Do you think Cross-selling services to the same set of customers will lead to increased profitability?
Though the obvious answer to the question seems to be a yes, it still remains a topic of discussion whether selling again to the same set of customers is profitable or not. The usual belief is that an increase in sales would definitely increase the profits but every action inside the business has its pros and cons. One thing that can be precisely asserted is that cross selling definitely increases the sales volume and increasing the sales is one of the primary objectives for most enterprises. Yet the fact remains that an increase in sales doesn’t directly result in increased profitability!
As far as the discussion regarding pros and cons of cross-selling are concerned, here is a list of points that emphasize the impact cross selling has on an organization:
Advantages
- Reduces seller’s efforts
Cross-selling reduces seller’s efforts to a great extent. When a product or service is sold for the first time, a seller has to make efforts in explaining the functionalities and benefits to the buyer, which on the other hand gets reduced in cross-selling due to the buyer’s familiarity with the products as well as the organization.
- Reduces selling cost
Cross-selling helps in reducing the selling cost to a great extent because a seller doesn’t have to spend extra money to advertise or otherwise promote the merchandise. Things usually get complex when you have to convince and attract a customer to your business by putting extra efforts and cost in promoting your business. Attracting new customers also involves marketing costs in other forms such as giveaways and discount offers. Cross-selling eases your job in reducing the cost and enhancing attraction of the merchandise towards customers without any extra efforts.
- Increased profitability
Cross-selling is quite beneficial from a profitability point of view as it is quite easy to increase your sales by selling a different set of products to the same customer. The process of cross-selling doesn’t involve much effort in terms of cost or promotion. Along with the cost reduction contributing to profitability, other factors also play a huge role. For instance, a new customer will have to be attracted by offering extra discounts and low prices, but selling to a loyal customer may not require factors like discounts. It is indeed much easier to sell at higher prices to a customer who trusts the quality being offered.
- Consolidating the customer base
Though it is often regarded that cross-selling restricts the expansion of customer base but having a limited customer base can be a better alternative if cross selling is done correctly. As Pareto’s 80-20 rule suggests, 20% of your loyal customers provide 80% of the business’s revenue! Cross-selling allows a seller to maintain a healthy relationship and personalized interactions with the customers. A personal touch to seller-buyer interactions provides an opportunity to receive constant feedback from them which can be used to enhance your product’s quality.
Some Common Notions about cross-selling
A common notion about cross-selling remains that it restricts the customer base of the business; but in reality, the claim has no substantial grounds. In cross-selling, whenever you sell a different set of products to the same customer, there is a strong possibility that the customer would recommend your products to his near and dear ones.
Another notion regarding cross-selling is that it confuses and annoys the buyer very often when you recommend another product after he has purchased the original one. But the argument loses its ground with the counter that recommendation of another product provides the customer with another alternative which he will keep in his mind while making his next purchase.
With increasing competition amongst businesses to attract more and more customers, the process of cross-selling proves to be a win-win situation for both business and the customers. A business involved in cross selling saves costs, efforts and money involved in attracting new customers with promotions and discounts. On the other hand, a customer too experiences a sense of association while getting quality and personalized suggestions from the business.
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