What is Cross-sell?

What is Cross-Selling?

Cross-selling is a sales tactic that involves selling supplementary products or services based on the customer’s interest in one of your company’s products. Cross-selling is one of the most effective methods of deriving more revenue from the existing customer base. It does not involve higher CAC (Customer Acquisition Cost), because revenue is generated from your existing customers. It also eventually increases your company’s ARPU (Average Revenue Per Customer). This is the revenue your company generates per unit/user over a particular span.

Cross-selling opportunities can be identified by the customer’s purchase data. That is because with this data you can analyze their purchase patterns, and understand their interests. The strategy of cross-selling allows businesses to derive more value from their customers. It ensures that customers do not become devoid of their revenue potential after completing a single purchase. Rather, they can contribute to the company’s income multiple times.

To derive revenue from a customer multiple times, your company’s cross-selling strategy must be impactful. There are numerous points in the sales process that give you the chance to sell additional goods. Identifying those points can be your key to success. Some potential points for cross-selling can be the customer’s online shopping cart, checkout page, and after-purchase email.

For better understanding, consider this example: A merchant sells clothes on his website. He has enabled complementary product recommendations there. If a customer adds a single shirt to their cart, they are recommended matching trousers to go with it. This attracts the customer as they are encouraged to complete their look. They might act upon the recommendation, and buy the trousers too. This helps the merchant make extra revenue.

Examples of Cross-Selling in the Context of Subscriptions

Businesses can leverage the technique of cross-selling, regardless of their industry. Subscription businesses can sell closely-related products or services as separate subscriptions. This increases the chance of clients buying more than one subscription as the products complement each other.

Example 1: Imagine a business that offers a monthly subscription box of premium powdered teas. The same business offers a monthly box of aesthetic tea accessories too. This may include unique china like teapots, or tea preparation tools such as whisks.

This business can create appealing advertisements displaying people enjoying their tea. It can include its signature tea accessories in the ads too to highlight their complementary nature. This tactic can effectively make its tea subscription customers become tea accessory subscription customers as well. In this way it can kill two birds with one stone.

Example 2: Let us imagine a subscription business offering AI-content detection services. It offers its plagiarism checker as an add-on. If users purchase its subscription, it can encourage them to buy its plagiarism checker as well.

This add-on can be appealing to the users, as they can fully judge the originality of their content by checking it with both the detectors. This advantage might encourage them to buy the add-on alongside their subscription. In this way, the business can derive more value from its subscription clients.

Cross Selling vs Upselling: What’s the Difference?

Cross selling and upselling do not refer to the same idea. They are distinct approaches both aimed that increasing revenue. While cross selling means encouraging customers to buy products in addition to their original purchase, upselling means convincing them to buy the more expensive version of the original product.

Let us refer to the Example 2 given above once again. Suppose the business has two subscription plans offering AI-detection services: the Basic plan and the Premium plan. The Basic plan offers AI-content detection in the English language only. The Premium plan offers it in other languages as well, and gives users more detailed insights into their content. This business can persuade its Basic plan subscribers to shift to the Premium plan for more advanced functions. This is a typical upselling scenario.

Thus, when companies cross-sell, they make additional revenue by selling extra items that complement the original product. On the other hand, when they upsell, they boost their revenue streams by making users buy the more expensive versions of their products or services.

What are Effective Cross-Selling Strategies for Subscription Businesses?

Cross-selling does not happen at random. A merchant cannot pair up random products and convince customers to buy one with the other. Such an approach can lead to customer frustration. Even if they end up buying the other product, they are going to realize that it offers them little value. This kind of marketing can be perceived as dishonest, and creates gaps in the trust between the merchant and customer.

Therefore, it is essential to plan out cross-selling strategies thoroughly, so that they appear gently convincing, and don’t bug the customers. Some of such strategies are as follows:

Understanding Your Audience

It is important to get insights into your customers’ demographics and purchase patterns. Customer needs are likely to change before and after their purchase. Businesses need to keep up with those. They can use specialized subscription management software or CRMs to gather customer data across various touchpoints. Such as, the business’s social media platform, website, customer support channels, and so on.

This data tells them a lot about how customers interact with their products. For instance, they can identify their most viewed products or services and find out what most customers are interested in. Similarly, they can analyze customers’ purchase patterns as well: what sort of products they buy as a bundle, do they buy surplus products to qualify for free shipping etc.

This information can be crucial in formulating an impactful cross-selling strategy which is more personalized. By knowing the audience better, the company can also communicate the cross-selling offers to them in a way they can relate to.

Identifying the Right Chances

Businesses can cross-sell at various points in their sales process. But they should try not falling victim to the scenarios of “right place, wrong time” or “right time, wrong person”. The optimal cross-selling times differ from customer to customer. They must analyze which approach convinces their customers the most.

