Sr.No. |
Industry |
Example |
|
Product |
Cross-sell product |
||
1 |
Telecom |
Mobile services |
Music updates |
2 |
Petroleum |
Engine oil |
|
3 |
IT & Business service providers |
IT solution for banking |
IT solution for securities |
4 |
Financial services |
Savings |
Housing loan |
5 |
Aviation |
Travel |
Insurance |
6 |
Automobile |
Vehicle |
Insurance |
7 |
FMCG |
Toothpaste |
Tooth brush |
8 |
CG -electronic goods |
TV |
Washing Machines |
9 |
IT-hardware |
Computer |
Printer |
2.1.1 Motives and Benefits of Cross-selling for Marketers: Despite the complexities of successful cross-selling, most marketers found the opportunities to cross-sell well worth the risk taking, because of the numerous benefits it offers.
The literature espouses several benefits of the cross-selling approach. Cross-selling creates barriers to switching. Buchanan[16] and Day[17] elaborated that this is achieved by fostering intense, difficult?to?duplicate marketing relationships with the key trading partners. Cross-selling reduces transaction expenses.[18] Cross-selling ultimately contributes towards improvements in marketing's effectiveness and efficiency.[19] Cross-selling also aims to leverage complementary strengths and achieve economies of scale. If cross-selling reduces marketing costs, it implies that subsequently it enhances the firm's value proposition in the market. This must lead into a positive spiral of more frequent customer interactions, and higher cross?selling and up?selling occasions and success rates.
As stated in the study of cross-selling practices in the Indian banking sector[20], some of motives and benefits are:
- Increased profitability : Additional sale of the product increases the profit that the organisation earns.
- Protecting market share : By satisfying the needs of customer by giving additional products the organisations can reduce customer switching and thus protect market share.
- Leveraging on existing brand equity : Brand equity facilitates in the effectiveness of brand extensions and brand introductions. This is because consumers who trust and display loyalty towards a brand are willing to try to adopt brand extensions.
- Economies of scale: Economies of scale can be achieved as common infrasturcture can be used for selling more products and thus distributing the cost over large number of products.
- Cost reduction in customer acqusition: Since additional products are sold to the existing customers which results in reduction in the cost of acquring new customer.
- Improvement in customer retention: Since one stop solution is provided, the switching of customers to other brands is reduced which results in retention of the customer with the company for a longer period.
2.1.2 Motives and Benefits of Cross-selling to customers: Parvatiyar hypothesized that consumers prefer to reduce choices by engaging in an enduring loyalty relationship with marketers and cited this as the fundamental maxim of cross-buying.[21] Bagozzi corroborated Sheth and Parvatiyar's contention that the consumer was pushed by a need to simplify and make sense of his/her consumption situation, mitigate risk, ease psychological tension and lessen cognitive dissonance.[22] These motivational and purposive aspects of consumer behaviour augment cross-buying behaviour.
An on?going relationship on account of cross-buying may offer security to the customer, lend a feeling of control and a sense of trust, minimize purchasing risks, and in the final analysis reduce costs.[23] Other benefits of cross-buying include continuity with the marketer, preferential treatment, a proactive service attitude exhibited by the service provider, customized service delivery, social benefits of the relationship, and a more thorough understanding of needs.[24]
It seems that different consumers may have different reasons for cross-buying. In addition, consumers may exhibit varied cross - buying proneness.
Satisfying customer's need is the pre-condition of cross-selling . The study of Richa and Nijaguna (2006), highlighted some of the motives and benefits of cross-selling to customers, viz.
- One stop soultion: Cross-selling satisfies the customer's exsting and latent needs with more convenience by providing solutions in the form of the products or services.
- Reduced formalities and paper work: Customers do not need to prove credentials for every new product bought which brings an ease in transactions.
- Reduced cost of transactions: Additional cost incurred in verifying the credentials is eliminated as it will be common for cross-sell products.
- Additional benefit i.e. preferential pricing: A price discount or concession in the price is given by marketers, which will be an additional benfit to the customer.
- Reduction in transactional risks: Satisfied with the past experience of transacting business with the organisation, greatly reduces the transactional risk in cross-selling for the customer.
