if you know that the company has a newly designed studio with all the bells and whistles.
It would be an irrelevant suggestion, and you would come across as being out of touch with its actual needs.
Buyer personas and mapping out the customer journey are important because they help you understand your ideal customers and their specific needs. That way, you can create the most effective strategies.
But the buck doesn’t stop at a purchase. Even after a sale, keep up with your audience so you can understand how their needs and challenges evolve over time.
Free to use image sourced from pexels
2. Identify complementary products
Can fries go with a burger? Yes, they can. What about a suitcase with a camera? Most customers won’t buy the vision, no matter how vividly you try to paint it.
Before cross-selling can work, you must be an expert on your range of individual products and know how they complement each other — if they complement each other. Otherwise, you’ll find yourself making suggestions that appear random and forced on the customer.
Here are some key points to consider:
- Do the products or services work together in terms of how they are used or consumed?
- Do they address similar customer needs or solve related problems?
- Are you going to market them to the same customer segment?
You want to arrive at the answers to each of these questions. For instance, a high-end VR headset may complement an AI-capable smartphone. But do you think it’s a good idea to try to cross-sell that to an elderly customer who just replaced their six-year-old phone?
3. Develop your techniques
So, you clearly understand your customers’ needs and have the right complementary products in mind. The next step is to work on the specific strategies you’ll implement.
There are loads of cross-selling techniques. You may decide to use:
Product recommendations:
Now common in ecommerce stores, product recommendations are suggestions based on purchase history and customer data.
You may extend product recommendations beyond in-app product listings. A lot of Amazon’s exponential growth has to do with how it has hacked product recommendations. Beyond on-site recommendations, it sends emails and pushes app notifications with cross-selling suggestions. Even abandoned carts are not lost sales.
Bundled Products:
You’ve seen those special packages that bundle the primary product with complementary items, right? For example, a camera bundle could come with a lens and tripod. Bundling is especially effective when you offer discounts as incentives.
Discounts and Loyalty Rewards:
Up to 91% of Americans check for discounts first before they buy — and up to 67% have been nudged into a purchase by discounts.
So, when you cross-sell a VoIP phone number at a discounted price to a customer who just purchased a new phone system, they’re likely to be interested.
Free shipping after a certain price is another great tactic because it encourages buyers to stack up items to avoid paying for shipping.
4. Train your team
An untrained yet passionate rep is just as likely to make sales cross-selling as they are to hurt your cross-selling efforts. To maximize the effectiveness of your strategies, you want to make sure your sales teams can execute those plans.
To do that, they need:
- Knowledge (of your products and customers)
- The right tools
For instance, a rep contacting a mid-sized business potentially interested in overhauling their CRM system must understand that company’s pain points, know how to use CRM software, and identify any cross-selling opportunities that present themselves.
Free to use image sourced from Unsplash
Interpersonal skills are also essential. Your sales team members should learn how to read body language and know when to ease off the pressure.
5. Track and refine
How do you know your cross-selling promotions and efforts are paying off without monitoring their performance? You want to track relevant metrics like conversion rate, increase in CLV, and average order value. Don’t forget to track customer satisfaction.
Analytics tools like Google Analytics and visualization tools like Tableau can come in handy. Opportunity Management CRM solutions can also help you gain a holistic picture.
Based on the data, identify areas for improvement and then tweak your processes where necessary.
Final thoughts
Cross-selling will increase revenue and help address customer expectations, creating happier buyers and building stronger customer relationships. In other words, it benefits both the buyer and seller.
But you don’t want to jump in unprepared without the right strategy. This article provided the building blocks you need to get your cross-selling efforts up and running. Remember that it’s a process that requires monitoring and refinement to milk the most rewards.
Frequently asked questions
How does cross-selling differ from upselling?
While cross-selling involves recommending complementary products or services, upselling encourages customers to purchase a higher-end, more expensive version of the product they are considering. Both strategies aim to increase the total sale value but are applied differently.
Are there any risks associated with cross-selling?
Yes, there are potential risks, such as overwhelming customers with too many options, appearing too pushy, or suggesting irrelevant products, which could lead to a negative customer experience. It’s important to balance cross-selling efforts and listen to customer needs to avoid alienating potential buyers.
Originally published Sep 02, 2024, updated Sep 10, 2024