Some customers might find product recommendations in their cart more convenient, as they might help them find the right thing. If they get recommendations after their purchase, say via email, they may not buy them due to extra shipping charges or because they don’t want to go through the whole buying process again.

On the other hand, there might be customers who find post-purchase recommendations more convincing. They might be more likely to add those items to their wish lists for future. The point being that your cross-selling approach cannot be the same for all customers. You might divide like-minded customers into separate segments to get successful cross-selling results.

Understanding Your Services

To convince customers into buying additional products or add-on services, you have to first convince yourself whether the products complement each other or not. You cannot try to cross-sell random things and expect customers to buy.

If a company sells an add-on service alongside a primary subscription, it should clearly communicate what value the add-on would bring to the customer’s existing subscription. Portraying the service as something which it is not can make you lose customers. That is why it is important to convey to the customers exactly how your additional services add value to their primary purchase. This can boost the service’s selling potential.

In other words, the focus should not be cross-selling items, but cross-selling those items that the customers consider valuable.

Offering Exclusive Bundles & Discounts

Another important strategy is to offer customers bundles of products or services while making it obvious how well they go together. For instance, it is common for clothing websites to offer customers the ‘shop the look’ option. It is a bundle of clothing items that go best with each other.

Subscription businesses offering cloud services can utilize the same approach. For example, a business might offer two of its separately sold services as a bundle for lesser price. It can offer, let’s say, a subscription bundle that provides both the AI and plagiarized content detection services for a lower price.

Offering discounted pricing plays an important part when selling subscription bundles. They make the customers see how they can save up on their costs. If customers buy those services separately, it clearly leads to a higher total price. Thus, offering complementary services in a bundle is a great way to cross-sell while letting customers be the judge of benefits themselves.

What are the Pros of Cross-Selling?

Boost in Revenue

The most immediate and obvious benefit of cross-selling is the boost in a business’s revenue. By investing their time and expertise in their cross-selling strategies, businesses can generate revenue from the same customer base multiple times.

Subscription businesses do not have to stop at acquiring new subscribers, and retaining them for consistent revenue streams. They can leverage their retained subscribers and offer them compelling cross-selling offers to make them purchase more of what they have to offer.

It automatically leads to higher average revenue per user (ARPU). It also helps businesses save costs on customer acquisition. Instead of investing their all to acquire new subscribers, they can work on their existing ones to keep them active and dedicated.

Customer Retention

If a business optimizes product suggestions for customers according to their interests, its customers are more likely to feel valued. Going the extra mile to offer customers a personalized experience can sometimes be all it takes to retain them.

Because of effective cross-selling offers, customers might stay loyal to you instead of heading to your competitors. Because, if your business fulfils their needs efficiently, they have fewer reasons to look for solutions elsewhere.

For example, a business offers subscription for an online Word to PDF convertor. It also sells separate features which support the conversion of other file formats as well. This business can offer these features as add-ons in a subscription bundle which offers the original service too, all for a cheaper total price. If users buy this bundle, they won’t have to go to the competitors’ sites to look for the conversion support of other file formats.

Increased Product Visibility

Cross-selling can introduce customers to those of your products which they might have been unaware of. Through product recommendations, customers get to explore your product range better.

Subscription businesses can offer free trials of their additional services or in-app features. Customers can utilize those to see how they enhance their overall subscription experience. Free trials help customers gain firsthand experience of your additional features, and leave them wanting to buy those features for continuous use.

What are the Cons of Cross-Selling and How to Overcome Them?

Customer Dissatisfaction

Not all customers appreciate additional purchase suggestions, even if they are relevant. If a business does not change its approach toward these customers, they might get frustrated and stop engaging.

Solution: To prevent this from happening, make sure you understand your customers. Robust subscription management software offers insights into customer activity. You can analyze which customers interact with your cross-selling offers, and how. This helps you modify your strategy for each customer accordingly.

Loss of Customer Trust

If you successfully cross-sell something that doesn’t live up to its standards, its negative impact can be lasting. It may increase your short-term revenue, but may decrease the long-term one. Because customers won’t act on your suggestions again.

Solution: Businesses shouldn’t try to cross-sell items just to cleanse their inventories. They must only offer those products which can add value to the customer’s purchase.

Decreased Revenue Due to Problem Customers

Giving out services in bundles, and at discounted prices sometimes attracts those customers who never pay the original product prices. These customers buy only the discounted items, and might initiate unfair chargebacks frequently. When this happens, cross-selling actually makes you lose profit instead of gaining it.

Solution: Businesses can change their strategies for each customer segment. Instead of offering exclusive bundles and discounted services to everyone, they can limit these offers to only their profitable customers, and those customers with a clean purchase history.