- Time saved of alternative option search: For the product/service purchase , customer needs to search for the alternative product/service suppliers. The time is saved in this process of purchase selection.
2.2 Drivers of Cross-Selling (Antecedents): The factors that drive cross-selling were mentioned in the study of Richa and Nijaguna (2006), viz.
- Brand name: Corporate brand name of the product /service is an important factor in the decision making process of the customer for cross-sell products.
- Motivated employees: Employees initiative for cross-selling activity will increase the rate of success in cross-selling.
- Incentive for cross-selling: Reward for the cross-selling efforts taken by the employees assures consistent efforts for cross-selling activity.
- Training for cross-selling: For the customers to perceive cross-selling efforts as fair, it is necessary to train the employees in cross-selling techniques.
- Database and CRM tools Availability: Understanding of the customer's need is important to target the customer for the cross-sell product.
- Internal and external communication: Communication helps in targeting the customer more accurately for cross-selling.
Customer Satisfaction is a central element of a firm's marketing concept. Various models and theories have been developed in order to define and explain the phenomenon of satisfaction. Everelles and Leavitt,[25] Churchill[26] and Suprenant were amongst the many scholars who subscribed to the dominant Confirmation/Disconfirmation (C/D) paradigm and perceived performance or quality approach. Satisfaction is defined as a post?purchase attitude formed through a mental comparison of the service and product quality that a customer expects to receive from an exchange and the level of service and product quality the customer perceives actually receiving from the exchange. Customer satisfaction is also viewed as attribute satisfaction, i.e. "the customer's subjective satisfaction judgment resulting from observations of attribute performance."[27]
It is established that satisfaction does not always result in retention and, it is equally apparent that dissatisfaction does not necessarily result in defection.[28]
A number of studies have shown a moderate to strong relationship between customer satisfaction and the desired outcome construct of consumer loyalty or repeat purchasing behaviour and customer retention.
2.3 Challenges in Cross-selling : Various studies on cross-selling have indicated the following challenges in practising cross-selling,
- Many organisations lack a clear top-down approach to cross-selling i.e. improper communication of strategies to the team who is working on it .Inadequate compensation scheme and lack of measurement programs of cross selling performance make it difficult to monitor it.
- If need identification is not carried out properly it is possible that customer will get irritated with the efforts of cross selling and it will result in loss of customer.
- Lack of proper communication will result in customer confusion which will cause customer switching.
2.4 Factors influencing customer receptivity to cross-selling: Literature review has helped the researcher to identify the following factors which affect customer's receptivity to cross-selling (in the context of financial products).
- Corporate reputation: Corporate reputation refers to the global perception of the extent to which a company is held in high esteem. If the company has a good reputation, customers are likely to transfer their perception of high credibility to other products or services sold by the company, which often results in increased intentions to cross buy.
- Competing supplier's price: Comparing Prices of the services sold by the focal company and other companies is critical for customers who cross-buy.
- The extensive literature on brand extension documents that consumers are more likely to purchase line or brand extensions of a brand that is perceived to offer a higher quality product in an existing category. Literature survey also concludes that it does not confirm purchasing intentions of additional products from the same organization.
- Relationship between characteristics of first purchase product category and additional product is an important driver of cross-buying.
- Search cost for the alternative: A customer who is currently purchasing a product from a firm and is looking to purchase additional products, is less likely compare products and prices offered by competitors, when he has high search cost.
- Interpersonal relationships: Interpersonal relationship refers to the strength of the personal bonds that develop between customers and service salespersons.
- Demographic factors of customer such as age, family life cycle etc., it is observed that households sequentially acquire different products over time. An important trigger for such acquisition of products is the consumer's age and family life cycle stage ( such as 'young singles' or ' young married couples'). Changing life cycle stage changes the needs and household resources as well as knowledge. The last factor is true for household's consumption of riskier financial products such as stocks which require both a certain level of wealth and financial maturity.
- Customer satisfaction with existing product/service as an antecedent to cross buying intention.
Conclusion: It is evident that, it is easier to maximize profit by cross-selling services to existing customers than to attract new customers; customer retention is enhanced with cross-selling of multiple products or services.
Though Cross-selling is a profitable method of increasing sales it is also a dual-edged sword which needs to be handled efficiently just as a surgeon uses his knife.
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